The Research On The Influence Of Auditor Size And Industry Specialization On Auditor Style

At present,the importance of the auditing of accounting firms is increasingly recognized by all sectors of society,and the annual financial reports issued after auditing have received extensive attention.The development of the domestic auditing market was relatively late,and the development of the local accounting firms were late too.Overall,the domestic auditing market is decentralized and highly competitive.Moreover,the income structure of local accounting firms is also relatively single,most of the revenue is derived from the auditing business.The available information shows that in the long-term auditing practice,accounting firms will gradually develop their own unique internal learning products to constantly update the auditors' understanding and application of accounting standards and auditing standards.Francis et al.(2014)believed that the international "Big Four" have their own unique internal rules for the interpretation and implementation of generally accepted accounting principles and generally accepted auditing standards.They have formed their own auditor style.On the basis of previous studies,this paper defines the "auditor style" as:Because of the different cultural backgrounds and business concepts of the accounting firms,each of them has a unique and unified internal working guide.This paper believes that the difference in style will make the behavior of auditing staffs to be in a certain paradigm,which will make them to show different auditing characteristics or habits with other accounting firms in auditing work.It will also be directly reflected in the annual financial report issued by them,which in turn will have an effect on the comparability of the auditing customers' accounting information.At the same time,this paper,based on the relevant audit research,considers that the size and the industry specialization of accounting firms may have an impact on the auditor style of accounting firms.Large accounting firms charge higher fees,who are widely believed to have high audit quality,and enterprise and society public trust them.The exposure of irregularities such as bad operation has extremely bad influence on large firms,even leading to bankruptcy.Considering the importance of reputation,large firms tend to make strict standards of internal work,offer systematic and professional training,standardize its auditors.These are beneficial to forming auditor style.Accounting firms with industry specialization have the leading status of and huge customer groups in specific industry,thus they can accumulate rich work experience to strengthen their study and understanding of a specific industry,which is helpful to cultivate the sensitivity of a specific industry information.And they can conserve it in the forms of internal work rules,which makes it form stronger auditor style in these fields with industry specialization.Based on the listed companies in Shanghai Stock Exchange and Shenzhen Stock Exchange from 2009 to 2014,this paper analyzed the effect of auditor size and industry specialization on auditor style.We start from the perspective of the comparability of audit clients' accounting information,and pair two companies in the same industry and same year.We define abnormal accruals of pair companies as auditor style,and set up multiple regression model.Then,we divide the accounting firms into three categories,international Big Four firms,domestic Big Eight firms four,and others.We calculate the proportion of annual auditing companies'main incomes in the industry's total incomes,and define industry specialization as the number which is greater than 10%.The results show that,the abnormal accruals of pairs audited by the same firms are smaller than pairs audited by different firms.It shows that Chinese accounting firms have formed the unique auditor style.We have not found that the firm size has influence on auditor style,the abnormal accruals of Big four or domestic Eight comparing to other companies has no significant difference.We also found that the accounting firms with industry specialization have a stronger auditor style.However,we didn't find any evidence indicated that financial statements audited by international Big Four firms or domestic Big Eight firms are more comparable than others.We also found that accounting firms with industry specialization have a strong auditor style,and after controlling the auditor size,the influence of industry specialization remains significant.Our results indicated that it was industry specialization rather than auditor size that have a significant impact on auditor style.This paper studies the auditor style of domestic accounting firms,fills the domestic study on auditor style.Moreover,this paper combines the industry specialization and firm size to discusses the influence on auditor style,not only opens the door for future research,but also break the past situation of accounting comparability research focusing on financial accounting principles or management behavior.And we discuss the role of auditors,helping strengthen the public,especially company leaders'emphasis on the work of certified public accountants,and also helping them to choose auditors carefully.