The Strength of Industry Specialization: Highlighted by the IFRS Adoption in the EU

Abstract

This study explores the impact that an audit industry specialist has on a firm’s audit quality after the implementation of a large change in financial reporting regulation. One of the main goals of IFRS was to increase the comparability of financial statements. I investigate whether IFRS increased the comparability of financial statements insomuch as it affected audit industry specialists’ ability to transfer knowledge between clients, thereby affecting the quality of their audits. Although my results are inconclusive, the explanation may be attributed to the increase in comparability being strong enough to benefit the non-industry specialist users but not being enough to increase already high quality audits of industry specialists.