FAR Research Project: What do we know about group audits?

Abstract

Despite concerns about the quality of group audits, recently raised by practice, inspectors, regulators, and standard setters, only a limited number of academic studies have specifically examined these engagements to date. This paper first describes some of the concerns about group audits to explain why research in this area is important and has the potential of providing a valuable contribution to practice. Then, we review the limited extant research available on group audits. Following, we present an overview of our own ongoing research project “Coordination and Communication Challenges in Global Group Audits: Evidence from Component Audit Leaders”, in which we examine (1) the determinants of coordination and communication challenges, (2) the degree to which the strategies described mitigate such challenges, and (3) how, ultimately, component auditors' perceptions of engagement performance are affected. We finalize the paper with a discussion of possible implications of our research for practice.

The effects of self‐esteem and perspective‐taking on group auditor's review actions

“…The setting of multinational group audits is complex, creating coordination and communication challenges between group auditors and component auditors that potentially constrain professional scepticism in these types of audits (Downey & Bedard, 2019;Downey & Gold, 2017;Downey & Westermann, 2021). These challenges are a driver of regulator concerns regarding professional scepticism in group audits (IFIAR, 2021;PCAOB, 2016).…”

“…This increased scale and complexity of companies drive the need for the use of component auditors. Hence, multinational group audits can be very complex as a result of coordination and communication challenges between the group audit team and component auditors (Downey & Bedard, 2019; Downey & Gold, 2017; Downey & Westermann, 2021). Further, regulators around the world, such as the International Forum of Independent Audit Regulators (IFIAR, 2021) and the Public Company Accounting Oversight Board (PCAOB, 2016), have raised concerns about audit quality in group audits 1 .…”