The effect of diversification on auditor selection in business groups: A case from Taiwan

This study examines effects of group diversification on the number of industry-specialist auditor selections in business groups. Using 2003-2010 Taiwanese business groups as the sample, our results show that unrelated diversification is significantly positively associated with the number of industry-specialist auditor selections in business groups, including audit firms and audit partners. Related diversification is significantly negatively associated with the number of industry-specialist audit partner selections in business groups. Overall, group member firms select different industry-specialist audit firms because of industry diversity and the same industry-specialist audit partners because of industry similarity.