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Higher audit fees associated with auditor industry specialization could represent higher unit price charged by industry specialist auditors (ISAs) or the provision of a greater quantity of audit services. This study exploits a field setting in Korea, where the disclosure of audit hours is required in company annual reports, and finds that ISAs charge significantly higher total audit fees but also expend significantly greater audit hours than non-ISAs. When audit fees and hours are considered together, the unit audit price of ISAs is significantly lower than that of non-ISAs. This indicates that higher total audit fees associated with ISAs are likely to be attributable to greater audit hours associated with ISAs. However, greater audit hours for ISAs may suggest higher audit quality or may simply indicate that the additional audit work performed by ISAs is conducted by relatively cheaper junior auditors. Our work provides an alternative explanation for the higher total audit fees documented in the previous studies. ayant une sp ecialisation sectorielle est ex ecut e par des assistants d'audit dont les honoraires sont relativement moins elev es. Les auteurs proposent ainsi une nouvelle explication aux honoraires d'audit totaux plus elev es document es dans les etudes ant erieures.

This study examines the relation between auditors and their clients' investment efficiency. We hypothesize and find that auditor characteristics that proxy for an auditor's knowledge and resources are associated with higher client investment efficiency, after controlling for the auditor's effect on financial reporting quality. This result is consistent with auditors providing informational advantages to their clients in a generalized investment setting. We find that this auditor effect is more pronounced for clients who have a higher demand for information as measured by client size, industry competition, and client complexity. The effect is also more pronounced for clients of longer-tenured auditors. Overall, the results suggest that auditors may be one component to the management information environment and, as such, appear to influence capital investment behavior. JEL Classifications: M4; M42. Data Availability: All data are publicly available.

SUMMARY We find that auditor industry expertise is both a firm-level and partner-level phenomenon, which suggests that industry expertise captured by accounting firms is dispersed among engagement partners through knowledge sharing and transfers within audit firms. We also find that the higher audit fees by expert auditors are due to more hours and not higher rates. While spending more hours allows expert auditors to extract higher fees in total, the finding that expert firms/partners exert greater effort does not support the suggestion that expert auditors are in general more efficient in audit production. However, we find weak evidence that audit hours for expert auditors are lower in industries and companies with homogenous operations and comparable accounting than in other industries and companies. This finding suggests that knowledge transfers more likely take place in homogeneous and comparable industries, leading to production efficiency that moderates the increase in audit hours charged by experts. JEL Classifications: M4; M42. Data Availability: All data are available from the identified sources.

We examine long-run stock returns and operating performance around firms' offerings of common stock, convertible debt, and straight debt from 1985 to 1990. We find that pre-issue abnormal returns are positive and significant for stock issuers, but not for convertible and straight debt issuers. The post-issue mean returns show that common stock and convertible debt issuers experience underperformance during the post-issue periods, but straight debt issuers do not. Consistent with these results, common stock issuers experience the best pre-issue operating performance among all three types of issuers, and operating performance declines during the post-issue periods for common stock and convertible debt issuers. Using a new approach in linear model estimations to correct heteroskedasticity and to adjust for finite sample, we find a positive relation between post-issue operating performance and issue-period stock price reactions. The results suggest that future operating performance is anticipated at the issue and that securities issues provide information on issuers' future performance. The Southern Finance Association and the Southwestern Finance Association.

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