The Effect Of Client Industry Agglomerations On Auditor Industry Specialization
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The Effect Of Client Industry Agglomerations On Auditor Industry Specialization
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Author : Devin Williams
language : en
Publisher:
Release Date : 2023
The Effect Of Client Industry Agglomerations On Auditor Industry Specialization written by Devin Williams and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with categories.
Prior research on auditor industry specialization documents fee premiums for local audit offices that are industry specialists. This research assumes that the effects of specialization are uniform across markets. We examine industry specialization based on the economic theory of industry agglomeration (geographic areas with high industry concentration). Agglomeration economies can facilitate access to knowledge for auditors serving a specific industry in those locations. We find that industry specialists in agglomerations earn a fee premium in excess of specialists in other markets. We find that non-specialist offices in agglomerations also earn fee premiums in that industry when compared to non-specialists in other markets even when controlling for these groups' absolute share of the national market. We also address whether or not this expertise can be shared among offices in an agglomeration specialist's firm. We find that audit offices that have easy connections to a within-firm office in an agglomerated market can earn a fee premium relative to more distant offices, suggesting a benefit from knowledge transfer. This fee premium accrues to offices that would not be considered a specialist using traditional market share measures in a given industry. These findings indicate that the benefit of industry specialization depends on more than local market share.
Audit Industry Specialization
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Author : Keith A. Houghton
language : en
Publisher:
Release Date : 2001
Audit Industry Specialization written by Keith A. Houghton and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with Auditing categories.
While auditing literature has investigated the main effect of auditor industry specialization on audit fees and planning decisions, the underlying processes explaining differential pricing between specialists and other auditors are largely unexplored. This study seeks to fill a portion of this gap by examining the interaction between auditor industry specialization and auditee risk. Using data derived from a sample of public sector audits, this study examines distinctions in how different auditors price risk. Building upon the differentiation between "premium" and "discount" specialists investigated in Houghton, Dolley, Jubb and Monroe (2000) and possibly found in DeFond, Francis and Wong (2000), the results of this study demonstrate that, in response to increased auditee risk, premium specialists price risk relatively less than other auditors. In contrast, discount specialists increase fees relatively more than other auditors. These results may reflect differences in the skill sets and work processes that underlie specialization for these two specialist sub-groups. The results are also consistent with increased competencies of premium specialist auditors in the audit of risky clients.
Auditor Industry Specialization And Client Disclosure Quality
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Author : Kimberly Dunn
language : en
Publisher:
Release Date : 2000
Auditor Industry Specialization And Client Disclosure Quality written by Kimberly Dunn and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with categories.
We examine the relation between audit firm industry specialization and client disclosure quality. Our motivation for conducting this research arises from the claims made by each of the Big5 public accounting firms that industry specialization enables each to provide superior service and quality to clients in its target industries.We document a positive association between industry-specialized audit firms and analysts' rankings of disclosure quality in unregulated industries, but no relation in regulated industries. Alternative measures of auditor industry specialization support our conclusions. Our results suggest industry-specialized audit firms add value to clients in unregulated industries in the form of improved disclosure quality.
A Hidden Risk Of Auditor Industry Specialization
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Author : Cory A. Cassell
language : en
Publisher:
Release Date : 2019
A Hidden Risk Of Auditor Industry Specialization written by Cory A. Cassell and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
Using a measure of office-level industry concentration/specialization (as opposed to a market-based measure), we identify situations in which auditor industry specialization could be detrimental for audit outcomes. In stable environments, industry specialist auditors should be able to apply their unique experience and knowledge in ways that yield better audit outcomes. However, during periods of heightened industry-specific risk, specialist auditors from the affected industry could struggle to secure and allocate sufficient resources to mitigate the heightened risk in the affected industry because, by construction, specialists in the affected industry have a client portfolio that is concentrated in the affected industry (i.e., there is insufficient resource slack). We test our predictions by investigating the effects of the recent financial crisis on audits of clients from the banking industry. We find that, during the period before the financial crisis, banking auditor industry specialization is associated with higher audit quality and more timely audits. However, during the financial crisis, the results indicate that banking auditor industry specialization is associated with lower audit quality and less timely audits. Collectively, our results suggest that auditor office-level industry specialization can be detrimental in certain circumstances and that audit firms and audit regulators should consider whether the audit market, audit firms, or audit offices have become too specialized to handle the resource allocation problems that crisis situations present.
Does Auditor Industry Specialization Improve Audit Quality
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Author : Miguel Minutti-Meza
language : en
Publisher:
Release Date : 2013
Does Auditor Industry Specialization Improve Audit Quality written by Miguel Minutti-Meza and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
This study examines whether auditor industry specialization, measured using the auditor's within-industry market share, improves audit quality and results in a fee premium. After matching clients of specialist and non-specialist auditors on a number of dimensions, as well as only on industry and size, there is no evidence of differences in commonly used audit-quality proxies between these two groups of auditors. Moreover, there is no consistent evidence of a specialist fee premium. The matched-sample results are confirmed by including client fixed effects in the main models, examining a sample of clients that switched auditors, and using an alternative proxy that aims to capture the auditor's industry knowledge. The combined evidence in this study suggests that the auditor's within-industry market share is not a reliable indicator of audit quality. Nevertheless, these findings do not imply that industry knowledge is not important for auditors, but that the methodology used in extant archival studies to examine this issue does not fully parse out the effects of auditor industry specialization from client characteristics.
Auditor Specialization Auditor Dominance And Audit Fees
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Author : Steven F. Cahan
language : en
Publisher:
Release Date : 2012
Auditor Specialization Auditor Dominance And Audit Fees written by Steven F. Cahan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
A report issued by the U.S. General Accounting Office (GAO) in 2003 identified auditors' industry expertise as a critical factor for firms choosing an auditor, and highlighted the rather extreme levels of auditor concentration in some industries. We posit that the investment opportunity set (IOS) plays a fundamental role in determining whether an industry is an attractive target for auditor specialization. When industry-specific IOS is high, specialist auditors make costly investments in industry-specific knowledge, allowing them to offer a differentiated product and to create entry barriers for other audit firms. When the IOS of firms within an industry is relatively homogeneous, auditors can transfer such knowledge across clients in the industry more easily, resulting in cost savings and scale economies. However, greater homogeneity of IOS in an industry can also increase a client's aversion to sharing an auditor with its competitors because of concerns about transfers of proprietary information, suggesting that industries with relatively homogeneous IOS are less likely to be dominated by a single auditor. We show that auditor concentration in an industry relates positively to both the level and homogeneity of IOS in the industry, while auditor dominance relates negatively to industry IOS homogeneity. Further, we examine the effects of industry IOS on audit pricing.
Does Auditor Tenure Improve Audit Quality Moderating Effects Of Industry Specialization And Fee Dependence
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Author : Chee Yeow Lim
language : en
Publisher:
Release Date : 2015
Does Auditor Tenure Improve Audit Quality Moderating Effects Of Industry Specialization And Fee Dependence written by Chee Yeow Lim and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
We investigate whether the relation between auditor tenure and audit quality is conditional on auditor specialization and fee dependence. Although prior studies have investigated the relation between extended auditor-client tenure and audit quality, none has examined how this relation is jointly influenced by both auditor specialization and fee dependence. Our main analyses, using accrual quality as a measure of audit quality, show that firms audited by specialists (vs. non-specialists) have relatively higher audit quality with extended auditor tenure, and that this relation is negatively moderated by auditors' fee dependence on clients. These results are robust to sensitivity tests, and alternative proxies for audit quality such as the issuance of going concern opinions and the market's response to quarterly earnings surprises.
The Economic Consequences Of Auditor Industry Specialization
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Author : Ali R. Almutairi
language : en
Publisher:
Release Date : 2006
The Economic Consequences Of Auditor Industry Specialization written by Ali R. Almutairi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Corporations categories.
Auditors Litigation Risk
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Author : Kevin M. Raedy
language : en
Publisher:
Release Date : 1998
Auditors Litigation Risk written by Kevin M. Raedy and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with categories.
The Economic Value Added By Specialist Auditors Hypothesis Sample And Data Results
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Author : Ali Almutairi
language : en
Publisher: VDM Publishing
Release Date : 2007
The Economic Value Added By Specialist Auditors Hypothesis Sample And Data Results written by Ali Almutairi and has been published by VDM Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Business & Economics categories.
Prior literature has conjectured that auditor industry specialization is an important dimension of audit quality. This book addresses the economic benefits that companies may achieve by employing auditors with industry expertise. It examines the link between the employment of industry specialist auditors, and the degree of information asymmetry and the cost of debt of a client company. More specifically, the analysis should answer the following questions: Is there a relation between the employment of an industry specialist auditor and the level of information asymmetry of client companies? Is there a relation between the employment of an industry specialist auditor and the cost of debt of client companies? Is the economic impact of the employment of an industry specialist auditor on the cost of debt larger for financially troubled client companies? The book is directed towards researchers in business, regulators, auditors, credit agencies, and investors.