The Effect Of Industry Specialization On Audit Quality

High quality audit report can restrain the behavior of the fabricated false financial information of listed companies,and reduce the audit risk to the public accounting firm.In general,the accounting firms with industry expertise to use their knowledge of industry specialization,provides the high quality for the listed company's audit report.Due to the different substitution index selection,the determination of the research range,the choice of the empirical method can make the research of industry expertise to a different conclusion,thus for certified public accountants industry expertise can improve the quality of audit,there are big differences.On the impact of traditional research industry expertise on audit quality documentary evidence has accumulated certain experience,but did not agree to the conclusion that this is mainly,because the industry expertise affect audit quality inner path analysis is not complete and clear.Audit quality depends on the certified public accountants professional competence and independence of the two aspects,the certified public accountants industry expertise to help improve the quality of professional competence,and the firm's independence would be affected by the audit clients economic dependence.Due to the audit client's contribution to the firm's income level is different,differences between firm degree of dependence on different customer,the importance that customers will choose public accounting firm and CPA behavior have important influence,therefore,this paper argues that different customers under the level of importance,industry expertise on the quality of the audit will exist difference.Because in the big customer market,the loss of a single customer's market share proportion of industry expertise affairs will produce great influence,even lead to public accounting firms market share ratio dropped below the threshold,accounting transaction with industry expertise.At the same time,the big customers with more complex business,also to the requirement of the audit service quality is higher.A single large customer audit failure for the reputation of the accountingtransaction cost impact will far outweigh the small customer market.Therefore,in order to maintain the accounting affairs industry expertise ability,and good reputation,certified public accountants audit skills will use the special industry,providing customers with high quality audit report,thus spent a higher cost of human resources,material resources and specialized resources such as audit technology,thus improve the quality of the audit.For the small customer market,due to a single customer for market is small,the influence of the demand for auditing services are relatively single,public accounting firms to cut costs,typically reduce audit,give up the industry specialization development opportunities,and focus on obtaining economies of scale advantage,audit quality of service provided by the audit clients is relatively low.This article first reviewed the domestic and foreign industry expertise,customer importance and relationship between the audit quality theory and literature,on this basis,starting from the connotation of audit quality,from the division of labor theory,scale economy theory,product differentiation theory analysis of industry expertise effects on audit quality.From the reputation theory,rent theory,game theory analysis of the importance of customers' s influence on the relationship between industry expertise and audit quality.Then on the basis of theoretical analysis put forward research hypothesis,is determined in this paper,explained variables,the measurement method of the explanatory variables,control variables to build the research model.Then through descriptive statistics,correlation,regression analysis and robustness testing of sample data to carry on the statistical tests.Hypothesis 1: firm industry expertise and audit quality are related.Hypothesis 2: with expertise in the industry of certified public accountants to audit quality will be affected by the importance of customer.Hypothesis 2 a: the big customer market,firm,industry expertise and audit quality are related;Hypothesis 2 b: in the small customer market,industry expertise and audit quality there is no significant correlation.The results showed that: the first,industry expertise and audit quality are related.Second,with expertise in the industry of certified public accountants to audit quality will be affected by the importance of customer specific embodied in the large customers market,firm,industry expertise and audit quality are related;In the customer market,industry expertise and audit quality there is no significant correlation.Finally,combining the present situation of the domestic capital market,puts forward the corresponding policy proposals,aimed at the shortcomings in the empirical study,has carried on the review and outlook,hope can in this field,to further research can play a role in the future...