Auditor Industry Specialization And Audit Quality

New audit standard and modern risk-oriented audit in 2006, and CICPA took measures to encouraged CPA firm to grow bigger and stronger,as well as the general office of the state council transpond documents of the ministry of finance,which some opinions about speeding up the development of CPA industries(the number of 56 document about the state council).These policies has creased some favorable conditions to auditor industry specialization in objectives. With respect to large-scale development, auditor industry specialization is another effective way of competitive strategies.In other words, it's a way of specialization in essence.Now the research for the auditor expertise is widely and deeply in overseas academia,the same research in our country began spring up in recent years. The domestic research mainly focus on the basic theory of auditor expertise, and the relationship between audit quality,audit price and industry specialization.However, the consistent conclusion has not got between audit quality and auditor expertise. Based on these,this dissertation wants to study,under the influence of the different size of the clients and CPA firms,the relationship between audit quality and industry specialization.So that we can provide some useful evidence for the development of the auditor industry specialization.Based on the theory analysis,we collect the list companies which was charged by CSRC as a result of financial fraud from 2002 to 2009 as a sample,build three logic hypothesis of audit quality and use the Binary Logit model to test and verify these hypothesis.We receive some conclusions through multiple regression analysis:Firstly,auditor expertise can enhance the audit quality.We generally find a significant negative relationship between auditor industry specialization and the possibility of the auditor issued a clean opinion.So that we could test auditor industry specialization can enhance the audit quality and performance from a view point of the fraud list companies.,as well as reduce the possibility of the auditor issue the unqualified opinion.This finding can be a proof that the policy department advocate and encourage the auditor industry specialization in the macroscopic level.Secondly,in large client market,the positive relationship between auditor industry specialization and audit quality is weaken and limited.The increase of the client size can offset the performance level of the auditor expertise in a large extent.This paper not finds,in large client size market, a significant negative relationship between auditor industry specialization and the possibility of the auditor issued a clean opinion. So that we can test our conclusions,which provides valuable experience for auditor enhance audit quality,as well as improve the advantage of the auditor industry specialization and get rid of these disadvantage.Thirdly,from the viewpoint of auditor expertise, China Big10 CPA firms audit quality is not significant higher than the any other CPA firms(mainly non-Big10).Our domestic Big10 and non-Big10 CPA firms,the negative relationship, are not significant difference between audit quality and the possibility of the auditor issued an unqualitified opinion via verify.The reason that why the audit quality of Big10 are not higher than the non-Big10 is various sides. It may be likely that auditor plan the audit resource in accordance with legal action risk and client operation failure risk.Furthermore, large CPA firms have more ability to bear the loss of audit failure,and lower requirements for the audit quality compare with the other CPA firms.Therefore, large CPA firms in our country should attach great importance to audit quality and win the competition.Finally,the increase of the client size has an effect of offset and weaken for the audit quality, which exists not only non-Big10 firms but also the Big10 CPA firms as well. The Big10 are difficult to maintain independence and prudence when they face the large clients,though they have higher auditor industry specialization and the level of independence. It's may be that auditor relied on large client in some important industries,as well as made some concessions in order to seize the market share.In addition,this dissertation investigate our country's audit market concentration to reflect the current situation of the auditor industry specialization so as we can put forward a feasible suggestions. The results of the survey show that the level of the auditor expertise is still lower than the big international CPA firms.In this situation, this paper,combining the empirical research results,holds that we should made every effects to encourage CPA firms to develop auditor industry specialization in policy. When facing large clients,the auditor should maintain it's independence, and reduce economic dependence by diversified industries revenues as well as improve their negotiation and resist compression capacity. The auditor should implement cost leadership strategy when they facing medium and small size clients. At the same time, domestic big CPA firms should pay more attention to improving their audit quality, and develop auditor expertise so as to enhances the market competition.The government also should take various kinds of incentive measures to promote auditor industry specialization rapid development in our country.