Accounting Firm Industry Expertise And Audit Fees Relationship Study

Auditing firms are generally beginning to enhance their competitive position by strengthening the industry specialization as the auditing practice becoming complicated as well as the competition getting fierce in the industry;the relevant research has been catching the domestic and foreign scholars' eyes.As for auditing firms,auditing quality is based on their special skills and brand name.Industry specialization is one of the important facts in the special skills which may play a positive roll in auditing quality, but whether the improvement of the auditing quality can be recognized is still an empirical problem.A differentiation strategy will lead to higher audit fees if valued by clients theoretically.This paper studies the recognition of the industry specialization by the auditing community and exams the association between the specialization and the auditing fees, then finds out the contribution of brand name to the specialist premium, which also means the brand name reputation is not a necessary foundation on which to achieve higher priced quality-differentiated audits based on industry specialization.We find evidence of higher fees for Big 4 industry specialists relative to nonspecialists in the Chinese audit market,and so does the Big 10 large local firms.That means industry specialization can act as a factor alone to improve the auditing quality which can win the recognition from the clients to pay higher.In a word, the improvement of industry specialization is an effective competitive strategy.