Does Information Risk on Fair Value of Financial Industry Change Auditor's Effort and Reporting Quality? - Case of Korea

This study examines whether financial industries' exposure to fair value estimates affects auditor's effort and reporting quality. The result shows that audit time and audit fees are associated with fair value estimates of financial assets and liabilities. However, discretionary accruals increase as fair value estimates of low-level financial assets and liabilities increase. This implies that financial reporting quality does not increase as much as increased audit effort on fair value estimates. Additionally, audit effort and financial reporting quality vary depending on fair value estimates for financial assets and liabilities, indicating that auditors' risk taking on financial assets and liabilities differs