The Effect of client industry structure on client prference for privacy and auditor concentration

Purpose - The purpose of this paper is to examine the effect of a client's potentially conflicting needsfor privacy and industry expertise on auditor concentration.Design/methodology/approach - The method examines the distribution of auditor concentrationassuming that auditor choice occurs randomly. It then examines the observed distribution within therandom assignment to consider whether the privacy or expertise motive dominates.Findings - The main finding is that at the client industry level, clients in a dominant film industrystructure prefer privacy; whereas clients in a competitive market structure prefer expertise.Research limitations/implications ... An implication of this paper is that an increase in thenumber of large auditors may change auditor concentration in client industries that prefer privacy, anauditor different from its competitor.Practical implications - Policy makers should note that auditor concentration is not only afunction of the number of auditors, but also of the client industry structure.Originality/value - The results provide a new measure for industry specialists and provideadditional insight regarding auditor choice when privacy is relevant.