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Does continuous auditing enhance the quality of financial reporting? Korean evidence

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  • Jung-Wha Lee
  • Minjung Kang
  • Yunsook Oh
  • Gyungmin Pyo

Abstract

This study examines the effects of audit efforts through interim reviews of financial reports. Using Korean data, we specifically investigate the relationship between the number of audit hours worked during the first three quarters and the quality of interim and annual financial reports. Our results show that continuous auditing efforts are negatively associated with interim and annual discretionary accruals ( DA ). Moreover, the results from the positive and negative DA of annual financial reports also support the notion that continuous auditing efforts restrict upward earnings management more than downward earnings management. Overall, our results complement prior research and regulators' assertions by highlighting the importance of continuous audit efforts for interim and annual financial reports.

Suggested Citation

  • Jung-Wha Lee & Minjung Kang & Yunsook Oh & Gyungmin Pyo, 2014. "Does continuous auditing enhance the quality of financial reporting? Korean evidence," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 21(3), pages 284-307, September.
    • Handle: RePEc:taf:raaexx:v:21:y:2014:i:3:p:284-307
    DOI: 10.1080/16081625.2014.884483
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    Cited by:

    1. Dafydd Mali & Hyoung‐joo Lim, 2021. "Do Relatively More Efficient Firms Demand Additional Audit Effort (Hours)?," Australian Accounting Review, CPA Australia, vol. 31(2), pages 108-127, June.
    2. Pei-Gi Shu & Tsung-Kang Chen & Wen-Jye Hung, 2015. "Audit duration quality and client credit risk," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 22(2), pages 137-162, June.
    3. Sung Hwan Jung, 2016. "Audit Effort and Market-perceived Risk: Evidence from South Korea," Australian Accounting Review, CPA Australia, vol. 26(3), pages 255-270, September.

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