The Validity of Auditor Industry Specialization Measures

Posted: 12 Jul 2013 Last revised: 12 Oct 2017

See all articles by Sophie Audousset-Coulier

Sophie Audousset-Coulier

Concordia University, Quebec - John Molson School of Business

Anne Jeny

IESEG School of Management

Like Jiang

University of Melbourne - Faculty of Business and Economics

Date Written: May 29, 2015

Abstract

In this research note, we examine the validity of the measures of auditor industry specialization in empirical archival audit research. Industry specialist auditors are auditors who have developed a specific expertise and are therefore able to provide high quality and more efficient services to their clients. Over the years, research scholars have developed a multiplicity of measures of industry specialization (ISP). We compare 30 ISP measures and find that the use of different ISP proxies results in inconsistent classifications of auditors as specialists. Using audit fee and earnings quality models, we further show that these inconsistencies have a significant effect on the inferences drawn from the models using ISP measures. We conclude that ISP measures exhibit a low degree of internal and external construct validity. This represents an important measurement challenge for researchers and casts some doubts on the robustness of prior empirical evidence found in auditor industry specialization research.

Keywords: auditor industry specialization, construct validity

JEL Classification: M42

Suggested Citation

Audousset-Coulier, Sophie and Jeny, Anne and Jiang, Like, The Validity of Auditor Industry Specialization Measures (May 29, 2015). Auditing: A Journal of Practice & Theory, Vol. 35, n°1, 2016, Available at SSRN: https://ssrn.com/abstract=2292534 or http://dx.doi.org/10.2139/ssrn.2292534

Sophie Audousset-Coulier (Contact Author)

Concordia University, Quebec - John Molson School of Business ( email )

Montreal, Quebec H3G 1M8
Canada
001 514 848 2424 ext 2021 (Phone)

Anne Jeny

IESEG School of Management ( email )

Socle de la Grande Arche
1 Parvis de la Defense
Puteaux, Paris 92800
France

Like Jiang

University of Melbourne - Faculty of Business and Economics ( email )

Victoria, 3010
Australia

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