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 improvingaudit quality.

Demanding auditor specialization in an industry leads to a higher level of technical competenceand 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 discovererrors, and thereby, affect the probability of reporting the discovered errors (Hammersley, 2006).

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Requestingindustry expertise can represent an incentive for audit firm to invest in expertise and to desire industry-basedcostumers. Besides, the industries which normally use the expertise contract, accounting relatedtechnologies, are more powerful to reach a higher level of audit quality by utilizing industry expert auditorsthan non-expert auditors (Craswell et al., 1995).

So, audit quality is positively related to specialization andindustry expertise (Lowensohn, Johnson, Elder, ; Davies, 2007). In addition, audit tenure is directly related tothe 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 duringthe first years of audit tenure (Stanley ; Todd DeZoort, 2007). In this regard, higher audit fee increases asaudit expertise enhances.

This is mainly due to the fact that higher audit expertise can lead to higher auditquality (Francis, 2004). In other words, additional investment on expertise can cause a positive effect on theaudit fee premium (Craswell et al., 1995). Hence, industry expertise is positively associated with audit fee andaudit quality (Cahan, Godfrey, Hamilton, ; Jeter, 2008). In this situation, industry expertise might reach morepremiums 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, industryexpertise advantages together with general audit knowledge can enhance the audit technical ability and auditreputation and so increase audit quality as well as leading to a higher level of audit fees.

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