The Impact of Corporate International Diversification on Audit Fees and Audit Hours

• Published in: International Journal of Advanced Culture Technology(IJACT) Vol. 10; no. 3; pp. 202 - 209
• Main Author: Jungeun Cho
• Format: Journal Article
• Language: English
• Published: 국제문화기술진흥원 30.09.2022
• Subjects: 과학기술학; Audit Risk; International Diversification; Audit Hours; Audit Fees
• ISSN: 2288-7202; 2288-7318
• DOI: 10.17703/IJACT.2022.10.3.202

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.