Journal article

Does auditor industry specialization matter? Evidence from market reaction to auditor switches

WR Knechel, V Naiker, G Pacheco

Auditing | Published : 2007

Abstract

Numerous capital market studies have investigated the stock market's reaction to firms switching to and from brand name auditors (Big 8/6/5/4 auditors). However, audit firm brand name Is only one possible Indication of the quality of an auditor. This study contributes to the existing literature on auditor switching, by examining how the market reacts to auditor switches to or from audit firms that are considered to be Industry specialists. Consistent with our hypotheses, we find that firms switching between Blg 4 auditors experience significant positive abnormal returns when the successor auditor Is an industry speclallst, and they experience significant negative abnormal returns when the su..

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University of Melbourne Researchers

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