Korean Accounting Review

Print ISSN 1229-3288 | Online ISSN 2508-7193

Korean Accounting Review (KAR) is the official journal of the Korean Accounting Association. The Korean Accounting Association (KAA) is the largest and oldest academic organization of accounting scholars and practitioners in Korea. It aims to create a fertile environment for innovation and collaborative research, to foster and improve research for the development and the promotion of accounting, and to develop a powerful network among scholars, practitioners, and authorities concerned with political decision making in this field.

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Vol.50No.22025

Current Issue
Reexamination of Relationship between Pre-Tax Accounting Income and Cash Effective Tax Rate 현금유효세율과 세전 회계이익 간의 관계에 대한 재검토 최기호 Kiho Choi 50(2) 1-41, 2025 DOI:10.24056/KAR.2025.04.001 Title Reexamination of Relationship between Pre-Tax Accounting Income and Cash Effective Tax Rate 현금유효세율과 세전 회계이익 간의 관계에 대한 재검토 최기호 Kiho Choi DOI:10.24056/KAR.2025.04.001 KAR Vol.50(No.2) 1-41, 2025 Abstract Prior studies have attempted to explain the variations of the cash effective tax rate (CETR), a typical measure of tax avoidance, by including various firm specific variables. Recently Edwards et al. (2021) (“EKS”) showed a strong negative relationship between CETR and accounting profit before tax (EBT), suggesting that there is a mechanical relationship between CETR and 1/EBT derived from the linear tax function. and empirically demonstrated that 1/EBT appropriately explains the variation in CETR of U.S. listed companies. In this paper, I applied the EKS model to Korean companies. In appearance, there seem to be a negative relationship between CETR and EBT in Korean companies as in the United States, suggesting the applicability of the EKS model. However, in the further analysis, I find that 1/EBT does not sufficiently explain the variation of CETR of Korea's listed companies. As an alternative to the EKS model, I proposed and empirically confirmed that the seemingly negative relationship between CETR and EBT in my sample firm-years may be due to the effect of Winsorizing CETR at 0 and 1. These results are similar to those of EKS in that control of profit level is necessary when using CETR as a dependent variable. However, they are different from EKS in that the main cause is the Winsorization of CETR, and in such cases, a profit level variable such as ln(EBT) is more appropriate as a control variable than 1/EBT. Key Words 세금함수, 현금유효세율, 세전이익, 윈저라이즈, Winsorize, tax function, cash effetive tax rate, pre-tax accounting income, Winsorization
The Impact of Investment Competition on Opportunistic Earnings Management in the Korean IPO Market IPO 시장에서 투자경쟁률이 기회주의적 이익조정에 미치는 영향 김경순 Kyung-soon Kim , 최성환 Sung-hwan Choi 50(2) 43-92, 2025 DOI:10.24056/KAR.2025.04.002 Title The Impact of Investment Competition on Opportunistic Earnings Management in the Korean IPO Market IPO 시장에서 투자경쟁률이 기회주의적 이익조정에 미치는 영향 김경순 Kyung-soon Kim , 최성환 Sung-hwan Choi DOI:10.24056/KAR.2025.04.002 KAR Vol.50(No.2) 43-92, 2025 Abstract This study investigates whether earnings management in the IPO year, which can be implemented to increase the sale value of insider shareholders’ shares after the lock-up period, is differentially determined according to the pre-listing equity participation competition rate (book-building competition rate of institutional investors, subscription competition rate of general investors, subscription rate of employee stock ownership plan). The empirical analysis results are as follows: First, unlike the competition rate of other investors, the book-building competition rate showed a statistically significant negative relationship with accrual-based earning management and a significant positive relationship with real activity-based earnings management. This suggests that for companies with a high book-building competition rate, accrual-based earning management is suppressed due to the institution's monitoring effect, but real activity-based earnings management, which has fewer legal restrictions, may be used as an alternative method. Second, the impact of the book-building competition rate on accrual-based and real activity-based earnings management is mainly observed when the IPO market environment is not institutionally strict. However, no significant relationship is observed in the market environment where the system is relatively strict. These results suggest that non-financial factors can indirectly affect IPO firms’ opportunistic earnings management in a market environment with low institutional strictness, but the indirect effects of nonfinancial factors are replaced by the direct constraints of the system as accounting standards and IPO regulations become more stringent. Key Words 신규상장, 기회주의적 이익조정, 수요예측, 일반공모청약, 우리사주, IPO, earnings management, book-building, general public offering subscription, ESOP
The Relation between Corporate Tax Burden and ESG Tax Disclosure: Focusing on the Disclosure of Sustainability Reports Hye-yeong Lee , Young-han Lee 50(2) 93-124, 2025 DOI:10.24056/KAR.2025.04.003 Title The Relation between Corporate Tax Burden and ESG Tax Disclosure: Focusing on the Disclosure of Sustainability Reports Hye-yeong Lee , Young-han Lee DOI:10.24056/KAR.2025.04.003 KAR Vol.50(No.2) 93-124, 2025 Abstract We examine the relation between a company’s tax burden and its tax-related activities disclosed in sustainability reports. International ESG disclosure guidelines, such as GRI and PRI, recommend that companies disclose their tax strategy, governance and risks. Many companies include this tax-related information in their sustainability reports. We analyze using data from 3,379 firm-year observations using KIS-VALUE, TS-2000, the Korea Exchange Information database, and corporate sustainability reports. The empirical analysis reveals a significant negative relationship between a firm's effective tax rate and the extent of tax-related disclosures in sustainability reports. This suggests that companies with lower effective tax rates(i.e., the higher level of tax avoidance), the more tax-related activities are disclosed in the sustainability report. This study is significant because it is the first to examine tax information and tax avoidance in the context of ESG information. The results indicate that companies’ tax-related disclosures are correlated with their level of tax avoidance, suggesting that these non-financial disclosures are strategically used to mitigate negative external stakeholder perceptions of aggressive tax planning. In addition, the study highlights that tax activities disclosed in ESG reports may not accurately reflect companies’ actual tax burdens, suggesting a potential inconsistency. The findings have important policy implications, highlighting the need for legislation and detailed guidelines to ensure that tax disclosures in ESG reports are aligned with financial metrics such as a company’s tax burden. This alignment is essential to improve the transparency and reliability of ESG reporting and to provide stakeholders with a more accurate picture of a company’s tax practices. Key Words ESG, sustainability report, ESG disclosure, tax burden, tax avoidance
Audit Opinion Shopping and Consulting Service Fees 감사의견구매와 비감사서비스 최종학 Jong-hag Choi , 정희선 Heesun Chung 50(2) 125-160, 2025 DOI:10.24056/KAR.2025.04.004 Title Audit Opinion Shopping and Consulting Service Fees 감사의견구매와 비감사서비스 최종학 Jong-hag Choi , 정희선 Heesun Chung DOI:10.24056/KAR.2025.04.004 KAR Vol.50(No.2) 125-160, 2025 Abstract This study examines the effect of auditor changes for the purpose of opinion shopping (OS) on consulting services provided by the new auditor. Client firms that change auditors for OS purposes may have incentives to purchase consulting services from the new auditors. First, from the ‘expertise perspective’, client firms that change auditors for OS may regard the new auditor as having professional expertise and purchase more consulting service. Second, from the ‘impaired independence perspective’, auditor-switching firms for OS may compensate the auditor if they perceive that the auditor lowers the acceptable threshold of audit failure risk as a result of the impaired independence. We find that client firms that change auditors for OS tend to purchase more consulting services from the new auditor in the subsequent two years. This finding is robust in various sensitivity analyses. Additional analysis suggests that the documented results are likely due to the impaired auditor independence. Our finding suggests the importance of establishing regulations that ensure auditor independence in the auditor appointment process under a free auditor selection system and provides several important insights into the nature of auditor behavior. Key Words 감사의견구매, 감사인 교체, 감사인의 전문성, 감사인의 독립성, 비감사서비스, audit opinion shopping, auditor change, auditor expertise, auditor independence, consulting service
The Effect of Corrections in Annual Reports on Auditors’ Risk Responses 사업보고서 정정과 외부감사인의 위험평가 정남철 Namchul Jung 50(2) 161-201, 2025 DOI:10.24056/KAR.2025.04.005 Title The Effect of Corrections in Annual Reports on Auditors’ Risk Responses 사업보고서 정정과 외부감사인의 위험평가 정남철 Namchul Jung DOI:10.24056/KAR.2025.04.005 KAR Vol.50(No.2) 161-201, 2025 Abstract This study investigates whether external auditors consider corrections in annual report descriptions and attachments when assessing audit risk, including audit fees and audit effort. Specifically, The study analyzes the relationship between annual report corrections (including corrections of descriptions and attachments) and audit fees and hours. Based on an analysis of 13,622 listed company-years from 2011 to 2019, annual report corrections exhibited a significant positive relationship with both audit fees and audit hours in the following year. This suggests that auditors perceive annual report corrections as indicators of high information asymmetry and declining disclosure quality, and incorporate these factors into their risk assessments. In addition, the study suggests that among the types of annual report corrections, auditors assess risks more actively for description corrections than for attachment corrections. Furthermore, this study suggests that revisions to annual reports are negatively associated with financial reporting quality, serving as a key indicator of information risk for companies. This study has the following policy implications. First, this study examines auditors’ risk response behavior, suggesting that they consider corrections in annual reports as audit risk factors. Second, this study provides empirical evidence that supervisory authorities’ inspections of annual reports and their subsequent responses play a crucial role in capital market oversight, as indicated by the observed negative relationship between annual report corrections and financial reporting quality. Key Words 사업보고서, 정정공시, 감사보수, 감사시간, 재무보고품질, annual report, correction disclosure, audit fees, audit hours, financial reporting quality