According to a higher level of technical competence

According to literature, it is clear that the expertise of the auditor plays an important role in improving
audit quality. Demanding auditor specialization in an industry leads to a higher level of technical competence
and technical information. It is mainly due to auditor’s potential ability to detect financial statement errors
(Arrunada, 2000). In this case, industry expertise knowledge enhances the likelihood that auditors discover
errors, and thereby, affect the probability of reporting the discovered errors (Hammersley, 2006). Requesting
industry expertise can represent an incentive for audit firm to invest in expertise and to desire industry-based
costumers. Besides, the industries which normally use the expertise contract, accounting related
technologies, are more powerful to reach a higher level of audit quality by utilizing industry expert auditors
than non-expert auditors (Craswell et al., 1995). So, audit quality is positively related to specialization and
industry expertise (Lowensohn, Johnson, Elder, ; Davies, 2007). In addition, audit tenure is directly related to
the industry expertise, because of a new industrial audit client can desire to benefit from audit expertise,
technical ability and knowledge. So, auditors will be able to fulfill the lack of client-specific knowledge during
the first years of audit tenure (Stanley ; Todd DeZoort, 2007). In this regard, higher audit fee increases as
audit expertise enhances. This is mainly due to the fact that higher audit expertise can lead to higher audit
quality (Francis, 2004). In other words, additional investment on expertise can cause a positive effect on the
audit fee premium (Craswell et al., 1995). Hence, industry expertise is positively associated with audit fee and
audit quality (Cahan, Godfrey, Hamilton, ; Jeter, 2008). In this situation, industry expertise might reach more
premiums compared to non-industry expertise (Wang ; Iqbal, 2009). In addition, industry expertise,
reinforced by auditors during the engagements, will lead to higher audit quality (Hussein ; Hanefah, 2013).
Such experiences can also enhance the audit reputation through market credibility. In summary, industry
expertise advantages together with general audit knowledge can enhance the audit technical ability and audit
reputation and so increase audit quality as well as leading to a higher level of audit fees.


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