In-Network Auditors as Information Intermediaries Within Business Groups

52 Pages Posted: 13 May 2019 Last revised: 11 Apr 2022

See all articles by Eva Labro

Eva Labro

Kenan-Flagler Business School University of North Carolina

Caspar David Peter

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Jochen Pierk

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Christophe Van Linden

Illinois State University

Date Written: April 8, 2022

Abstract

We investigate if and how in-network auditors (where parent and subsidiary are audited by auditors from the same audit firm network) serve as information intermediaries within business groups. Using a sample of European groups, we show that in-network auditors, in contrast to involving out-of-network auditors, increase the speed at which information is compiled and enhance the comparability of information within groups. We confirm these results through interviews which provide examples of how in-network auditors can improve information flows within groups. As a result, groups and subsidiaries benefit from increased responsiveness to investment opportunities. While prior literature mostly focuses on the role of the auditor in providing assurance to financial reporting, our paper shows that in-network auditors provide increased added value to their audit clients through improved information intermediation within business groups.

Keywords: group audit, auditor alignment, interface between auditing and managerial accounting, internal information quality, common auditor

JEL Classification: M41, M42

Suggested Citation

Labro, Eva and Peter, Caspar David and Pierk, Jochen and Van Linden, Christophe, In-Network Auditors as Information Intermediaries Within Business Groups (April 8, 2022). Available at SSRN: https://ssrn.com/abstract=3370953 or http://dx.doi.org/10.2139/ssrn.3370953

Eva Labro

Kenan-Flagler Business School University of North Carolina ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
(919) 962-5747 (Phone)

Caspar David Peter

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T10-49
3062 PA Rotterdam, 3062 PA
Netherlands

HOME PAGE: http://www.rsm.nl/people/caspar-david-peter/

Jochen Pierk (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Christophe Van Linden

Illinois State University ( email )

United States

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