Actual vs. Contracted Audit Hours and Fee Differences in the High-Tech Industry

[Purpose] This study examines whether actual audit hours exceed the contracted hours in high-tech industries and whether such increases lead to changes in audit fees. [Methodology] Using data from companies listed on the KOSPI market between 2020 and 2022, this study empirically analyzes whether firms in high-tech industries exhibit greater differences between actual and contracted audit hours and fees compared to other firms. The data on contracted and actual audit hours and fees were obtained from newly disclosed audit engagement reports mandated since 2020. [Findings] The results show that the gap between actual and contracted audit hours is significantly larger for high-tech firms than for others. However, the increase in audit hours does not lead to a corresponding increase in audit fees. Further analysis reveals that this effect is statistically significant only among firms audited by Big 4 auditors and non-designated auditors. [Implications] This study contributes by utilizing new audit disclosure data to show that audit related risk is reflected in increased audit hours during the audit process.