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Assessing Initiatives to Improve the Quality of Group Audits Involving Other Auditors

  • PCAOB (US Public Company Accounting Oversight Board) (dark gray) Image

Nov 30, 2016

In November 2016, the Public Company Accounting Oversight Board (PCAOB) released the paper "Assessing Initiatives to Improve the Quality of Group Audits Involving Other Auditors." The paper was presented at the PCOAB’s 2016 Conference on Auditing and Capital Markets on October 20-21, 2016.

One of the major current concerns of regulators internationally is the quality of the auditing of multinational groups, particularly those involving the co-ordination by the principal auditor of other auditors. These concerns resulted in changes to the international auditing standard on group audits, International Standards on Auditing (hereafter ISA) 600, which are consistent with current initiatives being considered by the PCAOB. The authors examine audit quality pre and post ISA 600 to help inform the IAASB as to the efficacy of the ISA 600 amendments and inform the PCAOB with regard their similar initiatives under consideration. They make use of unique Australian disclosures which allow them to identify the nature and extent of involvement of other auditors in group audits. They found that the revisions to ISA 600 have contributed to an improvement in audit quality, specifically for clients of non-Big 4 auditors. Further, the authors found that the quality of MNE group audits involving other auditors from the same network is lower, and this appears not to be affected by the ISA 600 revisions. Consistent with regulatory concerns, they also examine whether there are any incremental costs for group audits involving other auditors. While the authors found that group audits involving other auditors are more costly, they did not find evidence of an increase in audit fees associated with these regulatory initiatives.

Review the study on the PCAOB's website.

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