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The Impact of Firm level and Individual Level Industry Expertise on Earnings Conservatism
Shu - Hui Sue,
National Chengchi University And Shin Chien University Kaohsiung Campus
Chenlung Chin, National Chengchi University
ABSTRACT. This paper examines the association of earnings conservatism with an auditor’s industry expertise, measured at both individual auditor level and audit firm level, and explores whether the differential degree of conservatism due to industry expertise is primarily driven by industry experts at individual level or at audit firm level. Using a unique sample of listed firms in Taiwan, we find that signing auditor experts, either alone or joint individual-firm level, have an incentive to ensure a greater degree of earnings conservatism. We also find that firm-level industry experts alone are never associated with greater degree of earnings conservatism. These results suggest that the differential degree of earnings conservatism due to industry expertise is primarily driven by industry experts at individual level rather than industry experts at firm level. Second, we find no evidence of the differential degree of earnings conservatism between lead and concurring industry experts.
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