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Blurred lines: How firm-level messaging impacts awareness of cultural differences during review of component auditors’ work

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  • Title:
    Blurred lines: How firm-level messaging impacts awareness of cultural differences during review of component auditors’ work
  • Author: Gant Booker, Danielle
  • Subjects: Component auditor ; Culture ; Multinational group audits
  • Description: Academic research and regulatory inspection findings indicate issues with multinational audits, specifically related to lead auditors’ review and critical evaluation of the work of foreign component auditors. One factor that may be exacerbating this problem is the lead auditors’ lack of consideration of the vast difference in national culture of component auditors located outside of the U.S., which influences the subjective application of accounting firms’ global audit methodology, even within the same network. Cross-cultural differences between lead and component auditors in different countries potentially create challenges for firms aiming to achieve consistency in service and quality provided by global network firms. Recent communications by accounting firm leadership and regulators emphasize standardization of firm-level audit methodology/approaches to enhance consistency across the globe. This type of messaging approach could result in lead auditors overrelying on their firm’s in-network affiliate, causing them to be less aware of cultural differences and in turn produce an insufficient review of the work of the component auditor, especially when evidence exists that the subsidiary client’s reporting may include aggressive assumptions. Based on preliminary data collected, I find that firm-level messaging that places greater emphasis on distinction of network affiliates and less emphasis on global consistency lead auditors to make professional judgments that were more consistent with critical review of the component auditors’ work. Results from preliminary data collection suggest that awareness of cultural differences was not a significant mediator of the interactive effect of firm-level messaging and subsidiary reporting. This was potentially due to participants overlooking the description of culture in the experimental design, which will be more salient in future data collections.
  • Creation Date: 2020
  • Language: English
  • Source: ThinkTech
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