Firm-wide And Office-level Industry Expertise, Audit Pricing And Audit Quality

The audit market will price the brand name and industry expertise if the auditor possesses brand name and industry expertise. The professors further study the industry expertise premium by classifying industry expertise into firm-wide and office-level. We start with the sample of Chinese publicly listed companies and divide auditors into three categories: national industry leader but not city-specific industry leader, city-specific industry leader but not national leader and joint national and city leader. The study examines that if the Big20 auditors can get the industry expertise premium and which level does the premium derive from, firm-wide or office-level. The study further examines if the auditors getting the premium can offer the higher level audit quality. We document that there is a significant fee premium of 48 and 52.96 percent associated with industry expertise when the auditor is national industry leader but not city-specific industry leader and the auditor is joint national and city industry leader. We also find out that only the auditor which is joint national and city leader offers higher level audit quality.