Auditor Professional Versatility: Labor Market Rewards for Interdisciplinary Expertise

The auditing profession plays a vital role in maintaining trust in capital markets, where the skills of individual auditors are key to ensuring quality audits. Prior research has focused on depth of auditor expertise, such as industry specialization (see Lennox and Wu, 2018). However, there is a significant gap in understanding the role of breadth of expertise, i.e., interdisciplinary knowledge. This study aims to introduce and explore the concept of Auditor Professional Versatility (APV), an individual auditor’s strategic investment in a range of professional credentials beyond the core Certified Public Accountant (CPA) qualification, including certifications in taxation (Certified Tax Agent), valuation (Certified Public Valuer), and legal matters (Certificate of Lawyer Qualification). This study predicts that APV can enhance an individual auditors’ career outcomes through two channels: (1) Enhanced Competence Channel, where the integration of interdisciplinary knowledge improves the effectiveness and efficiency of audits, particularly when dealing with complex engagements; and (2) Strengthened Independence Channel, where greater external marketability reduces the fear of job loss and strengthens auditors’ ability to resist client pressure, especially concerning reputation and litigation risk. We hypothesize that individual auditors with higher APV will experience greater career stability and success, due to their increased value in managing complex engagements and reducing reputational and litigation risks. This study will utilize China’s unique disclosure environment, providing detailed data on individual auditors and their credentials, and examine whether APV has positive effects on individual auditors’ career outcomes. We will test the two channels by analysing auditor competence and auditor independence. We will examine whether the positive effects (if any) of APV vary with depth of auditor expertise, client complexity, litigation risk, audit firm size, and labor market competition. Additionally, we will employ instrumental variable approach, change model, auditor fixed effects model, and propensity score matching to address endogeneity concerns. This research makes several contributions. Conceptually, it introduces APV as a new dimension of auditor human capital and clarifies how interdisciplinary expertise influences career paths. Empirically, it shifts the focus from audit firm- or office-level factors to individual auditors’ characteristics, responding to calls for research on individual auditors (e.g., Hanlon et al. 2022). Practically, the findings are expected to offer valuable insights for audit firms in talent management and professional development, for individual auditors in making strategic career investments, and for regulators interested in market-based mechanisms that enhance audit quality and auditor independence.