Journal of Korean Society for Quality Management (품질경영학회지)

Korean Society for Quality Management (한국품질경영학회)
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Nonfinancial Information and Audit Efforts: Evidence from Management Discussion and Analysis (MD&A) Quality

비재무적 정보와 감사수준 : 경영진단의견서(MD&A) 공시품질에 관한 연구

  • Ha-Yeon, Park (Department of Business Administration, Catholic Kwandong University) ;
  • Cheong Kyu, Park (Department of Accounting Dongguk University)
  • 박하연 (가톨릭관동대학교 경영학과) ;
  • 박청규 (동국대학교 회계학과)
  • Received : 2022.10.27
  • Accepted : 2022.11.18
  • Published : 2022.12.31
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Abstract

Purpose: The purpose of this study is to investigate whether the Management Discussion and Analysis (MD&A) has an impact on auditors' audit efforts. MD&A is a means of disclosure that provides information about a company from the management's perspective in financial reporting. The MD&A is a standardized format of nonfinancial information that can be useful for the stake-holders. The auditors have incentives to utilize the nonfinancial information contained in the MD&A for their decision-making. We posit that the MD&A disclosure quality is associated with the level of audit efforts. Methods: We hand-collect the disclosure data from the Financial Supervisory Service of Korea (the Korean SEC). Results: By employing two measures of audit efforts, we document evidence that the quality of MD&A is associated with both audit hours and audit fees. Conclusion: It implies that the auditors perform intensive audit work for companies with high-quality disclosure of MD&A. The study contributes to the literature by providing the first approach to examine the association between the MD&A disclosure and audit efforts.

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References

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