Abstract
ABSTRACT This study examines whether auditors develop expertise in audit risk homogenous industries. Using critical audit matters (CAMs) disclosed in audit reports of Chinese listed companies, we construct a homogeneity measure that captures the similarity of audit risks in a client industry. We find that individual partner expertise occurs in industries with high levels of CAM similarity. We also find that industry expert partners provide fee discounts in more homogenous industries, whereas audit quality is unchanged. These results suggest that auditors benefit from achieving economies of scale rather than providing quality-differentiated audits, by specializing in industries with similar audit risks.
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