The Impact of Additional Audit Efforts on Audit Quality After the Introduction of Standard Audit Time System：Focusing on Corporate Governance
Woo-Kyung Heo, I.S. Kim, Su‐In Kim · 2025
[Purpose] This study aims to analyze whether the impact of the standard audit time system on audit quality varies based on the corporate governance of the firms [Methodology] The absolute value of discretionary accruals was used as a proxy for audit quality, while audit effort was measured by the difference between actual audit hours and standard audit hours. For the proxy of corporate governance, the ESG score provided by the Korea Corporate Governance Service (KCGS) was utilized. Using regression analysis, the study analyzed the impact of audit effort on audit quality, the effect of corporate governance on audit quality, and whether the influence of audit effort on audit quality varies depending on corporate governance. [Findings] Based on a total of 3,353 firm－year data from 2014 to 2019, the results of the regression analysis indicated that audit effort has a positive effect on improving audit quality, and this effect became statistically significant after the introduction of the standard audit time system. ESG was found to improve audit quality only in cases of corporate governance, while social responsibility and environmental management showed no correlation with audit quality. The effect of audit effort on improving audit quality was significantly observed only in firms with lower corporate governance, while no improvement in audit quality was noted in firms with good governance [Implications] The standard audit time system has faced continuous criticism for its inability to reflect the characteristics of firms and changes in the audit environment. The standard audit time guidelines, which will be applied starting in 2025, have been improved to allow for a reduction in standard audit time when factors like corporate governance and digital auditing techniques are applied. This study is significant as it provides empirical results regarding the revised standard audit time guidelines that will be implemented in 2025 by analyzing the effects of corporate governance on audit quality and audit time.