Abstract

The overconfidence is one of the most important features of the managers that affects the risk-taking. The industry specialist auditors have a greater ability to detect distortions within their specialized industry. Therefore, it is less likely that overconfident managers make use of industry specialist auditors, due to the fact that such auditors are more likely to detect aggressive accounting practices of their employers. Furthermore, the overconfident managers might employ non-specialist auditors in order to pay less audit fees. This study aims to examine the effect of the managerial overconfidence on the use of the industry specialist auditor. The research sample consists of 71 firms listed in Tehran Stock Exchange (TSE) within the period 2008-2013. Considering the independent variable being two-dimensional (using industry specialist auditor), the logistic regression model was applied to test the research hypothesis. Meanwhile, the market share approach was utilized in this study to determine the industry specialist auditor. The results of the investigation show that the overconfidence has no significant impact on using the industry specialist auditor. Furthermore, the examinations indicate that the larger the firm’s size, it is more likely to use industry specialist auditors.