Audit fee premiums and audit quality of global industry specialist auditors

초록

The literature suggests that national industry specialist auditors provide high-quality audits and charge higher audit fees. This study expands prior research using auditor industry expertise at the global level. The global audit firm networks enable auditors to share industry knowledge with foreign members, which promotes them to develop global industry expertise. Global industry specialist auditors have competitive advantages from the participation in the global audit firm network, and as a result, their clients are willing to pay premiums in return for specialized audit services. To test the impact of global industry expertise on audit fees and audit quality in the Korean audit market, we use a sample of 4,766 firm-year observations from 2015 to 2017. We identify an audit firm as the global industry specialist auditor if the market share based on client sales across the world is the highest in a particular industry. Also, we use performance-matched abnormal accruals as a proxy for audit quality. Our results show that global industry specialist auditors provide high-quality audit services, even though they do not achieve audit fee premiums. On the other hand, national industry auditors receive audit fee premiums but do not deliver high-quality audit services. These results indicate that global industry expertise in the Korean audit market has a positive effect on audit quality, but the value of this global industry expertise is not adequately reflected in the audit fees. © 2021, Korean Accounting Association. All rights reserved.

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