Seminar (Dept. of Accounting)

Theme：General Business Knowledge and Professional Skepticism

Speaker：Xiao Tusheng, Associate professor, Central University of Finance and Economics

Time：2021-12-15 10:00

Address：Room 1007, Mingde Business Building

Language：Chinese

ABSTRACT:

In this paper, we hypothesize and find that there is a positive relation between professional skepticism, proxied by audit adjustments, and the extent to which auditors have higher general business knowledge, i.e. knowledge of different client industries. Partners with higher general business knowledge, which we label as generalist auditors, are more likely to require downward as well as upward audit adjustments and large as well as small adjustments. Our results are robust to a wide battery of alternative specifications. In addition, generalist auditors are more likely to require audit adjustments for larger clients, clients with more subsidiaries, more diversified clients, when they work for a big audit firm and during economic downturns. Together, our findings suggest that auditors’ general business knowledge developed through auditing clients in different industries enhances their professional skepticism.