International Journal of Advanced Culture Technology

The International Promotion Agency of Culture Technology (국제문화기술진흥원)
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The Impact of Corporate International Diversification on Audit Fees and Audit Hours

  • Cho, Jungeun (College of Business Administration, Pukyong National University)
  • Received : 2022.08.01
  • Accepted : 2022.09.06
  • Published : 2022.09.30
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Abstract

This study investigates the association between corporate international diversification and audit fees and audit hours. Korean firms' overseas investment has rapidly increased in recent years and the trend of international diversification is expected to accelerate in the future. Thus, it is important to investigate how auditors respond to globally diversified firms. Our empirical findings show that internationally diversified firms incur higher audit fees and audit hours. This suggests that auditors perceive global diversification as being a higher business risk and require higher external audit fees so that they can decrease audit risk arising from inherent organizational complexity. Further, auditors expand audit procedures to collect more audit evidences, exerting increased audit effort. This study provides empirical evidences that corporate global diversification results in higher audit fees and audit hours. Auditors may refer to these results when planning their audit and determining audit fees and audit hours.

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Acknowledgement

This work was supported by the Pukyong National University Research Fund in 2020.

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