Large-accounting frauds as Enron and so on in the early 2000s revealed the limitations of supervision by external audit and increased the demand that firms should set up its own supervision function. In the United States, Sarbanes-Oxley Act was enacted in 2002 to reinforce the responsibilities of the manager and external auditor for internal control. In Korea, Act on Extern Audit of Stock Companies was revised in December, 2003 and led to the implementation of internal accounting control system in the fiscal year starting on January 1, 2004. Especially, Due to the mandatory adoption of IFRS to listed companies on KSE and KOSDAQ in 2011, firms should consider flexibility of the IFRS allowing for alternative accounting methods, which means management''s discretion will increase and managements should take more responsibility. Therefore, the importance of in-house accounting-disclosure expert is expected to increase in the forseeable future. However, there are a few studies reporting the importance of the role of in-house accounting-disclosure expert. This study investigates empirically whether the in-house accounting-disclosure expert introduced to increase the transparency of accounting would be effective to improve the quality of accounting information. Especially, I classified the in-house accounting-disclosure expert according to the expertise and analyzed whether each expert group would be effective to improve the quality of accounting income. The purpose of this study are as follows ; first, to investigate whether the in-house accounting-disclosure expert would be effective to control the earnings management. second, to investigate whether the in-house accounting-disclosure expert would be effective to control the tax avoidance. Third, to investigate the effect of the in-house accounting-disclosure expert on audit quality.
The proxy for accounting earnings management are Book-Tax Difference(below BTD) and Discretionary Accruals(below DA) that were estimated by Dechow et al(1995) and Kothari et al(2005) respectively. And the real earnings management(REM) was estimated by Roychowdhury(2006). The proxy for tax avoidance is discretionary BTD that was estimated by Desai and Dharmapala(2006) and the proxy for audit quality are audit fees and audit hours. Empirical analysis covered data from 2004 to 2008 over a period of five years for which data on the in-house accounting-disclosure expert of the internal accounting control system. were obtainable. There are four categories of samples to improve the accuracy of the analysis. The main category included 2,528 companies listed in the stock market, closed accounts as of December 31. The variables relevant to this study are the number of in-house accounting-disclosure expert. The dependent variables are earnings management(BTD, DA, REM), tax avoidance(Discretionary BTD), and audit quality(audit fees, audit hours). The main control variables influencing the earnings management, tax avoidance, and audit quality include SIZE, LEV, CFO, GRW, YEAR dummy, IND dummy and so on.
The major findings of this study are as follows. First, the in-house accounting-disclosure expert and earnings management has a significant negative relevance. Specifically, It would be expected that in-house accounting-disclosure expert can be helpful to control earnings management. Second, the in-house accounting-disclosure expert and tax avoidance has a significant negative relevance. It would be expected that in-house accounting-disclosure expert can be helpful to control tax avoidance. Third, the in-house accounting-disclosure expert and audit quality has a significant positive relevance. It could be expected that in-house accounting-disclosure expert can be helpful to improve audit quality. Especially, these results were supported by the CPA and related expert. on the contrary, it was not the case in lawyer. On the one hand, these results were supported by additional analysis that excluded sample didn''t hold in-house accounting-disclosure expert and controled the effect of company size. Therefore, It can be expected that the in-house accounting-disclosure expert introduced to increase the transparency of accounting would be effective to improve the quality of accounting information.
The implications of this study are as follows. First, these results provide insights into the question of why holding and training in-house accounting-disclosure expert on the job improve the effectiveness of the internal accounting control system and enhance accounting transparency. Also this study can provide government authorities with some implications in policy and encourage firms to hold in-house accounting-disclosure expert whin business organization. Second, this study expanded prior studies, in which used lump-sum data such as several in-house accounting-disclosure expert information and earnings measurements. Instead, this study classified these lump-sum data into sub-category as CPA, lawyer and related expert, and BTD, DA, REM in earnings management, audit fees and audit hours in audit quality, and utilized respectively.