Prior studies imply a positive relation between auditor specialisation and audit quality, but the effect of auditor tenure on audit quality is mixed. In this study, we examine whether industry specialisation of auditors affect the association between auditor tenure and equity liquidity. Lower audit quality indicates lower accounting information quality, which may lead to a larger proportion of informed traders dealing in the equity of the firm, along with a corresponding decline in the willingness of uninformed liquidity traders to trade in such equities. We also find that the liquidity is positively related to the employment of an industry specialist auditor and negatively related to audit firm tenure. In addition, we find that the association between shorter auditor tenure and lower liquidity is weaker for firms audited by industry specialists compared to non-specialists.
Keywords: auditor specialisation, auditors, audit firm tenure, equity liquidity, audit quality, auditing, Tunisia, accounting, information quality, informed traders, listed firms, stock exchanges, shares, investors, bid-ask spread, business continuity, risk management