Evaluating the Effect of Industry Specialist Duration on Audit Quality

• In Event: Continental Breakfast & Research and Education Forum
  In Paper Session: Table 1: Audit Quality

Abstract

Mandatory CPA firm rotations could help improve audit quality by promoting independence; however, they could also increase auditor switching costs and limit audit firms’ ability to accumulate client- and industry-specific knowledge. Using a sample of 18,171 observations during the period 2006 to 2014, we evaluate whether industry specialist duration (i.e., the cumulative number of years a CPA firm can be considered an industry specialist) affects audit quality. We find that audits performed by CPA firms with longer specialist durations are associated with indicators of higher audit quality, compared to those performed by CPA firms with shorter specialist durations.

Authors

• Dennis M Lopez, University of Texas-San Antonio

• Jose Vega, Clarkson University