（2004）Client size, auditor specialization and fraudulent financial reporting.pdfVIP

The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at /researchregister /0268-6902.htm Client size, auditor specialization Fraudulent financial and fraudulent financial reporting reporting 651 Joseph V. Carcello University of Tennessee, Knoxville, Tennessee, USA, and Albert L. Nagy Department of Accountancy, John Carroll University, University Heights, Ohio, USA Keywords Fraud, Auditors, Expertise, Financial reporting Abstract This study examines the effect that client size has on the relation between industry-specialist auditors and fraudulent financial reporting. Most of the major accounting firms have organized their audit practices along industry lines, reflecting a belief that industry specialization leads to higher quality audits. Furthermore, regulatory bodies and extant research suggests that larger clients have greater bargaining power and are more likely to be able to convince the auditor to acquiesce to aggressive accounting. Also, it may be more difficult for an auditor to possess industry expertise for larger clients who are likely to be more complex and operate in more than one industry. Consistent with previous research, we generally find a significant negative