Auditor Industry Specialization,Homogenous Industries And Audit Fees

In recent years,audit market is increasingly standardized in China,and the structure of it changed obviously.Meanwhile,the competition of accounting firms is becoming increasingly fierce,so developing core competitive advantages distinguished from other rivals becomes one of the primary means.In this paper,firstly I examine samples of A-Share Listed Companies in China to test the relationship between CPA industry specialization from CPA individual level and accounting firm level,and to test which level plays a leading role in improving audit fees.Secondly,I examine whether the CPA can charge lower audit fees in homogeneous industries than non-homogeneous ones based on economies of scale.As further proof,I examine whether reduction of audit fees in homogeneous industry is due to the formation of a cost advantage,or due to the lower quality on basis of accounting firm reformation.The results show that CPA with industry specialization will charge higher audit fees,and compared with the accounting firm level,the individual plays a more important role in the improvement of audit fees in addition to the 'BIG 4' group.Considering the homogeneity,I find that due to the high business similarity in the homogeneous industry clients,the investment cost of CPA specialization can share among more industry clients than the non-homogeneous industry,which results in cost advantages and form lower audit fees in client firms with relatively high bargaining power.Expansion test also shows that,compared with the non-homogeneous industry,the audit quality is undamaged when CPA with industry specialization audits clients in homogeneous industries.In addition,after the CPA reformation,the professional expertise is beneficial to the improvement of audit quality,but there is no obvious difference between homogeneous and non-homogeneous industry.The conclusion of this paper has a certain reference for development direction of the industry specialization.Moreover,it provides the relevant evidence of audit pricing,conducive to the stakeholders judging and understanding the audit pricing mechanism in different industries.In addition,it may be helpful to audit market regulators to establish standards system of audit quality and audit fees.