Audit Quality and Specialist Tenure

Posted: 7 Nov 2013 Last revised: 3 Jul 2019

See all articles by Jennifer J. Gaver

Jennifer J. Gaver

University of Georgia - J. M. Tull School of Accounting, Terry College of Business

Steven Utke

University of Connecticut - Department of Accounting

Date Written: July 10, 2018

Abstract

We argue that the association between auditor industry specialization and audit quality depends on how long the auditor has been a specialist. We measure audit quality using absolute discretionary accruals, income-increasing discretionary accruals, and book-tax differences. Our results, based on a sample of Big 4 audit clients from 2003-2015, indicate that auditors who have only recently gained the specialist designation produce a level of audit quality that does not surpass that produced by non-specialist auditors, and is generally lower than the audit quality produced by seasoned specialists. We estimate that the seasoning process takes two to three years. In contrast to prior research that finds no effect of specialization after propensity score matching, we find that seasoned specialists generally produce higher quality audits than other auditors even after matching. This suggests that the audit quality effect associated with seasoned industry specialist auditors is not due to differences in client characteristics.

Keywords: Audit Quality, Industry Specialization, Auditor Tenure, Discretionary Accruals, Book-Tax Differences, Auditor Changes, Propensity Score Matching

JEL Classification: M42

Suggested Citation

Gaver, Jennifer J. and Utke, Steven, Audit Quality and Specialist Tenure (July 10, 2018). The Accounting Review, Vol. 94, No. 3, May 2019, Available at SSRN: https://ssrn.com/abstract=2350803 or http://dx.doi.org/10.2139/ssrn.2350803

Jennifer J. Gaver (Contact Author)

University of Georgia - J. M. Tull School of Accounting, Terry College of Business ( email )

233 Brooks Hall
Athens, GA 30602-6252
United States
706-542-3699 (Phone)
706-542-3630 (Fax)

Steven Utke

University of Connecticut - Department of Accounting ( email )

School of Business
Storrs, CT 06269-2041
United States

HOME PAGE: http://www.steveutkedata.com/

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
4,149
PlumX Metrics