MyJournals Home  

RSS FeedsSustainability, Vol. 11, Pages 1089: How Investors Perceive Mandatory Audit Firm Rotation in Korea (Sustainability)

 
 

19 february 2019 22:00:28

 
Sustainability, Vol. 11, Pages 1089: How Investors Perceive Mandatory Audit Firm Rotation in Korea (Sustainability)
 




Credible audit quality is a precondition for a firm’s sustainability. External auditors offer assurance with regard to the uncertain factors that can jeopardize a firm’s sustainability and provide audit opinions that help investors assess risk. After the global crisis and accounting scandals, mandatory audit firm rotation has been implemented globally. However, few studies have investigated either the cost or the benefit of mandatory audit firm rotation. Prior studies provide only indirect evidence on the effects of audit firm tenure on audit quality/perceived audit quality. By discussing prior arguments, we examine how investors perceive the implementation of mandatory audit firm rotation in Korea. Using a unique and direct setting to examine our research question, we analyze the relationship between firms with mandatorily switched audit firms and the cost of equity capital from 2006 to 2008. We find that the mandatory change in the auditors has a negative association with the cost of equity capital. The results are robust to using the arithmetic mean of the cost of equity capital, lagged control variables, and the manufacturing industry effect. The results indicate that investors perceive that mandatory audit firm rotation provides an environment for qualified audits by enhancing auditor independence and skepticism, and thus decreases the cost of equity capital. This study helps to improve our understanding of the impact of mandatory audit firm rotation the information risk evaluations and provides political implications for policy makers by showing the benefit of mandatory audit firm rotation.


Del.icio.us Digg Facebook Google StumbleUpon Twitter
 
91 viewsCategory: Ecology
 
Sustainability, Vol. 11, Pages 1090: Simulation-Based Exceedance Probability Curves to Assess the Economic Impact of Storm Surge Inundations due to Climate Change: A Case Study in Ise Bay, Japan (Sustainability)
Sustainability, Vol. 11, Pages 1088: A Comparison of the Microbial Community and Functional Genes Present in Free-Living and Soil Particle-Attached Bacteria from an Aerobic Bioslurry Reactor Treating High-Molecular-Weight PAHs (Sustainability)
 
 
blog comments powered by Disqus


MyJournals.org
The latest issues of all your favorite science journals on one page

Username:
Password:

Register | Retrieve

Search:

Ecology

Use these buttons to bookmark us:
Del.icio.us Digg Facebook Google StumbleUpon Twitter


Valid HTML 4.01 Transitional
Copyright © 2008 - 2019 Indigonet Services B.V.. Contact: Tim Hulsen. Read here our privacy notice.
Other websites of Indigonet Services B.V.: Nieuws Vacatures News Tweets Travel Photos Nachrichten Indigonet Finances Leer Mandarijn