The Value of auditor industry specialization: evidence from a structural model

Qiang Guo, Christopher Koch, Aiyong Zhu

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

This study investigates the value of auditor industry specialization. In the first step, we use a discrete choice model to derive the first-order demand for auditor industry specialization. Our results reveal that clients have a general preference for auditor industry specialization, relating to both audit firm and audit office specialization. We observe that specializations at the audit firm and audit office level are substitutes. We also find that larger, more complex clients have a stronger demand for industry specialization at the audit office level. In the second step, we use the results from the discrete choice model to quantify the value of auditor industry specialists for clients. We find the overall value of industry specialization aggregated across all clients is 5.2 million USD (0.36 percent of audit fees) and that industry specialization at the firm (office) level is decisive for auditor choice in 4 percent (6 percent) of all cases.

Original languageEnglish
JournalThe Accounting Review
Volume97
Issue number7
Pages (from-to)193-222
ISSN0001-4826
DOIs
Publication statusPublished - Nov 2022

Keywords

  • auditor industry specialization
  • auditor demand
  • discrete choice model
  • counterfactual analysis
  • counterfactual analyses

Fingerprint

Dive into the research topics of 'The Value of auditor industry specialization: evidence from a structural model'. Together they form a unique fingerprint.

Cite this