| Summary: | 碩士 === 國立臺中科技大學 === 會計資訊系會計與財稅碩士班 === 102 === This study examines whether auditor industry specialization, measured using the auditor’s within-industry market share, improves audit quality proxied by the magnitude of absolute discretionary accruals. The full sample results run by cross-sectional regression model are consistent with prior literature that auditor industry specialization is positively associated with audit quality. To mitigate model misspecification problems by reducing or even eliminating the correlation between the treatment variable and the matching variables, the main analyses of this study, for audit-quality proxy and specialization measure, clients of specialist and nonspecialist auditors are matched using both client size and propensity scores. After matching clients of specialist and nonspecialist auditors on client size, the results show that industry specialization is positively associated with audit quality. The results are the same as that of the full sample, whereas the significant level is lower than that of industry specialization is positively associated with audit quality. After matching clients of specialist and nonspecialist auditors on propensity scores, the evidence shows that the association industry specialization is positively but statistically insignificant associated with audit quality. The combined evidence in this study suggests that the auditor’s within-industry market share is not a reliable indicator of audit quality. Nevertheless, these findings do not imply that industry knowledge is not important for auditors, but that the methodology used in extant archival studies to examine this issue does not fully parse out the effects of auditor industry specialization from client characteristics.
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