The Impact of ESG Performance on Audit Risk : An Analytical Inquiry into the Underlying Causes of Discrepancies between Theory and Prior Domestic Research

Unofficial AI-generated summary based on the public title and abstract. Not an official translation.

🔬研究者:Provides a novel mechanism (regulatory maturity) to reconcile conflicting findings in ESG-audit literature.

🏢実務担当者:Highlights how improving ESG disclosure quality can reduce audit burden and fees as regulations mature.

🏛政策担当者:Suggests that early finalization and mandatory implementation of ESG standards can enhance information reliability and audit efficiency.

This study examines the underlying reasons for the inconsistent findings in prior theoretical and domestic empirical research on the relationship between ESG performance and audit risk—measured by audit hours and audit fees—and identifies the maturity of the ESG regulatory environment in Korea as a key explanatory factor. Using ESG ratings issued by the Korea Institute of Corporate Governance and Sustainability (KCGS), we analyze 3,849 firm－year observations of KOSPI and KOSDAQ listed companies (excluding financial firms) from 2012 to 2024. The sample period is divided into the ESG introduction stage (2012－2019) and the transition stage (2020－2024). Ordinary least squares regression with a lagged model is employed, with additional analyses conducted using size－effect controls, firm－fixed effects analysis, first－difference estimation, and 10% trimmed mean analysis. The results show that, over the full sample period, ESG performance is positively associated with both audit hours and audit fees. However, the interaction term ESG×Post20—representing the ESG transition period—exhibits a significantly negative association with both audit measures. This indicates that as the ESG regulatory framework matures, improvements in the reliability, volume, and quality of ESG disclosures lead auditors to gradually recognize strong ESG performance as a factor that reduces audit risk. Robustness tests restricted to large firms with total assets exceeding KRW 500 billion and those using a 10% winsorized sample yield consistent results, providing strong evidence of structural changes driven by regulatory maturity. This study contributes to the literature by empirically presenting the temporal progression— introduction, transition, and maturity—of the ESG regulatory framework as a mechanism that explains divergent findings between domestic and international research. The results further suggest that the early finalization and mandatory implementation of the K－ESG disclosure standards may enhance the reliability of ESG information and improve audit efficiency.

• semanticscholar https://doi.org/10.35850/kjta.27.2.8first seen 2026-07-31 07:11:51 · last seen 2026-08-01 06:47:24