Global Group Audits: The Perspective of U.S. Group Audit Leads

• In Event: Working Better With Each Other: Collaborative, Group, and Audit Team Dynamics

Abstract

Regulators are concerned about the quality of group audits due to poor inspection results, recent enforcement actions against component auditors, and the significance of these audits to the global economy (e.g., IAASB 2015; PCAOB 2016a). In response, we aim to obtain a better understanding of global group audits as experienced by U.S.-based global group audit leads. Our data represent qualitative survey responses from 148 group audit leads (i.e., senior managers) on their perceptions of highly challenging and non-challenging global group audits. In challenging group audits, group auditor respondents routinely find fault with their component auditor counterparts, perceiving that work performed and/or documentation provided is not sufficient, not appropriate and/or not communicated timely, to comply with U.S. standards and reporting deadlines. In some cases, they perceive that the component auditor is unwilling (i.e., exercises resistance) and/or unable (e.g., due to resource constraints, inadequate training in U.S. standards) to comply; in others, that the component auditor is willing and able, but misunderstands group instructions. Noticeably this perspective is not self-reflective, as group auditors almost exclusively attribute issues to component auditors. While this perspective appears myopic, it provides insights into flaws of the global firm model of cooperative arrangements employed by the Big 4 firms, which is largely unacknowledged in regulatory discussions and the academic literature. To ensure audit quality on global group audits, it is imperative that sociocultural, regulatory, and institutional differences across member firms are addressed.

Authors

• Denise Hanes Downey, Villanova University

• Kimberly D Westermann, California Polytechnic State University - San Luis