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Dr. Luo Zuo
Associate Professor of Accounting
Samuel Curtis Johnson Graduate School of Management
Cornell University

We define auditor industry range as the extent to which an auditor has experience in auditing clients from different industries, and we link this construct to auditor judgment. We develop proxies for auditor industry range based on both a simple count of the number of industries and more sophisticated measures that assign different weights to the relative importance of each industry within an auditor’s client portfolio. We find that auditors with a wide range of industry experiences are more likely to require audit adjustments than auditors with a narrow range. In addition, this positive relation between auditor industry range and audit adjustments is stronger for more complex clients and in more uncertain environments. We also find that the effect of industry range on audit adjustments is more pronounced for industry specialists than for non-specialists. We do not find evidence that this relation is driven by clients’ pre-audit financial reporting quality. Together, our findings suggest that an auditor’s diverse experiences in different industries can facilitate the development of professional skepticism.