Research On The Correlation Between Auditing Firms’ Industry Expertise And Their Audit Quality

Professional competence is an important guarantee for the certified public accountants to ensure a high audit quality, while auditing firms’industry expertise is a sign of professional competence. Improving the auditing firms’ industry expertise can effectively improve the quality of audit and the competition ability of the public accounting firm. At the same time, it can reduce the occurrence of financial fraud and the enterprise audit cost, which makes it more conducive to the effective operation of capital market in China. Our country studies the correlation between firm industry expertise and audit quality quite late, so the research methods are imperfect and the research results are scarce. Therefore, researching on the correlation between auditing firms’ industry expertise and their audit quality has very strong significance both in theory and practice.This article absorbed the research results of scholars both at home and abroad, combined the specification and empirical research method, and used the data of 12 major industry in 2011-2012、2013 of our country’s audit market, in addition to the finance and insurance industry, a total of 6384 samples. This paper had carried on empirical research on the correlation of auditing firms’ industry expertise and audit quality, in order to verify the assumption that the correlation of auditing firms’ industry expertise and audit quality is positive Through the study, the empirical results of this article explained the positive correlation of auditing firms’industry expertise and the audit quality, which also passed the significance test.The main content of this article is as follows.The first chapter is introduction. Firstly, it describes the research background and research significance of this article, and then reviews the domestic and foreign research on the relationship between the auditing firms’ industry expertise and audit quality. After that, it introduces the research framework and research methods. Finally it figures the innovation and the deficiencies in the study.The second chapter is the related theory of the auditing firms’ industry expertise and audit quality. In this part, firstly, it introduces the theory which this paper based on, mainly including the principal-agent theory, the theory of market competition, product differentiation theory, and the theory of reputation. Secondly, it introduces the relative concepts of the auditing firms’ industry expertise and audit quality, and the use of substitution variables, and focuses on the advantages and disadvantages of various alternatives.The third chapter is to design the empirical research of the correlation between the auditing firms’ industry expertise and audit quality. The first part is about the related hypothesis in this paper, and the second part is the main source of the sample selection and data. Finally, in the third part it introduces the selection of variables and how to design the related model. This article uses the method of industry-market-share calculates auditing firms’ industry expertise, using the playable accrued profit instead of the audit quality. This chapter is the basis of the fourth chapter, which has close relations with the fourth chapter.The fourth chapter is the empirical study on the correlation of auditing firms’ industry expertise and audit quality. This chapter is the most core chapter, mainly includes the descriptive analysis, correlation analysis, multiple regression analysis and robustness testing.The fifth chapter is the conclusion of this article. It describes the research conclusion through the empirical research and puts forward related suggestions. Research conclusion is that there is a positive correlation between the auditing firms’ industry expertise and audit quality. At last, this article puts forward to related suggestions to improve auditing firms’ industry expertise and the quality of audit from the perspective of public auditing firms, governments, and auditors.