Do audit fees and audit hours influence credit ratings?: A comparative analysis of Big4 vs Non-Big4

We examine the relationship between credit ratings / changes and audit fees (hours) for Big4 and Non-Big4 firms. Audit fee (hours) may be considered as a default risk metric for credit ratings agencies. However, firms audited by Big4 are larger, better performing and operate with lower leverage compared to firms followed by Non-Big4. Therefore, the association between audit fee (hours) may be different for firms followed by Big4 and Non-Big4 audit firms. We find that there is a negative association between audit fees and credit ratings for firms followed by Big4 audit firms. However, we find an insignificant relation for firms followed by Non-Big4. We conjecture the different association due to the Big4 firms having more robust accounting procedures; Big4 firms must offer competitive audit fees because they are engaged in fierce competition with other Big4 firms. Moreover, Big4 and Non-Big4 firms have different relationships with their clients because Non-Big4 firms are more income dependent on their clients. Using a sample of 1,717 firm–year observations between 2002 and 2013, we establish a relation between audit fees in period t and credit ratings in period t+1, for firms followed by Big4 auditors. We do not find a significant relation for firms followed by Non-Nig4 firms, suggesting that credit ratings agencies perceive audit fee differently for Big4 and Non-Big4 firms. Client firms followed by Big4 auditors that experience a credit rating change in period t+1 pay lower audit fees in period t compared to firms that do not experience a credit rating change. Our additional analysis suggests a different association between firms audit fees and firm performance for firms that experience a credit rating increase and decrease. Firms that experience a credit ratings increase in period t+1 have strong performance and lower audit fees in period t. On the other hand, firms that experience a credit rating decrease have weak financial performance and negative audit fees compared to firms that do not experience a credit ratings change. Our results suggest that audit fees combined with financial performance influence a credit ratings agency' perception of default risk

An Empirical study on equity of corporate tax burden and firm characteristics

학위논문(박사)--서울大學校 大學院 :經營學科 經營學專攻,1997.Docto

Review on Taxation of Stock Options

Stock option is introduced in 1997, in Korea and it’s expected that exercise of stock options is increased sooner or later. So, this paper compared tax treatments of stock options in U.S. and in Korea with Scholes and Wolfson(1992) paradigm. For tax purposes, the two types of options are NQO(Nonqualified stock option) and ISO(Incentive Stock Option). On an average level, the relative use of ISO and NQO has changed over time consistent with changes in the tax laws favoring one or the other option type. This paper reviewed the taxation of ISO and NQO. In Korea, the exercise income is taxed at exercise date although after exercise, stock price falls below exercise price. The exercise income is not other income but wage and salary income (class B). This study proposed on tax treatments of stock options. Therefore, This study is expected that it will contribute to future tax reforms in Korea and empirical researches on stock options

A Study on the Issues of Improving Current Korean Accounting Regulation System

본 연구는 한국회계학회 연구용역보고서(2011)의 일부를 수정ㆍ보완한 것이다.본 연구는 우리나라 회계 감독 체계의 현황 및 문제점에 대하여 알아보고 선진국의 사례를 참조하여 우리나라 회계 감독 체계의 문제점을 해결하기 위한 구체적인 개선 방안을 제시하였다. 본 연구에서 제시한 개선 방안을 요약하면 다음과 같다. 첫째, 내부 회계 관리 제도의 실효성을 강화해야 한다. 이를 위하여 내부 회계 관리 제도의 적용 대상 범위를 축소하고 내부 회계 관리 제도에 대하여 검토가 아닌 감사를 실시하며 내부 회계 관리제도 감사 관련 보수와 시간을 별도로 공시해야 한다. 둘째, 증권신고서에 첨부되는 감사보고서 사용에 대한 동의를 감사인으로부터 받도록 해야 한다. 이러한 방안은 회사가 제출하는 유가증권신고서의 신뢰성을 증가시킬 수 있는 장점이 있는 반면에 회사의 비용 부담을 증가시키는 문제점이 있을 수 있다. 셋째, 사전 예방적 공시 심사 감독 체계로 전환해야 한다. 이러한 방안은 사전 예방 중심의 공시 심사 감독으로 이해관계자의 피해를 사전에 방지할 수 있다는 장점이 있는 반면에 많은 인적 자원의 투입이 필요하여 비용 부담이 증가한다는 단점이 있다. 넷째, 부실 감사 회계법인에 대한 제재의 실효성을 제고해야 한다. 이를 위하여 부실 감사 회계법인의 감사 업무를 제한하고, 손해배상 공동기금을 추가 적립하도록 하고, 감사인 지정 대상에서 제외하도록 하고, 과징금을 확대해야 한다. 다섯째, 금융회사에 대한 외부 감사 기능을 강화해야 한다. 이를 위하여 감사인 지정 대상을 확대하고, 부정행위에 대한 감독당국 보고를 의무화하며, 금융감독원의 회계 검사 시 자격 있는 회계법인에게 위탁하고, 부정 적발 감사를 제한된 범위 내에서 도입해야 한다. 본 연구의 결과는 우리나라의 회계 감독 체계의 개선을 위한 대안을 제시함으로써 우리나라 회계 감독 체계의 발전에 기여할 것으로 기대된다.This study investigates the issues surrounding current accounting regulation systems in Korea. In this paper we argue the following five points. First, the effectiveness of internal accounting control within a firm should be enhanced. Second, when firms use auditors report for the purpose of issuance of both equity and debt securities, they should get permission from their audit firms so that the reliability level may be upgraded. Third, for the purpose of accounting regulation, we should have a preventive monitoring system rather than ad-hoc review system. Fourth, more severe penalty should be imposed upon audit firms which violates auditing standards. Fifth, intensive accounting monitoring is needed for financial institutions including designated auditor system.서울대학교 경영대학 경영연구소의 연구 지원을 일부 받았다