Audit Firm Industry Specialization and Client Disclosure Quality

This paper provides evidence that clients select auditors as part of their overall disclosure strategy. We hypothesize that in addition to higher quality audits, industry-specialist audit firms assist clients in enhancing disclosures. We also posit that the choice of an industry-specialist auditor s...

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Bibliographic Details
Published in:Review of accounting studies 2004-03, Vol.9 (1), p.35-58
Main Authors: Dunn, Kimberly A., Mayhew, Brian W.
Format: Article
Language:English
Subjects:
Accounting firms
Audit engagements
Auditing profession
Auditors
Audits
Competition
Disclosure
Earnings
Hypotheses
Market shares
Regulated industries
Specialization
Studies
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Summary:This paper provides evidence that clients select auditors as part of their overall disclosure strategy. We hypothesize that in addition to higher quality audits, industry-specialist audit firms assist clients in enhancing disclosures. We also posit that the choice of an industry-specialist auditor signals a client's intention to provide enhanced disclosures. However, we predict that industry-specialist audit firms are less important in regulated industries where enhanced disclosures add little value. Consistent with our hypotheses, we document a positive association between industry-specialist audit firms and analysts' rankings of disclosure quality in unregulated industries, but no relation in regulated industries. [PUBLICATION ABSTRACT]
ISSN:1380-6653
1573-7136
DOI:10.1023/B:RAST.0000013628.49401.69