A Study On Correlation Between Auditor Industry Specialization And Audit Quality

In the early20th century, some of Certified Public Accountants in the United States had been trying to expand the operation scale through mergers and acquisitions in the nationwide and worldwide. To the late eighties, the Big-8accounting firms in the United States also began implementation of the strategic combination, the Big-8in every industry has its own advantages and industry expertise, and they believe that by consolidating through mergers, they can obtain cross-industry skills and the diversification of business to gain synergies. After four major mergers, known as the Big-5accounting firms (PricewaterhouseCoopers, Ernst&Young, Deloitte, KPMG and Arthur Andersen) appeared. In the process of Big-5accounting firms’strategic merger, all of them invariably recognize the importance of developing industry specialization. In1993, KPMG took the lead in the Big-5accounting firms restructuring its organizational structure in accordance with industry service line, and then other firms soon claimed to be industry experts in some lines of industry on their home pages. The course of development of the international accounting firms demonstrate that specialized investment can be a major strategy to obtain the competitive advantages of cost leadership or product differentiation. The new risk-based audit model advocated by the international auditing standards and practice guidelines of the Chinese Institute of Certified Public Accountants bring the industry knowledge and industry experience to a higher demand. In our newly formulated Auditing standards, it is clear that" the CPA should provide the project team with members equipped with the relevant knowledge and experience. In the process of development of the CPA profession, there is an important issue can not be ignored, that is to ensure the quality of audit services, and safeguarding the fundamental interests of our investors. At home and abroad in recent years a series of shocking case of audit failure, cast a shadow to the professional image and reputation of CPAs, and study ways to improve audit quality has become a hot topic of the audit research areas. DeAngelo (1981) think that audit quality is usually subject to the combined effect of two factors-the accounting firm’s independence and expertise, industry specialization is an important factor to reflect the professional skills of the accounting firm. Abroad a large number of empirical studies have found that the accounting firm industry specialization investment can contribute to the improvement of audit quality. The course of development of the international accounting firm, the promulgation of new standards and the establishment of the new risk-based audit model will contribute to our accounting firm industry specialization investment. However in the China’s audit market, it is unconcerned that whether the accounting firm’s specialized industry investment behavior also means that the upgrade quality of auditing or not. Examination of this issue help us to better analyze the impact of Certified Public Accountants audit quality factors, and to provide decision support for the government in guiding the auditing profession and developing measures to strengthen the securities market regulation.This article consists of the following six parts:The first part is introduction. Introduce the research background, research significance. The second part is the literature review, to introduce the research of scholars at home and abroad in the audit market structure, the audit industry specialization and audit quality. The third part-industry-specific audit market structure-describes the industry expertise of the key concepts, while the use of two metrics of the current audit market structure is classified to explore our specialized industry development status and industry experts. The fourth part is the theoretical analysis between the relationship industry specialization and audit the quality. This section firstly introduces the benefits of industry expertise, then its relationship with audit quality in China’s audit market conditions. The fifth part is the empirical test of the relationship between industry specialization and audit quality, including descriptive statistics, regression results of the overall sample analysis, grouping the regression results and sensitivity testing. The sixth part is the conclusions, outlook and policy recommendations. This section Summarize the full text of conclusions of the study, pointed out the inadequacies of the research and the outlook for the future industry research.