Industry Homogeneity、Auditor Industry Specialization Auditor Fees

Ministry of Finance issued a new auditing standards on February 2006,that means our country has established a modern risk-based audit mode. CPA Professional Standards No. 1211 provides the auditor should be aware of its environment and the entity and assessing the risks of material misstatement, which means the auditors need to accumulate their practice or investment in special industries in order to grasp the customer’s industry knowledge in the course and form the auditors’ auditor industry specialization. Since 2007, the AICPA have released a number of policy measures to support and encourage auditors to form industry specialization, improve professional competence,and enhance their competitiveness. In the real, the auditors also has realized the importance of the development of industry specialization, and actively develop auditor industry specialization. So study the audit industry specialization both in theory or practice field is necessary.Existing studies about the audit industry specialization more focus on external market performance,such as audit pricing and audit quality.There are few researchers explore the factors affecting the formation of the audit industry specialization, and the result of the relationship between audit industry specialization and audit fees has not to reach a consensus.At present, the academic believes that the industry concentration of assets, the degree of control and other industry characteristics affect the degree of development of the audit industry specialization. These factors are key factors that can not be ignored.In this study, we analyzed the impact of industry homogeneity characteristics of this industry audit firm industry specialization degree after controlled of these key factors. This paper selects 2011-2013 A-share listed companies as samples, introduce the concept of investment opportunities set to measure the degree of homogeneity for each of the industry, using descriptive statistics, multiple linear regression model and correlation analysis to test the correlation between audit firm industry specialization and industry homogeneity. Multiple regression model indicates that the higher homogeneity of the industry, the higher the degree of the auditor industry specialization. This is because the higher industry homogeneity, the higher the industry knowledge and industry audit techniques in the industry transfer ability.The conclusion of the relationship between audit industry specialization and audit fees has yet to reach a consensus.The researchers tried to interpreted this contradiction from different aspect,such as the bargaining power of customers,the measure of auditor industry specialization and so on, but few literature focus on industry characteristics. After controlled the influence on audit fees of customer size, the degree of complexity of the business, characteristics of auditor and financial condition, this paper studied the influence of industry homogeneity characteristics on audit fees,which auditors have industry specialization. This paper selects relative data from 2011 to 2013.The top of the industry sector is defined as a high homogeneity. This paper uses multiple regression model to test the relationship between the audit industry specialization and audit fees. The results of multiple regression model showed that the auditors who are industry experts acquired premiums, but auditor tend to charge lower audit fees in the high homogeneity of the industry. This is because compared to auditing expertise to create economies of scale and cost reductions resulting decline in audit fees, audit firms of more reflected in investment due to the industry-specific, differentiated services, audit fees rise brings aspects. In addition, the industry high homogeneity, industry-specific knowledge and audit programs to other customers during the audit again quickly and effectively applied in the industry, thereby reducing costs apportioned to each customer, the cost of this part of the savings to make firm cost leadership advantages obtained, with a reduced audit pricing space. Therefore, the industry high homogeneity, the firm’s audit fees in the industry is low.According to research findings and reality of our country, this paper made a number of recommendations. Industry specialization strategy is an effective way to strengthen the bigger auditors. In the process of implementation of the strategy, in addition to considering the status of their own resources, auditors also should consider the impact of the industries’ homogeneity. In addition, when make the audit pricing decisions,auditors should consider the industry characteristics.