New Clients, Audit Quality, and Audit Partner Industry Expertise: Evidence from Taiwan

16 Pages Posted: 10 Oct 2017

See all articles by Li‐Lin Liu

Li‐Lin Liu

California State University, East Bay

Xinmei Xie

Woodbury University; University of Texas at Dallas

Yu‐Shan Chang

Tamkang University

Dana A. Forgione

University of Texas at San Antonio - College of Business

Date Written: November 2017

Abstract

New client acceptance decisions are critical for auditors. Audit quality can be negatively affected by limited knowledge of the new client's operations and finances. This may be mitigated for auditors with industry specialization. We examine whether new clientele negatively affect audit quality at the individual level and how the association with audit quality varies across auditors with different levels of industry specialization. Our study fills a gap in the literature by directly addressing the effects of new clients on audit quality for specialist and non‐specialist auditors, as well as portfolio‐concentration experts, and sheds light on the nature of risks associated with new client acceptance decisions. We find both industry specialists and portfolio‐concentration experts can maintain their audit quality when accepting new clients, while there is a decline in quality for auditors who are neither industry specialists nor portfolio‐concentration experts.

Keywords: Audit quality, auditor industry expertise, auditor tenure, new client acceptance decision

Suggested Citation

Liu, Li‐Lin and Xie, Xinmei and Chang, Yu‐Shan and Forgione, Dana A., New Clients, Audit Quality, and Audit Partner Industry Expertise: Evidence from Taiwan (November 2017). International Journal of Auditing, Vol. 21, Issue 3, pp. 288-303, 2017, Available at SSRN: https://ssrn.com/abstract=3050221 or http://dx.doi.org/10.1111/ijau.12095

Li‐Lin Liu (Contact Author)

California State University, East Bay

Xinmei Xie

Woodbury University ( email )

7500 Glenoaks Blvd.
Burbank, CA 91510
United States

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Yu‐Shan Chang

Tamkang University

No.151, Yingzhuan Rd
Taiwan, 25137
China

Dana A. Forgione

University of Texas at San Antonio - College of Business ( email )

One UTSA Circle
San Antonio, TX 78249
United States
+1.210.458.6318 (Phone)
+1.810.815.5378 (Fax)

HOME PAGE: http://www.utsa.edu

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
316
PlumX Metrics