The Impact of Auditor Industry Specialization and Auditor Economic Dependence on the Client on Corporate Sustainability Performance: The Role of the Audit Committee Chair Power

Document Type : Original Article

Authors

1 MSc., Department of Accounting, Seraj Institute of Higher Education, Tabriz, Iran.

2 Associate Professor, Department of Accounting, Ta.C., Islamic Azad University, Tabriz, Iran.

3 Assistant Professor, Department of Accounting, Va.C.,Islamic Azad University, Varzaghan, Iran.

Abstract

Objective: Sustainable corporate performance in creating long-term value for stakeholders requires transparent and reliable reporting that serves as a foundation for informed decision-making and public trust. In this regard, industry-specialized auditing plays a critical role in enhancing the quality of reports, ensuring the accuracy of financial information through thorough and comprehensive analysis. Moreover, the auditor’s economic dependence on the client, along with the structure and leadership of the audit committee, are decisive factors significantly affecting the independence and effectiveness of the audit process. This institutional and professional combination establishes a strong foundation for achieving sustainability objectives and long-term value creation. Accordingly, the primary aim of the present study is to examine the impact of auditor industry specialization and the auditor’s economic dependence on the client on corporate sustainability performance, considering the moderating role of the audit committee chairman’s authority.
Methods: Given its objective, this study falls within applied research. Methodologically, it adopts a descriptive-correlational approach and, in terms of nature, is classified as causal-comparative research. The data collected are quantitative, extracted from corporate audit reports, financial statements, relevant documents, and explanatory notes available in the CODAL system and Rahavard Novin Software. The statistical population includes 151 companies listed on the Tehran Stock Exchange from 2017 to 2023, encompassing a total of 1,057 observations. To analyze the data and test the hypotheses, a multiple regression method based on panel data was employed.
Results: The findings indicate that auditor industry specialization has a significant positive impact on corporate sustainability performance; auditors’ deep knowledge and specialized experience in the company’s field of activity facilitate improvement in environmental, social, and governance (ESG) indicators, thereby enhancing reporting quality and decision-making processes. In contrast, the auditor’s economic dependence on the client did not demonstrate a significant effect on corporate sustainability performance. Furthermore, the audit committee chairman’s authority plays a significant moderating role in the relationship between auditor industry specialization and sustainability performance, while no such moderating effect was observed in the relationship between economic dependence and sustainability performance. These results highlight the critical importance of auditor independence and specialization.
Conclusion: Auditor industry specialization plays a highly effective role in enhancing corporate sustainability performance, as specialized knowledge and practical experience improve financial reporting quality and increase transparency. This enables informed, responsible, and long-term decision-making, helping companies balance economic, environmental, and social dimensions. However, evidence suggests that the auditor’s economic dependence on the client does not significantly affect sustainability performance, reflecting the presence of complex, multifaceted factors in the auditing process. Moreover, the authority of the audit committee chairman serves a vital supporting role in leveraging auditor specialization to strengthen sustainability performance, underscoring the importance of governance structure and strong leadership in this process.
Innovation: Despite extensive research in auditing and corporate governance, a significant gap remains in studies that simultaneously examine the impact of auditor industry expertise and the auditor’s economic dependence on the client on corporate sustainability performance. In most prior research, these variables have been analyzed separately, neglecting their potential interaction. Moreover, the role of moderating governance mechanisms, particularly the power of the audit committee chair, as an influential factor in these relationships has received limited attention. This study, adopting an innovative approach, integrates three key components: auditor industry expertise, the auditor’s economic dependence on the client, and the authority of the audit committee chair, to analyze their combined and synergistic effects on corporate sustainability performance. The significance of this approach lies in the fact that simultaneously examining these factors can lead to a deeper and more comprehensive understanding of the mechanisms affecting corporate sustainability, providing a more realistic depiction of governance dynamics.

Keywords

References

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Journal of Finance and Corporate Sustainability
Volume 1, Issue 2 - Serial Number 2
February 2026
Pages 52-87

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History

  • Receive Date: 25 September 2025
  • Revise Date: 17 October 2025
  • Accept Date: 19 October 2025
  • First Publish Date: 21 January 2026
  • Publish Date: 21 January 2026

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