A Study On Correlation Between Audit Industry Specialization And Audit Quality

High quality audit reports can reduce audit risk faced by the accounting firm and inhibit false financial information fabricated by company management. Generally, with the industry expertise of CPAs can provide high-quality audit reports for listed companies by using their in-depth knowledge and expertise. As audit market is still in the development stage, the current domestic literature research for industry expertise is still relatively insufficient. The study determined intervals, empirical methods used and the sample range of options are different from each other. Thus there is a big difference of whether the accounting firm industry expertise can improve audit quality or not.Although the traditional research literature for industry expertise on audit quality impact has accumulated some experience, we did not achieve the unanimous conclusion. The main reason is that the inherent path for industry expertise effect on audit quality analysis is not complete and clear. The purpose of this research is to explore the mechanism of firm industry expertise on audit quality from a theoretical perspective after analyzing the motivation theory and institutional context. Through practical data analysis, this paper is to valid the relation of industry expertise and audit quality.Through the regression of whole sample of listed companies, foreign "big four" group, domestic "big ten" group and the domestic small sample group, industry expertise in China failed to improve audit quality in both the overall sample and group sample. After analyzing the regression result, the paper proposes three reasons. The accounting profession is still in the stage of extensive growth and the industry expertise is lower than foreign accounting firms. The independence of accounting firms in China is poor. Meanwhile, the quality of the firm’s services has also reduced in order to seek maximum benefits.The contribution of this paper is to systematically analyze the current development of CPA profession and use the latest data and multiple variable measurement methods to study the relationship between industry expertise and audit quality. In addition, the paper discusses the relationship by groups of different firm sizes. The article points out the problems in the development process of accounting firms in China and provides reference suggestions from multiple perspectives on the future.