The Value of Auditor Industry Specialization - Evidence from a Structural Model

51 Pages Posted: 31 Aug 2020

See all articles by Qiang Guo

Qiang Guo

University of Southern Denmark - Department of Business and Economics

Christopher Koch

Johannes Gutenberg University Mainz - Gutenberg School of Economics and Management

Aiyong Zhu

Wuhan University - School of Economics and Management

Date Written: August 1, 2020

Abstract

This study investigates the value of auditor industry specialization. In the first step, we use a discrete choice model to derive the first-order demand for auditor industry specialization. Our results reveal that clients have a general preference for auditor industry specialization, relating to both audit firm and audit office specialization. Further, we observe that specializations at the audit firm and audit office are substitutes. We also find that larger and more complex clients have a stronger demand for specialization at the audit office but not the audit firm level. In the second step, we use the results from the discrete choice model to quantify the value of auditor industry specialist for clients. We find that the aggregate value of industry specialization for all clients is around 5 million US dollars and that it shapes the audit market as losing it results in the loss of approximately 5% of clients.

Keywords: auditor industry specialization, auditor demand, discrete choice model, counterfactual analysis

JEL Classification: M42, M48, L11, L84

Suggested Citation

Guo, Qiang and Koch, Christopher and Zhu, Aiyong, The Value of Auditor Industry Specialization - Evidence from a Structural Model (August 1, 2020). Available at SSRN: https://ssrn.com/abstract=3673987 or http://dx.doi.org/10.2139/ssrn.3673987

Qiang Guo

University of Southern Denmark - Department of Business and Economics ( email )

Campusvej 55
DK-5230 Odense, 5230
Denmark

Christopher Koch (Contact Author)

Johannes Gutenberg University Mainz - Gutenberg School of Economics and Management ( email )

Mainz
Germany
+49 (6131) 3929990 (Phone)

HOME PAGE: http://https://www.cg.bwl.uni-mainz.de/

Aiyong Zhu

Wuhan University - School of Economics and Management

Wu Han, Hu-Bai 430072
China

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

Paper statistics

Downloads
114
Abstract Views
695
rank
301,289
PlumX Metrics