Involvement of Component Auditors in Multinational Group Audits: Determinants, Audit Quality and Audit Fees

58 Pages Posted: 21 Nov 2014 Last revised: 9 Dec 2021

See all articles by Elizabeth Carson

Elizabeth Carson

University of New South Wales

Roger Simnett

Deakin University; UNSW Australia Business School, School of Accounting

Ulrike Thuerheimer

UNSW Business School

Ann Vanstraelen

Maastricht University

Date Written: October 31, 2021

Abstract

We study what determines the involvement of component auditors in multinational enterprise (MNE) group audits and the association with audit quality and audit fees. Using unique Australian disclosures of group audit fees paid to the principal and component auditors, we first document that MNE complexity, MNE internationalization, and auditor characteristics are associated with component auditor involvement, and extent and type of component auditor involvement. Next, we find that involvement of component auditors benefits audit quality as long as the principal auditor conducts a substantial amount of work. Once the involvement of component auditors exceeds a certain level, audit quality decreases. We also document that audit fees are higher in the presence of a component auditor and increase with the extent of involvement, irrespective of component auditor type. Our results contribute to the emerging literature on group audits and provide empirical evidence on regulatory concerns about group audit quality.

Keywords: group audit, component auditor, multinational audit, audit quality, audit fees

JEL Classification: G18; L84; M40; M41; M42

Suggested Citation

Carson, Elizabeth and Simnett, Roger and Thuerheimer, Ulrike and Vanstraelen, Ann, Involvement of Component Auditors in Multinational Group Audits: Determinants, Audit Quality and Audit Fees (October 31, 2021). Available at SSRN: https://ssrn.com/abstract=2528328 or http://dx.doi.org/10.2139/ssrn.2528328

Elizabeth Carson (Contact Author)

University of New South Wales ( email )

Sydney, NSW 2052
Australia
+612 9385 5822 (Phone)
+612 9385 5925 (Fax)

Roger Simnett

Deakin University ( email )

75 Pigdons Road
Victoria, Victoria 3216
Australia

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia
+61 2 9385 5825 (Phone)
+61 2 9385 5925 (Fax)

Ulrike Thuerheimer

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Ann Vanstraelen

Maastricht University ( email )

P.O. Box 616
Maastricht, Limburg 6200MD
Netherlands

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