초록

The objective of this study is to examine whether discretionary accruals decline in the last year with the predecessor auditor and increase in the first year with the successor. The full sample is divided into long versus short auditor tenures sub－samples and the results of the firm－years with short auditor tenure are generally consistent with those of full sample. My major findings of this study are as follows：First, discretionary accruals as earings quality are significantly negatively related with the predecessor auditor in the last year and generally insignificant during the first year with the successor. Second, for the short auditor tenure sample, I also find discretionary accruals in the last years highly significantly negatively related with the predecessor auditor. Meanwhile for the long auditor tenure sample, there are no significant changes in discretionary accruals in the last year with predecessor auditor or first year with successor auditor. Third, for the short predecessor auditor tenure, predecessor auditor tenure affects the magnitude of changes in discretionary accruals around auditor switch year. The magnitude of the decrease on discretionary accruals during the last year with the predecessor auditor appears to decline depending on predecessor auditor tenure. On the other hand, for long predecessor auditor tenure,predecessor auditor tenure do not seem to affect the magnitude of changes in discretionary accruals during the last year with the predecessor auditor and during the first year with the successor. These results show the influence pattern of auditor tenure on the association between audit quality and auditor switch. In conclustion, his study suggests that current regulations of minimum retention of audit contract and mandatory auditor rotation be reasonable and supportive in Korea.

키워드

• Earnings Quality
• Auditor tenure
• Auditor switch
• Mandatory auditor rotation
• Discretionary Accruals

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