This study investigates auditors’ consideration of industry-level information in their assessment of client-level risk. Auditing standards suggest that industry-level information is likely to be important in the assessment of client-level risk, but the standards provide few specifics about how auditors should use industry-level information in the risk assessment process. I argue that industry norms serve as a benchmark for evaluating the risk of the client and that deviations from industry norms could indicate increased audit risk. I create measures that capture the extent to which clients deviate from industry norms using proxies for client-level risk factors. In my primary tests, I investigate whether auditors respond to these measures of deviation from industry norms and whether these measures are associated with adverse audit outcomes. I find consistent evidence of a positive relation between these measures and audit fees, suggesting that auditors identify and respond to deviations from industry norms. I find limited evidence of a relation between these measures and the likelihood of misstatement, suggesting that auditors’ response to deviations from industry norms is generally appropriate. In subsequent tests, I consider whether auditors’ response to deviations from industry norms varies by auditor type. I find that Big Four auditors and industry specialist auditors are more responsive to deviations from industry norms than non-Big Four and non-specialist auditors. Consistent with this, I also find some evidence that deviations from industry norms for certain risk factors are more strongly associated with adverse outcomes for non-Big Four or non-specialist auditors relative to Big Four or specialist auditors. My findings should be of interest to auditors, regulators, and market participants because they suggest that identifying and responding to industry-level information when assessing client-level risk is an important component of effective audit risk assessment.
","abstract_html":"<p>This study investigates auditors’ consideration of industry-level information in their assessment of client-level risk. Auditing standards suggest that industry-level information is likely to be important in the assessment of client-level risk, but the standards provide few specifics about how auditors should use industry-level information in the risk assessment process. I argue that industry norms serve as a benchmark for evaluating the risk of the client and that deviations from industry norms could indicate increased audit risk. I create measures that capture the extent to which clients deviate from industry norms using proxies for client-level risk factors. In my primary tests, I investigate whether auditors respond to these measures of deviation from industry norms and whether these measures are associated with adverse audit outcomes. I find consistent evidence of a positive relation between these measures and audit fees, suggesting that auditors identify and respond to deviations from industry norms. I find limited evidence of a relation between these measures and the likelihood of misstatement, suggesting that auditors’ response to deviations from industry norms is generally appropriate. In subsequent tests, I consider whether auditors’ response to deviations from industry norms varies by auditor type. I find that Big Four auditors and industry specialist auditors are more responsive to deviations from industry norms than non-Big Four and non-specialist auditors. Consistent with this, I also find some evidence that deviations from industry norms for certain risk factors are more strongly associated with adverse outcomes for non-Big Four or non-specialist auditors relative to Big Four or specialist auditors. My findings should be of interest to auditors, regulators, and market participants because they suggest that identifying and responding to industry-level information when assessing client-level risk is an important component of effective audit risk assessment. </p>","abstract_has_math":false,"creators":["Rosser, David"],"institution":null,"degree_name":"Doctor of Philosophy in Business Administration (PhD)","degree_level":"Dissertation","degree_discipline":null,"degree_department":null,"school":null,"contributors":["Myers, Linda A.","Peters, Gary F."],"advisors":["Cassell, Cory A."],"committee_chairs":[],"committee_members":[],"year":2017,"date_issued":"2017-08-01T07:00:00Z","date_published":"2017-08-01T07:00:00Z","updated_at":"2026-07-24T01:00:28Z","subjects":["Audit Quality","Industry Specialization","Risk Assessment","Accounting","Business Administration, Management, and Operations"],"languages":[],"rights":[],"rights_urls":[],"identifier_entries":[]},"links":{"outbound_url":"https://scholarworks.uark.edu/etd/2414","outbound_label":"Repository record","outbound_source":"dc:identifier"},"metadata_groups":[{"id":"people","label":"People","entries":[{"key":"dc:contributor","label":"Contributor","values":["Myers, Linda A.","Peters, Gary F."]},{"key":"dc:contributor.advisor","label":"Advisor","values":["Cassell, Cory A."]},{"key":"dc:creator","label":"Author","values":["Rosser, David"]}]},{"id":"academic_context","label":"Academic Context","entries":[{"key":"dc:date","label":"Dc Date","values":["2017"]},{"key":"dc:date.available","label":"Dc Date Available","values":["2024-02-06T08:00:00Z"]},{"key":"thesis:degree_level","label":"Degree Level","values":["Dissertation"]},{"key":"thesis:degree_name","label":"Degree Name","values":["Doctor of Philosophy in Business Administration (PhD)"]}]},{"id":"subjects_keywords","label":"Subjects and Keywords","entries":[{"key":"dc:subject","label":"Dc Subject","values":["Audit Quality","Industry Specialization","Risk Assessment","Accounting","Business Administration, Management, and Operations"]}]},{"id":"identifiers","label":"Identifiers","entries":[{"key":"dc:identifier","label":"Identifier","values":["https://scholarworks.uark.edu/etd/2414"]}]},{"id":"additional","label":"Additional Metadata","entries":[{"key":"dc:description.abstract","label":"Abstract","values":["This study investigates auditors’ consideration of industry-level information in their assessment of client-level risk. Auditing standards suggest that industry-level information is likely to be important in the assessment of client-level risk, but the standards provide few specifics about how auditors should use industry-level information in the risk assessment process. I argue that industry norms serve as a benchmark for evaluating the risk of the client and that deviations from industry norms could indicate increased audit risk. I create measures that capture the extent to which clients deviate from industry norms using proxies for client-level risk factors. In my primary tests, I investigate whether auditors respond to these measures of deviation from industry norms and whether these measures are associated with adverse audit outcomes. I find consistent evidence of a positive relation between these measures and audit fees, suggesting that auditors identify and respond to deviations from industry norms. I find limited evidence of a relation between these measures and the likelihood of misstatement, suggesting that auditors’ response to deviations from industry norms is generally appropriate. In subsequent tests, I consider whether auditors’ response to deviations from industry norms varies by auditor type. I find that Big Four auditors and industry specialist auditors are more responsive to deviations from industry norms than non-Big Four and non-specialist auditors. Consistent with this, I also find some evidence that deviations from industry norms for certain risk factors are more strongly associated with adverse outcomes for non-Big Four or non-specialist auditors relative to Big Four or specialist auditors. My findings should be of interest to auditors, regulators, and market participants because they suggest that identifying and responding to industry-level information when assessing client-level risk is an important component of effective audit risk assessment.
"]},{"key":"dc:title","label":"Title","values":["Does Industry-level Information Affect Auditors’ Assessment of Client-level Risk?"]}]}],"canonical_facts":{"dc:contributor":["Myers, Linda A.","Peters, Gary F."],"dc:contributor.advisor":["Cassell, Cory A."],"dc:creator":["Rosser, David"],"dc:date":["2017"],"dc:date.available":["2024-02-06T08:00:00Z"],"dc:description.abstract":["This study investigates auditors’ consideration of industry-level information in their assessment of client-level risk. Auditing standards suggest that industry-level information is likely to be important in the assessment of client-level risk, but the standards provide few specifics about how auditors should use industry-level information in the risk assessment process. I argue that industry norms serve as a benchmark for evaluating the risk of the client and that deviations from industry norms could indicate increased audit risk. I create measures that capture the extent to which clients deviate from industry norms using proxies for client-level risk factors. In my primary tests, I investigate whether auditors respond to these measures of deviation from industry norms and whether these measures are associated with adverse audit outcomes. I find consistent evidence of a positive relation between these measures and audit fees, suggesting that auditors identify and respond to deviations from industry norms. I find limited evidence of a relation between these measures and the likelihood of misstatement, suggesting that auditors’ response to deviations from industry norms is generally appropriate. In subsequent tests, I consider whether auditors’ response to deviations from industry norms varies by auditor type. I find that Big Four auditors and industry specialist auditors are more responsive to deviations from industry norms than non-Big Four and non-specialist auditors. Consistent with this, I also find some evidence that deviations from industry norms for certain risk factors are more strongly associated with adverse outcomes for non-Big Four or non-specialist auditors relative to Big Four or specialist auditors. My findings should be of interest to auditors, regulators, and market participants because they suggest that identifying and responding to industry-level information when assessing client-level risk is an important component of effective audit risk assessment.
"],"dc:identifier":["https://scholarworks.uark.edu/etd/2414"],"dc:subject":["Audit Quality","Industry Specialization","Risk Assessment","Accounting","Business Administration, Management, and Operations"],"dc:title":["Does Industry-level Information Affect Auditors’ Assessment of Client-level Risk?"],"thesis:degree_level":["Dissertation"],"thesis:degree_name":["Doctor of Philosophy in Business Administration (PhD)"]},"updated_at":"2026-07-24T01:00:28Z"}