as well as board of directors is greatly facilitated. Such matters as scope of work,
audit findings, proposed audit reports, internal control, and other recommenda-
tions and fees can be reported promptly and efficiently for all locations.- All of the offices of the audit firm throughout the world shouldsubscribe to a
common service philosophy and audit approach. If they do, they can work more
effectively with each other in identifying and meeting the company’s needs and
resolving questions on auditing and accounting, format and content of reports,
deadlines and billing arrangements. This compatibility contributes to audit effi-
ciency because:- All offices act in harmony providing the most effective service to the group.
- Information flows freely between offices, individual partners, and staff with-
out unnecessary formality. - Full advantage can be taken of opportunities to restrict audit scope at selected
locations and to work with internal auditors. Also, audit scope can be com-
municated to other offices with less difficulty and less chance of misunder-
standing. - The principal office can more effectively monitor and control group audit fees
by prompt receipt of details on estimated and actual time and expenses. - The company can choose to negotiate fees with the auditors on a worldwide
basis or an individual location basis. If multiple auditors are involved, fee ne-
gotiations necessarily are required with each audit firm.
If more than one audit firm is used, there is also a question of divided responsi-
bility for the opinion of the group financial statements. In circumstances where mul-
tiple audit firms are selected, as a minimum, the principal auditor generally must
audit a majority of the group to issue a report on the group financial statements. What
constitutes a majority of the group is determined by reference to the most appropri-
ate criteria in the circumstances. Group consolidated assets and revenues are nor-
mally appropriate; however, net assets and earnings may also be important.
In some countries, the principal auditors are required to assume sole responsibil-
ity for the group audit report, even though other auditors examined part of the group.
In other countries, the principal auditor has the option of indicating the division of
responsibility by reference to the other auditors in his report. The predominant prac-
tice is for the principal auditors to refer to the other auditors if those auditors audit
operations that are material to the group financial statements. In either case, the other
auditors remain responsible for the performance of their work and for their own re-
ports. A key consideration here is whether the audit committee and management wish
to have sole responsibility for the audit of the group financial statements vested in a
single firm of auditors.
While it is not particularly common because of certain country requirements com-
panies sometimes select audit firms to perform an audit jointly. In these circum-
stances, a single audit report may be issued over the signature of both firms or sepa-
rate reports may be issued on the same set of financial statements. Any company
expectations in this regard must be clearly set forth to the audit firm candidates at the
outset, because firms may choose to accept such an engagement only in exceptional
circumstances or because of local requirements.
STATUTORY AUDIT REQUIREMENTS OUTSIDE THE PARENT COMPANY’S COUNTRY. Many coun-
tries impose statutory audit requirements on subsidiaries or other business units lo-
31 • 4 MANAGING THE AUDIT RELATIONSHIP IN AN INTERNATIONAL CONTEXT