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This paper aims to examine whether firms retaining industry-specialist auditors receive better price and non-price terms for bank loans.

Based on a sample of companies retaining big N auditors during the 2000-2010 period, this paper constructed six proxies for auditor industry expertise and tested three major loan terms: loan spreads, number of general and financial covenants and requirements for collateral.

It was found that companies retaining industry-specialist auditors receive lower interest rates and fewer covenants. Banks are also less likely to demand secured collateral. These findings are supported by several sensitivity tests.

The findings suggest that auditor industry expertise provides incremental value to creditors and that bank loan cost is one economic benefit for companies hiring specialist auditors.

To the best of the authors’ knowledge, this study is the first to investigate the impact of auditor industry expertise on the cost of private debts.

The purpose of this paper is to examine external auditors' perceptions of the impact of audit committee financial expertise and industry expertise on the mediating role played by the committee in resolving auditor‐client disagreements.

The study is a 2×2 between subjects experimental design, using 61 Malaysian auditors as participants. The authors manipulate audit committee financial expertise and industry expertise at high and low levels.

It is found that external auditors perceive that audit committees play a greater mediating role and use mediating techniques to a greater extent when committee members' financial and industry expertise is high compared to when expertise is lower.

This is the first paper to examine the importance of audit committee expertise on the mediating role of the audit committee. The major contribution of the paper is the finding that auditors believe the audit committee's role as a mediator is strengthened not only by the committee members' accounting and auditing expertise but also by their industry expertise. The paper's findings have implications for practitioners and regulators who are concerned with the role of the audit committee in enhancing the integrity of the financial reporting and audit process.

The purpose of this paper is to examine the effect of a client's potentially conflicting needs for privacy and industry expertise on auditor concentration.

The method examines the distribution of auditor concentration assuming that auditor choice occurs randomly. It then examines the observed distribution within the random assignment to consider whether the privacy or expertise motive dominates.

The main finding is that at the client industry level, clients in a dominant firm industry structure prefer privacy; whereas clients in a competitive market structure prefer expertise.

An implication of this paper is that an increase in the number of large auditors may change auditor concentration in client industries that prefer privacy, an auditor different from its competitor.

Policy makers should note that auditor concentration is not only a function of the number of auditors, but also of the client industry structure.

The results provide a new measure for industry specialists and provide additional insight regarding auditor choice when privacy is relevant.

This study aims to explore the relationship between audit partner and firm industry specialization and board of director independence on the decision by Taiwanese firms to use International Financial Reporting Standards (IFRS) flexibility concerning reporting interest income and expense and dividends received in different sections of the statement of cash flows. This flexibility existed in Taiwan for the first time in 2013, the year that Taiwan switched from its own generally accepted accounting principle to IFRS.

Using 2013 data for a sample of 1,227 firms, 354 of whom changed their reporting classification, this study examined the interaction effect of board independence and partner-level and firm-level auditor industry specialization on the cash flow reporting decision using logistic regression.

The results show there is a substitute relationship between board independence and partner-level industry specialization on the change in cash flow reporting classification, but a complementary relationship between board independence and firm-level auditor specialization. Further, both partner-level and firm-level auditor industry specializations have a complementary (but negative) relationship with board independence as to whether the firm is likely to report interest expense paid in the operating or financing activities sections.

An important implication is that knowing the levels of audit firm and partner specialization and how independent the board is, is useful for researchers and regulators in investigating auditor-client relationships and understanding the influences of variables investigated here on the outcome(s) of accounting policy and regulatory changes.

This study improved the field’s understanding of the impacts of audit partner and firm specialization, board independence and relevant interactions on cash flow reporting choices.

The purpose of this paper is to examine the association between the cost of debt (COD) and auditor industry expertise using Taiwanese data. Since previous studies (Li et al., 2010) have only examined the relation between industry specialization and COD at the audit firm level in western countries, the authors further examine the association between industry specialization and COD at the individual auditor level in an Asian context.

The authors use the interest rate on the firm’s debt as a proxy variable for the COD (Francis, Khurana and Pereira, 2005). The authors adopt three different methods to measure industry specialization, which consist of the auditors’ market share in terms of client sales and number of clients, and client assets.

The results indicate that the clients of industry specialists at individual auditor levels have a lower COD.

First, the authors extend the research of Li et al. (2010) and find that the clients of individual auditor industry specialists also have a lower COD. Second, the authors also believe the evidence on the effects of industry expertise at the individual auditor level may have policy implications for regulators and public investors. Finally, in contrast to works carried out in the US market, the authors provide empirical evidence for the relation between industry specialization and COD in an Asian market.

This paper aims to examine the association between gender composition of joint auditor pairs and the quality of reported financial information. More specifically, the authors attempt to assess whether and how these gender compositions affect the client firms’ earnings management behavior.

The authors utilized the unique institutional setting of Taiwan, where joint auditors are required by law. They studied the effect of gender in joint auditor pairs on accrual earnings management and real earnings management to achieve financial reporting objectives.

Empirical results indicate that engaging a woman as the lead auditor can constrain accrual earnings management, regardless of whether the joint auditor is male or female. The authors also found that all-male signing auditor pairs with industry expertise can significantly reduce accrual earnings management. The authors also documented that all-female signing auditor pairs and auditor industry expertise could drive clients to engage in real earnings management activities as an alternative to accrual earnings management.

The empirical results demonstrate that gender indeed plays a role in the quality of client’s reported financial information. Female auditors in a lead position and male auditors with industry expertise tend to be more successful in delivering better-quality audits.

The purpose of this paper is to examine whether the institutional changes accompanying the passage of the Sarbanes-Oxley Act of 2002 (SOX) have standardized the audit’s role in the overall financial reporting process, thereby reducing the impact of auditor characteristics on financial reporting quality.

To test this hypothesis, the association between audit quality characteristics (auditor size and industry expertise) and measures of financial reporting quality (analyst earning forecast dispersion and accuracy) are estimated using regression analysis. Results of this analysis are compared across the pre- and post-SOX periods.

The results of the study document a significant relationship between auditor size (Big N vs non-Big N) and financial reporting quality (as proxied by analyst earnings forecast properties) during the pre-SOX period but not in the post-SOX period. Auditor industry expertise is significantly associated with financial reporting quality throughout the entire sample period. Thus, financial reporting quality continues to be dependent on the degree of specialization of an audit firm in both the pre- and post-SOX periods; however, the impact of auditor size as a surrogate for quality has diminished.

The SOX Act of 2002 represented one of the most significant changes in the regulation of audits. This paper adds to the literature by examining the Act’s effects on financial professionals’ perception of the impact of audit firm characteristics on their client’s financial reporting quality.

This study aims to investigate the implications of audit industry specialization on auditor’s retention and growth within an emerging economy. Factors such as whether the firm is a Big 4, a firm with international affiliation, a local firm and the type of industry were studied to analyse the reasons behind audit firm retention and growth.

This research is based on a field study related to audit firms providing services to listed companies in an emerging economy. The sample includes the top 100 publicly held companies’ in the Egyptian stock market during 2006-2011 for which their annual reports are analysed to determine the audit firms’ retention and growth. An assessment of the continuity of the auditors and the increase in the number of audit clients were also measured.

The results confirm that industry specialization has an important effect on the auditor’s retention, especially for industries where capital investment is significant such as buildings, construction, financial services, housing and real estate. Big 4 audit firms retained their clients because of their industry specialization and brand name. Evidence was found that good knowledge of accounting and auditing standards resulted in audit firms with international affiliation competing with the Big 4 for clients’ retention and growth.

This study contributes to the existing literature, as it is among the first to provide empirical evidence on auditor retention, growth and auditor’s dominance in an emerging economy such as Egypt.

The purpose of this paper is to investigate the association between auditor industry specialization and audit fees surrounding Section 404 implementation.

With a sample of 1,006 industrial firms over the 2003-2005 reporting periods, an ordinary least square regression model was used to regress change in audit fees on auditor specialization measure and other control variables.

It was found that auditor industry specialization is negatively related to the change in audit fees during the first year of Sarbanes–Oxley Act (SOX) compliance (2003-2004). It was also found that there were no significant cost savings associated with auditor industry specialization in the second year of SOX compliance (2004-2005).

These results suggest that industry-specific expertise may enable auditors to adapt more efficiently to new significant audit standards and regulations, but that such efficiencies are likely to be most pronounced during the initial implementation year.

Auditor competition and auditor specialization are at the forefront of today’s ever-changing accounting industry. Analysis of a contemporary auditing issue (auditor specialization) in the context of major legislation (SOX) provides a research setting that gives both academics and practitioners valuable insight toward how future legislation can impact current accounting industry issues such as the increasing need to have more expertise.

From 2006 onwards very large Belgian nonprofit organizations (NPOs) are legally required to appoint an external auditor. In this context we investigate whether auditor choice in favor of a sector expert, being a higher quality auditor, is associated with NPOs’ expectations regarding several auditor attributes. We find that NPOs are more likely to choose a sector expert if they attach higher importance to an auditor’s client focus and relationship with management. NPOs are less likely to choose a sector expert if they care more about the practical execution of the audit. We provide recommendations for increasing the appeal of sector expertise as valuable auditor attribute. The resulting quality increase of NPOs’ financial statements and audit reports could benefit various stakeholders.