Determinants and Consequences of Auditors’ Consultations with the National Office
Abstract
Audit teams may consult with their firm’s national office to obtain specialized expertise, satisfy regulatory and quality control requirements, and demonstrate due professional care. We describe the consultation process based on PCAOB standards, firm methodologies, and auditor interviews. We explain different types of consultations and highlight differences in the determinants and usefulness of mandatory versus voluntary consultations. Using PCAOB inspection data, we show that formal consultations are largely predictable based on engagement characteristics and, on average, are not associated with audit quality. However, two subsets of formal consultations that focus on accounting issues and occur earlier in the engagement process are associated with greater regulatory compliance and higher audit quality. Hence, an increasing reliance on all types of consultations does not automatically translate into higher audit quality. Collectively, our findings deepen our understanding of auditors’ use of national office consultations and their implications for audit practice. Data Availability: Audit engagement data from the PCAOB are proprietary; other data are from public sources.
- DOI
- 10.2308/tar-2024-0348
- Pages
- 1-33
- Language
- en
- Sources
- crossref