Periodic Auditor Designation, Audit Fees and Audit Effort: Evidence from the Korean Mandatory Designation Regime

From fiscal year 2020, Korea has required a listed company that has kept the same auditor for six consecutive years to accept an auditor chosen by the securities regulator and keep it for three years. This study estimates what the rule costs and what it delivers. Using 17,890 firm-years from 2258 listed companies over 2015 to 2024, with designation identified from the auditor-change pattern the statute dictates, it estimates firm and year fixed-effects regressions against voluntary switchers. Designation raises the audit fee by 37.5 per cent and contracted audit hours by 14.8 per cent, so the average fee per audit hour rises by 19.7 per cent. Hours actually worked, disclosed separately by the auditor, give the same answer, and the composition of the engagement team does not change. Net of a voluntary change, the fee still rises by 0.1475 log points and hours by 0.0866. Absolute discretionary accruals do not move, and the interval excludes any improvement larger than a tenth of a standard deviation. Every effect appears in the designation year and disappears when the term expires. The costs of the regime are high and precisely estimated; no consistent improvement is observed in the accrual-based measure examined.