A Study on Audit Fees, Audit Hours, and Corporate Governance Practices

초록

This study investigated the effect of corporate governance of the firms included in theKorea Composite Stock Price Index (KOSPI) on audit fees and audit hours. Prior studiessuggested a positive association between audit risks and audit fees and hours. However, therewas no noteworthy research on the relationship between audit risks and audit fees and hoursfor Korean firms. Using 3,825 firm-year observations collected over the period of 2002 to2009 from Korean stock market, this study offered empirical evidence on the link betweencorporate governance and audit efforts. The empirical results revealed that the KOSPI firms’ sound corporate governance practiceshad a negative effect on yearly audit fees. The study also revealed that the firms with soundcorporate governance practices increased its yearly audit hours. In addition, this paper foundthat corporate governance practices decreased audit fee per audit hour when the effect offirm size on corporate governance is considered in the regression. After controlling for thepanel data regression problems, the negative effect of corporate governance quality on auditfee rate per audit hour is still robust.

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