Research On Correlation Between Audit Firm Industry Expertise And Audit Quality

The development of audit firms can take two strategies, expanding the scale or developing audit firm industry expertise.So, the effect of audit firms size and industry expertise on audit quality has become an important area of audit theory and practice. Foreign scholars have researched on the relationship of audit firms size、audit firm industry expertise and audit quality for nearly30years, and so far have received relatively abundant empirical evidence. China’s securities market is an emerging market, in recent years, domestic scholars have launched empirical researches about the relationship between audit firm size and audit quality.In2006, the Chinese institute of CPA proposed audit firms to be " bigger and stronger".Under the background of encouraging the audit firms to be expanded and internationalized, many scholars have researched the relationship of audit firms size and audit quality, discussed if it is possible for the audit firms to be expanded. As for the effect of audit firm industry on audit quality, domestic scholars have got some conclusions, these conclusions are inconsistent, and they are very different with foreigner’s research conclusions. In view of this, combined with China’s specific national condition, respectively, I researched the effect of auditor industry expertise on audit quality of audit firms about" big audit firms""small audit firms" and the general audit firms to explore the feasibility of the development of local audit firm industry expertise.Based on the review of related literature at home and abroad, starting from the connotation of audit quality, the relationship of audit firm industry expertise and audit quality is theoretically analyzed and the hypothesis is put forward, then I make the extent of earnings management in China’s listing Corporation annual report as a substitute variable of audit quality, audit guest market share in a particular industry and professional investment as a measure of the audit firm industry expertise, after controlling the impact of firm size, liquidity, ability to obtain cash, total accrual profit,and profit ability on abnormal working capita],building an empirical model about the effect of audit firm industry expertise on audit quality. Through descriptive statistics, multiple regression analysis method, a sample of597annual data for the collection of Shanghai A shares in2011listing Corporation was statistically tested. The results showed that for the " big ten" firms, audit firm industry expertise and audit quality is significantly positive correlated; for the "non-big ten " firms, audit industry loading and the audit quality is negtively correlated, but not significantly;generally speaking, the correlation between audit firm expertise and audit quality is not significantly negtive.