New clients, audit quality, and audit partner industry expertise: Evidence from Taiwan

Abstract

New client acceptance decisions are critical for auditors. Audit quality can be negatively affected by limited knowledge of the new client's operations and finances. This may be mitigated for auditors with industry specialization. We examine whether new clientele negatively affect audit quality at the individual level and how the association with audit quality varies across auditors with different levels of industry specialization. Our study fills a gap in the literature by directly addressing the effects of new clients on audit quality for specialist and non‐specialist auditors, as well as portfolio‐concentration experts, and sheds light on the nature of risks associated with new client acceptance decisions. We find both industry specialists and portfolio‐concentration experts can maintain their audit quality when accepting new clients, while there is a decline in quality for auditors who are neither industry specialists nor portfolio‐concentration experts.

Outsourced internal audit function and real earnings management: The role of industry and firm expertise of external providers

“…For example, Balsam, Krishnan, and Yang (2003) and Krishnan (2003) early find that the auditor with industry expertise mitigates discretionary accruals and, consequently, improves the quality of financial reports. Recent research confirms this result (e.g., Chi & Chin, 2011; Garven, Beck, & Parsons, 2017; Liu, Xie, Chang, & Forgione, 2017; Reichelt & Wang, 2010). However, Chi, Lisic, and Pevzner (2011) and Burnett, Cripe, Martin, and McAllister (2012) report that industry expertise is associated with higher REM.…”

Pengaruh Beban Kerja, Klien Baru, Dan Ukuran Klien Terhadap Defisiensi Audit

“…Hasil dari penelitian tersebut menyatakan bahwa keputusan penerimaan klien baru merupakan hal kritis bagi auditor. Kualitas audit akan dipengaruhi secara negatif oleh adanya penerimaan klien baru bagi auditor (Liu et al, 2017) yang artinya adanya penerimaan klien baru akan menurunkan kualitas audit sehingga berpotensi menimbulkan defisiensi audit yang lebih banyak. Hal ini disebabkan terbatasnya pengetahuan auditor terhadap kondisi keuangan dan operasi klien baru sehingga auditor kurang dapat merencanakan dan menerapkan prosedur audit yang tepat.…”

“…Penyebab lainnya diduga karena audit pada klien baru merupakan faktor kunci bagi auditor untuk memperoleh informasi apakah sebaiknya akan mempertahankan klien tersebut untuk periode berikutnya ataukah menghentikan auditnya hanya pada audit tahun pertama (Liu et al, 2017). Oleh karena itu, auditor akan melakukan upaya terbaiknya dalam melakukan audit pada tahun pertama untuk mengurangi potensi risiko pada tahun-tahun berikutnya.…”

Understanding the Mechanism of Workload Distribution Among Auditors in BPK RI in Relation to Gender: An Exploratory Study

“…When faced with complex audit tasks, they may easily and successfully overcome them (Abdolmohammadi and Wright, 1987;Wang et al, 2015;Sonu et al, 2016;Zimmerman and Nagy, 2016). They have the ability to detect particular errors and material misstatement, and they are less likely to miss many kinds of mistakes (Libby and Frederick, 1990;Bedard and Biggs, 1991;Tubbs, 1992;Hammersley, 2006;Che et al, 2017;Liu et al, 2017). They are more confident, and this confidence makes them more accurate in judgment (Chung and Monroe, 2000) and more independent due to less influenced by management (Chi et al, 2016).…”

“…They found that auditor's experiences have negative impact on discretionary accruals. Liu et al (2017) found that auditors with specific industry experience may better understand the auditee's business cycle, and they are more prone to expose misstatements and irregularities in financial statements because of the pill over effects of industry specialization. Zimmerman and Nagy (2016) stated that experience leads to knowledge acquirement and knowledge to ability.…”