Abstract

This study evaluates whether the capacity of registered auditors of stock－listed corporations has improved through the registration of auditors of stock－listed corporations introduced through the reform of the accounting system in 2018. This study regards audit capability as the ability of auditors to produce the optimal production method (‘production capability’) from a production perspective. In addition, the production method of BIG4, which provides differentiated audit quality was judged as the optimal production method according to previous studies. In this study, in order to evaluate whether the capabilities of small and medium－sized registered auditors are improved, the change in production capacity after registering as auditors of small and medium－sized registered auditors was compared and measured using the difference－in－differences method with BIG4 and nonregistered corporations as control groups. This study estimated the input intensity, quality of input, and audit techniques obtained from the external audit performance of audit engagements under the External Audit Act including unlisted companies from 2018 to 2021. In the measurement process, machine learning and text analysis techniques was used to effectively obtain and process necessary information from a large－scale research sample. As a result of the analysis, the relative input strength of small and medium－sized registered auditors was weakened after registration of auditors, and it was confirmed that the proportion of risk assessment input by engagement partners in charge decreased. This study evaluates that the production capacity of small and medium－sized registered auditors has not improved after the registration. This suggests that despite the registration of auditors, small and medium－sized registered auditors have not faithfully implemented integrated management focused on audit quality, and that the auditor registration system needs to be further improved through policy adoption. This study proposes policy improvements such as the introduction of an integrated management system to publicly manage the use of work resources and the distribution of resources in order to lead transition to an organization focused on audit quality rather than an organization focused on the distribution of designated audit engagements.

Keywords

• Accounting System Reform
• Audit Firm Structure
• Auditor
• Indepenent Accounting System

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