Auditor Industry Expertise, Fee Premium and Audit Quality: An Examination from Audit Team Perspective.

• In Event: Breakfast and Research & Education Table Forum
  In Roundtable Session: Table 1: Audit Industry Expertise

Abstract

Using unique Chinese data, this study analyzes auditor industry expertise from individual auditor perspective, and examines whether and how audit team industry expertise affects audit pricing and audit quality. We find audit team with industry expertise commands higher audit fees and provides higher quality of audit service. We also document that the positive association between the auditor industry expertise and audit quality becomes more pronounced when fee premium becomes greater. These findings lead to the conclusion that audit team with industry expertise have incentives to provide quality service and thus charge a higher fee premium to devote more resources into audit, which ultimately improve audit quality. Our findings provide empirical evidence on how auditor industry expertise may yield greater fees and higher audit quality, especially from a micro-level analysis. Our findings are also important for PCAOB policies related to mandating the engagement partner’s signature on audit report.

Authors

• Zilong Song, Wuhan university

• Yumiao Yu, Wuhan university

• Jun Zhan, CSU Northridge