Legal Systems and Earnings Quality: The Role of Auditor Industry Specialization
Publication Type
Conference Paper
Publication Date
6-2005
Abstract
This paper extends prior studies in auditor industry specialization to an international setting and examines if the impact of industry specialist auditors on earnings quality is dependent on the legal environments. Using data for 28 countries over 20 industries from 1993 to 2003, we find that clients of industry specialist auditors have lower discretionary current accruals and higher earnings response coefficients than clients of nonspecialist auditors. In addition, we find that the impact of auditor industry specialization on earnings quality increases as the legal environment weakens. Collectively, the results suggest that the benefits from engaging the services of industry specialist auditors increase as a country's legal environment shifts from a strong to a weak environment. Our results are robust to the inclusion of additional control variables.
Discipline
Accounting | Business Law, Public Responsibility, and Ethics
Research Areas
Corporate Governance, Auditing and Risk Management
Publication
International Symposium on Audit Research
ISSN
0278-0380
Identifier
10.2308/aud.2007.26.2.25
City or Country
Singapore
Citation
TAN, Patricia Mui Siang and LIM, Chee Yeow.
Legal Systems and Earnings Quality: The Role of Auditor Industry Specialization. (2005). International Symposium on Audit Research.
Available at: https://ink.library.smu.edu.sg/soa_research/290
Comments
Published in Auditing, 2007, 26 (2), 25-55. DOI: 10.2308/aud.2007.26.2.25. Full text at https://ink.library.smu.edu.sg/soa_research/587