Audit Firm Industry Specialization and Client Disclosure Quality

Kimberly A. Dunn and Brian W. Mayhew ()
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Kimberly A. Dunn: Florida Atlantic University
Brian W. Mayhew: Florida Atlantic University

Review of Accounting Studies, 2004, vol. 9, issue 1, No 2, 35-58

Abstract: Abstract This paper provides evidence that clients select auditors as part of their overall disclosure strategy. We hypothesize that in addition to higher quality audits, industry-specialist audit firms assist clients in enhancing disclosures. We also posit that the choice of an industry-specialist auditor signals a client’s intention to provide enhanced disclosures. However, we predict that industry-specialist audit firms are less important in regulated industries where enhanced disclosures add little value. Consistent with our hypotheses, we document a positive association between industry-specialist audit firms and analysts’ rankings of disclosure quality in unregulated industries, but no relation in regulated industries.

Keywords: auditor industry specialization; disclosure quality; regulated industries (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1023/B:RAST.0000013628.49401.69

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