Abstract:Using data from publicly listed firms of A shares of non-financial securities in China during 2003 and 2012, we find that the auditor industry specialization is associated with a lower likelihood of a firm’s future stock price crashes. Moreover, we find that the relationship between auditor industry specialization and crash risk is more pronounced for firms with higher information asymmetry and with more serious heterogeneous beliefs among investors. The findings of this paper indicate that enhancing corporate governance effect of audit, reducing stock price crash risk and promoting the development of capital market, the Chinese Government should continue to strengthen the construction of auditor industry specialization, deepen state enterprise reforms and improve legal system.