Audit Office Industry Diversity and Audit Quality

Journal of Accounting, Auditing, and Finance, Forthcoming

62 Pages Posted: 1 Nov 2014 Last revised: 17 Jun 2020

See all articles by Erik Beardsley

Erik Beardsley

University of Notre Dame - Mendoza College of Business

Nathan C. Goldman

North Carolina State University - Department of Accounting

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy

Date Written: April 3, 2020

Abstract

This study examines the association between the industry diversity of an audit office and audit quality, where industry diversity is the extent to which clients differ by industry classification. We find a negative association between industry diversity and audit quality that is robust to controlling for other audit office and client characteristics. We observe this association while holding the level of audit office specialization or expertise in a particular industry constant. The association is most apparent at the low end of the distribution of industry diversity, where audit offices with the least diverse client portfolios have the highest audit quality. We also find that the association exists for both small and large audit offices as well as both industry specialists and non-industry specialists. However, we do not observe the association when the office audits clusters of clients, where clusters are three or more clients in the same industry.

Keywords: Audit quality; industry diversity; industry expertise; knowledge management; restatements

JEL Classification: M00, M12, M20, M40, M41, M54

Suggested Citation

Beardsley, Erik and Goldman, Nathan C. and Omer, Thomas C., Audit Office Industry Diversity and Audit Quality (April 3, 2020). Journal of Accounting, Auditing, and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2516981 or http://dx.doi.org/10.2139/ssrn.2516981

Erik Beardsley (Contact Author)

University of Notre Dame - Mendoza College of Business ( email )

Mendoza College of Business
Notre Dame, IN 46556-5646
United States

Nathan C. Goldman

North Carolina State University - Department of Accounting ( email )

Raleigh, NC 27695-8113
United States

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
356
Abstract Views
4,930
rank
99,993
PlumX Metrics