Recently, accounting transparency problem in production-to-order industry has appeared as a social issue.

According to previous researches, the profitability of the production-to-order industry is lower than that of other industries and the value relevance of profit is also lower. The reason for this is pointed out as accounting for percentage-of-completion method. If there is a problem with accounting quality in a production-to-order industry, the auditor''s role would be more important than other industries.
This study is designed to examine1) whether the accounting quality of the production-to-order industry where accounting issues are constantly being raised is lower than that of other industries, 2) whether the auditors in the production-to-order industry has made more efforts to audit, and 3) whether the auditor''s audit effort has been effective in improving accounting quality of production-to-order industry. The ultimate purpose of this empirical study is to provide implications on the direction of improvement in the accounting quality of production-to-order industry.
For the purpose of this study, I used the audit hour data for each level of auditors for three years from 2014 to 2016. Disclosed data of audit hours-per-level has the advantage of being able to analyze the auditor''s efforts in more detail than the previous researches which used only the total audit hours. Disclosed data of audit hours-per-level also has the advantage of the data which is generated from every companies subject to be filed in the public, so it can represent a more general conclusion as compared to the previous researches which depended on the data from specific accounting firms.
This study tried to measure the accounting quality considering the characteristics of the production-to-order industry.
The discretionary accruals based on the traditional earnings adjustment method, such as adjusted Modified Jones (Dechow et al. 1995) model, was used to measure the accounting quality. In addition, excess costs measured were used as a measure of accounting quality to measure the earnings adjustment specific to the production-to-order industry, which commonly adjusts profits by overestimating the costs incurred during the period. Finally, level of due from customers for contract work was used to track the earnings adjustment based on the assumption that the effect of underestimation of total estimated contract costs are accumulated in due from customers for contract work.
In this study, nine types of audit hours-per-level are used as the interest variables; partner, the registered CPA, and the non-registered CPA for hours spent on quarterly reviews, year-end audit and total hours among 24 types. This study examined the relationship between dependent variables; Discretionary Accruals (Section 4), Excess Costs (Section 6), and Due from customers for contract work (Section 7) by whole sample, production-to-order industry sample, and big / non-big sample, respectively. In addition, I examined the excess audit hours?per?level (Section 5) and the proportion of audit hours?per?level (Section 8) as interest variables.

The results of the study are as follows:
First, as shown in the previous researches, accounting quality of the production-to-order industry was significantly lower than that of other industries (Table 9, Table 22, and Table 30). It is confirmed that the problem of the production-to-order industry, which is that more discretion of the managements is involved in the revenue recognition, causes decrease of the accounting quality. It is also confirmed that auditors pay more efforts to do audit companies in the production-to-order industry.
Second, the auditor’s audit efforts on the whole sample was found to have the effect of improving the accounting quality overall, although the results were not consistent according to the dependent variable. If a significant negative (-) effect is found, it appears to be limited to the senior level of auditors without exception.

Third, if accounting quality is a problem in the production-to-order industry and auditors are making more efforts accordingly, audit efforts will be expected to have additional accounting quality enhancement effects compared to other industries. Therefore, in this study, I researched whether audit efforts in the production-to-order industry have the effect of improving accounting quality. Empirical results show that the effect of accounting quality improvement relates to audit hours-per-level is not found in all production-to-order industry models (Table 12, Table 19, Table 24, Table 27, Table 33, and Table 39 Panel B).

Fourth, there was no difference between big and non-big since the empirical results were different rather depending on whole sample or production-order-to industry sample than big or non-big.

There have been studies on the improvement of accounting transparency by audit hours or audit hours-per-level, and there are also studies on the overall accounting transparency level of the production-to-order industry. However, there is no study on the effect of audit hours or audit hours-per-level on the accounting transparency of production-to-order industry. This study researched that whether the auditor has provide enough audit efforts and whether the auditor’s audit effort is sufficient to improve the accounting transparency of production-to-order industry which currently having social issues. It can be the significance of this study.
In particular, the fact that the audit effects are examined by each level of auditors participated in the audit work can be an important reference for setting the direction when establishing the policy. In the production-to-order industry, effect of the accounting quality improvement is shown only in the case that the audit partner hours are higher in the earnings adjustment model, and the verification fails in the every other models. In the whole industry, the effect of the accounting quality improvement is mainly appeared in the senior level of auditors. This confirmed a general theory which lead to assign more senior level of auditors with sufficient audit experience in the audit works.