Auditor industry specialization, political economy and earnings quality: some cross-country evidence

Jaggi, Bikki, Gul, Ferdinand A. and Lau, Thomas Sing Chiu 2012, Auditor industry specialization, political economy and earnings quality: some cross-country evidence, Journal of international financial management and accounting, vol. 23, no. 1, Spring, pp. 23-61, doi: 10.1111/j.1467-646X.2011.01053.x.

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Title Auditor industry specialization, political economy and earnings quality: some cross-country evidence
Author(s) Jaggi, Bikki
Gul, Ferdinand A.ORCID iD for Gul, Ferdinand A. orcid.org/0000-0001-8260-1472
Lau, Thomas Sing Chiu
Journal name Journal of international financial management and accounting
Volume number 23
Issue number 1
Season Spring
Start page 23
End page 61
Total pages 39
Publisher Wiley
Place of publication Chichester, Eng.
Publication date 2012
ISSN 0954-1314
1467-646X
Summary Using cross-country data, we evaluate the impact of investor protection on the association between earnings quality and audits by industry specialists. Our findings show that the positive association between industry specialist auditors and earnings quality as documented in the literature is affected by the political electoral system, which reflects investor protection rights in a country. We document that audits by industry specialists are associated with higher earnings quality in countries with the proportional electoral system, reflecting weak investor protection. Our results also confirm Kwon et al.'s findings that overall there is a positive association between earnings quality and audits by industry specialists in countries with weak legal enforcement. Our findings, however, indicate that Kwon et al.'s results are valid only for countries with weak investor protection reflected by the proportional electoral system and not for countries with strong investor protection reflected by the majoritarian electoral system. These findings thus suggest that higher earnings quality of firms audited by industry specialists across countries can especially be expected when investor protection is low and legal enforcement is also weak. In addition, our research suggests that future cross-country studies could explicitly consider the role of the political electoral system of a country in evaluating corporate governance, management and accounting issues.
Language eng
DOI 10.1111/j.1467-646X.2011.01053.x
Field of Research 150103 Financial Accounting
1501 Accounting, Auditing And Accountability
1502 Banking, Finance And Investment
1503 Business And Management
Socio Economic Objective 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2012, Blackwell Publishing
Persistent URL http://hdl.handle.net/10536/DRO/DU:30080017

Document type: Journal Article
Collections: Faculty of Business and Law
Department of Accounting
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