Involvement of Component Auditors in Multinational Group Audits: Determinants and Audit Outcomes

55 Pages Posted: 21 Nov 2014 Last revised: 26 Jun 2019

See all articles by Elizabeth Carson

Elizabeth Carson

University of New South Wales

Roger Simnett

UNSW Australia Business School, School of Accounting

Ulrike Thuerheimer

Maastricht University

Ann Vanstraelen

Maastricht Accounting and Auditing Research and Education Center (MARC); Maastricht University

Greg Trompeter

University of Central Florida

Date Written: June 25, 2019

Abstract

We study the determinants of involvement of component auditors (either network and/or unaffiliated) in multinational (MNE) group audits and associated audit outcomes. We identify the involvement of component auditors, using unique Australian disclosures of group audit fees paid to the principal and component auditors. We first document that MNE complexity, degree of MNE internationalization, and auditor characteristics determine the extent and type of component auditor involvement. Next, we find that increased involvement of component auditors is associated with lower audit quality and higher audit fees. We then investigate the impact of the revision of the international auditing standard related to group audits, which expanded the principal auditor’s responsibilities, and show that, while this reduced the involvement of unaffiliated (but not network) auditors, quality problems remain.

Keywords: group audits; component auditors; global audit firm networks; audit quality; audit fees

JEL Classification: M49

Suggested Citation

Carson, Elizabeth and Simnett, Roger and Thuerheimer, Ulrike and Vanstraelen, Ann and Trompeter, Gregory, Involvement of Component Auditors in Multinational Group Audits: Determinants and Audit Outcomes (June 25, 2019). 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

UNSW Australia Business School, School of Accounting ( email )

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

Ulrike Thuerheimer

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Ann Vanstraelen

Maastricht Accounting and Auditing Research and Education Center (MARC) ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Gregory Trompeter

University of Central Florida ( email )

PO Box 161400
Orlando, FL 32816
United States

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