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Audit Firm Industry Specialization and Client Disclosure Quality

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  • Kimberly A. Dunn

    (Florida Atlantic University)

  • Brian W. Mayhew

    (Florida Atlantic University)

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.

Suggested Citation

  • Kimberly A. Dunn & Brian W. Mayhew, 2004. "Audit Firm Industry Specialization and Client Disclosure Quality," Review of Accounting Studies, Springer, vol. 9(1), pages 35-58, March.
    • Handle: RePEc:spr:reaccs:v:9:y:2004:i:1:d:10.1023_b:rast.0000013628.49401.69
    DOI: 10.1023/B:RAST.0000013628.49401.69
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    References listed on IDEAS

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    7. Danos, P & Eichenseher, Jw, 1982. "Audit Industry Dynamics - Factors Affecting Changes In Client-Industry Market Shares," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 20(2), pages 604-616.
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    Cited by:

    1. Paul Hribar & Todd Kravet & Ryan Wilson, 2014. "A new measure of accounting quality," Review of Accounting Studies, Springer, vol. 19(1), pages 506-538, March.
    2. Daniel Aobdia, 2015. "Proprietary information spillovers and supplier choice: evidence from auditors," Review of Accounting Studies, Springer, vol. 20(4), pages 1504-1539, December.
    3. K. Hung Chan & Kenny Z. Lin & Phyllis Lai-lan Mo, 2006. "A Political–economic Analysis of Auditor Reporting and Auditor Switches," Review of Accounting Studies, Springer, vol. 11(1), pages 21-48, March.
    4. Paul N. Michas & Dan Russomanno & Meiling Zhao, 2025. "The opportunity for partner industry knowledge sharing within audit offices and audit quality," Review of Accounting Studies, Springer, vol. 30(3), pages 2555-2606, September.

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