Information Content of Client importance, Firm's Ownership Structure and Audit Quality

고객중요성, 기업소유구조와 감사품질의 정보효과

  • Choi, Mi-Hwa (Division of Accounting & Taxation, Busan University of Foreign Studies)
  • 최미화 (부산외국어대학교 회계세무행정학부)
  • Received : 2012.02.08
  • Accepted : 2012.03.21
  • Published : 2012.03.31


The study examines the effects that non-audit service and firm's ownership structure might have on the value relevance directly or indirectly. This investigation is based on prior research which suggests that the audit firms' non-audit services is likely to adversely affect investors' perceptions of the credibility of financial reporting and that corporate governance are likely to mitigate the adverse this kind of non-audit services effects. The sample consists of non-banking firms listed on the Korea Exchange that reported annual financial statements over the period from 2004 to 2008. In the setting, stock returns as proxy for capital market response, auditor quality(measured as the discretionary accruals) is endogenously determined. This study employs a structural equation model to take into account the endogenous variables under study. The analysis influences through the path analysis that ownership structure suppress the market response through audit quality and also the non-audit service have influence on the market response through audit quality. The results of this study contribute to the literature in the following ways. First, this provides direct evidence that there is a negative association between audit firms' client importance and the value relevance. Second, the findings that the negative association is attenuated for audit quality support the findings of prior studies which present that corporate governance provide higher credibility of financial reports.