The Impact Of Integrated Supply Chain Audit Services And Industry Specialization On Audit Quality And Audit Fees

With the division of labor among enterprises,the competition in the market has become the competition among supply chains of enterprises(Martin Christopher,1999).The development of supply chain relations has had great impacts on both companies and external regulators.As we all know,audit system is a major institutional arrangement for the capital market to protect the legitimate rights of investors.The characteristics of the audit market are determined jointly by the supply and demand sides(Xia Lijun,2004).This article takes the auditor industry specialization as the characteristics of the auditing firm and the supply chain relationship as the characteristics of the audited entities.Based on this,we define the integrated supply chain audit services as: the audited entity and its major customers or major suppliers co-employed a same auditing firm to audit the financial statements.However,research in the past tends to focus on the impact of supply chain relationships on firms,few literature discuss the impact of supply chain relationships on external regulators.Therefore,this paper studies the effect of the integrated supply chain audit services and the Industry Specialization on the investment and output of the audit market.Considering the characteristics of both supply and demand in the audit market,the research object of this article is A-share non-financial listed companies from 2007 to 2016.This article refers to Frankel's(2002)and Simunic's(1980)audit pricing model,empirically testing the relationship between the integrated supply chain audit services and the auditor industry specialization and their impact on audit quality and audit fees.Research indicates:(1)The integrated supply chain audit services provided by auditing firms with auditor industry specialization is positively related to audit quality.Besides,because of the differentiation effect,the integrated supply chain audit services and the auditor industry specialization have the positive impact on the audit fees.(2)Auditing firms that provide integrated supply chain audit services generate an auditor's Industry Specialization spillover effect.This spillover effect is reflected in the fact that,in the case of providing integrated supply chain audit services,even if the auditing firm has no industry specialization in the audited entity's industry,but has industry specialization in the industries where the audited unit's major customers or major suppliers are located,the quality of the audited unit has also been significantly improved.Besides,the auditor's Industry Specialization spillover effect is irrelevant(H4c)with audit fees.The research conclusions of this paper provides empirical evidence for the improvement of the current research on integrated supply chain audit services and auditor industry specialization,besides,this paper from the audit input(audit fees)and audit output(audit quality)demonstrates new ideas for improving the efficiency of the audit market.