|Intra-Audit Firm Office Changes and Financial Reporting Quality|
ABSTRAK: Abstract I examine a sample of companies who have switched engagement offices within the same audit
firm. This setting has not been previously examined in the literature and allows me to research changes in audit quality while controlling for the endogenous nature of financial reporting quality and auditor choice. I find that switching from a small audit office to a large one is associated with a significant increase in accrual quality. I also find that the sensitivity of accrual quality to auditor industry specialization is dependent on the how big a role one might expect auditor expertise to play. Specifically, for firms in industries with especially complex accounting standards, the act of switching from a non-specialist to an industry specialist audit office is associated with an increase in accrual quality. I also examine stock price synchronicity as a measure of firm- and industry-specific information in stock prices, a proxy for financial reporting quality, and find that switches both to large and industry specialist audit offices are associated with increases in stock price synchronicity. Further study reveals that industry specialist offices are associated with greater industry-specific future earnings information being impounded into stock prices.
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