Blurred Lines: How Firm-Level Messaging Impacts Awareness of Cultural Differences During Review of Component Auditors’ Work

• In Event: Doctoral Road Papers

Abstract

Academic research and regulatory inspection findings indicate issues with multinational audits, specifically related to lead auditors’ review and critical evaluation of the work of 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 impacts the subjective interpretation and application of accounting and auditing standards. Cultural differences between lead and component auditors in different countries potentially create challenges for firms that “espouse a view of consistency in the service and quality provided by member firms worldwide” (Downey and Westermann 2018). 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 may make lead auditors less aware of cultural differences and in turn reduce lead auditors’ professional skepticism when reviewing the work of the firm’s in-network component auditor. I expect to find that firm-level messaging that places greater emphasis on distinction of network affiliates and less emphasis on global consistency will make lead auditors more aware of cultural differences, heighten professional skepticism, and in turn improve audit quality.

Author

• Danielle Gant, AICPA Foundation