Academic Activities
[Research]Legal Systems and Earnings Quality: The Role of Auditor Industry Specialization
2007.11.01 Views 1357 경영학연구분석센터
A Journal of Practice & Theory
Vol. 26, No. 2, November 2007, pp. 25-55.
Soo Young Kwon (a), Chee Yeow Lim (b), and Patricia Mui‐Siang Tan (c)
a Professor at Korea University.
b Assistant Professor at Nanyang Technological University.
c Associate Professor at Nanyang Technological University.
http://dx.doi.org/10.2308/aud.2007.26.2.25
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.
Vol. 26, No. 2, November 2007, pp. 25-55.
Soo Young Kwon (a), Chee Yeow Lim (b), and Patricia Mui‐Siang Tan (c)
a Professor at Korea University.
b Assistant Professor at Nanyang Technological University.
c Associate Professor at Nanyang Technological University.
http://dx.doi.org/10.2308/aud.2007.26.2.25
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.