ILIAS G. BASIOUDIS
Aston University
Abstract: The purpose of this paper is to examine the association between four groups of users of financial information and companiesÂ’ selection of industry specialist auditors. Institutional shareholders, debtholders, government, and employees are hypothesised to influence the choice of audit quality proxied by industry specialist auditors. Mixed results are obtained depending on both the sample chosen and the specific measure of auditor's industry specialisation. Institutional investors have a positive association with audit quality when the sample includes only Big-5 firms, while a negative association is found when both Big-5 and non-Big 5 firms are included in the sample. Debtholders, government, and employees appear to have no association with audit quality. Despite the low market shares of the Big-5 audit firms, I find that Big-5 are preferred by institutional owners in some markets suggesting a Big-5 brand-name reputation is a necessary foundation on which to attract their clientele. Different explanations of the results and limitations are offered.
Keywords: stakeholders, audit quality, industry specialist auditor, institutional ownership
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