In this study, we examine whether auditors are able to recognize managers’ real earnings management activities. Roychowdhury (2006) define managers’ real earnings management activities as “departures from normal operational practices, motivated by managers’ desire to mislead at least some stakeholders into believing certain financial reporting goals have been met in the normal course of operations.” This type of earnings management brings negative effects on a firm’s long-term performance and eventually increase audit risk by failing a company's operation. Prior studies argue that real earnings management is less likely to draw auditor’s attention even though real earnings management may bring audit failure because,unlike earnings management using discretionary accrual, auditors have no specific regulation to restrain managers’ real earnings management activities (Graham et al. 2005; Roychowdhury 2006). However, we expect that auditors may recognize managers’ real earnings management activities when they evaluate a firm’s audit risk during a audit-planning period. For example,in the audit-planning period, auditors carefully review a firm's various characteristics that might affect the firm's audit risk. The characteristics might include a firm's governance structure, operational environments, operational strategies, unusual sales and purchases, etc. These characteristics might be directly and/or indirectly related to a firm's real earnings management behaviors. In order to test whether auditors can recognize managers’ real earnings management activities,we examine the association between managers’ real earnings activities and changes in audit hours and audit fees. We predict that if auditors recognize managers’ real earnings management activities which might increase audit risk, they will increase audit hours and/or audit fees to reduce or compensate additional audit risk due to the real earnings management activities. Using the sample of listed companies in the Korean Stock Market(KOSPI) during 2003-2009, we find that both audit hours and audit fees as of year t are significantly increased as more managers’ real earnings management activities as of year t-1 are observed. This finding suggests that auditors request more input of audit hours and more audit fees in the current year after recognizing managers’ real earnings management activity from the past year of audit. In addition, we examine the case of auditor changes to check the robustness of our results. The results show that even though we include the case of auditor changes in our sample, our findings are unchanged. We also examine whether auditors increase audit hour when they recognize managers’ real earnings management activities at the same year. In other words, we examine the contemporaneous relationship between a firm's real earnings management activities and audit hours/fees. The results are again is consistent with our findings, suggesting that our findings are robust. This study have several contributions to both academics and practitioners by providing a new perspective about the role of auditors in recognizing a firm managers’ real earnings management activities. The findings of this study suggest that auditors are able to recognize managers’ real earnings management activities and reflect them in assessing a firm's audit risk. We also believe that our empirical evidence may shed some lights on our understanding of the potential effect of audit hours and audit fees as measure of audit quality. The findings of this study demonstrate that audit hours and fees are closely associated with a firm's real earnings management, implying that they are related to the quality of audit.