Industry Specialist Audit Teams and Audit Production/Quality​

We use proprietary data from a Big 4 firm in Sweden that contains the audit team assignments and hours for individual auditors to compute two direct measures related to industry specialization. First, we use a measure of industry specialization at the engagement team level that reflects the average level of industry experience across all team members to identify industry specialist teams (ISTs). Second, to explore how the allocation of industry expertise within an IST matters, we use this data to identify the rank of specific team members who have a high level industry expertise. We find that ISTs have higher audit fees and higher audit hours, indicating more audit effort, but the average charge out rate does not differ between ISTs and non-ISTs. We also find that ISTs are associated with higher audit quality. However, the latter result is driven by ISTs that have industry experts spread throughout the team.

Professor Steven Cahan

Steven Cahan is a Professor of Financial Accounting at the University of Auckland Business School. His research interests are in the areas of auditing and financial reporting, and he has published over 60 academic research articles in journals including The Accounting Review, Accounting, Organizations and Society, Contemporary Accounting Research, Auditing: A Journal of Practice and Theory, Journal of Banking and Finance, and Accounting Horizons. His PhD is from the University of Colorado, Boulder. Find out more about Professor Steven Cahan.

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