Relevant direct international experience is a definite plus for all partners and man-
agers serving an international company. Such experience includes tours of duty in lo-
cations outside of one’s home country as well as specific client assignments of more
than brief duration outside one’s home country. Such tours and assignments should
benefit the engagement team members and, hence, the company immeasurably in un-
derstanding the business environments in different countries and in becoming aware
of the impact the national cultures have on how business is conducted.
Foreign language proficiency is desirable. In fact, since international companies
often operate in many countries, numerous languages are encountered and multiple
foreign language capability would be very beneficial. Unfortunately, individuals’ for-
eign language capabilities are often limited to a single additional language at the day-
to-day working level. The prevalence of English as a common language in business
mitigates some of the potential language problems. In some situations (e.g., Japanese
and Chinese), the use of interpreters is fairly common. If the interpreters have
worked with auditors frequently they can compensate for what otherwise would be,
literally, “lost in translation.” With the significant increase in the amount of non-U.S.
companies that have been entering the U.S. capital markets, certain professional serv-
ice firms have established practices of placing U.S. trained professionals in various
locations to serve these non-U.S. companies. Oftentimes, these professionals assist
the local offices with providing “invaluable on the ground quality service” to en-
gagement teams serving subsidiaries of U.S. companies in those locations.
(ii) Coverage of Company Locations. An audit firm’s ability to deliver quality serv-
ice is directly related to whether they have full time partners and staff in close prox-
imity to an international company’s subsidiaries or other significant operating units.
The option of flying professional staff in to provide recurring services is rarely suc-
cessful. Obtaining and maintaining a deep understanding of the company’s business
operations and being fully responsive to the company’s needs are quite difficult on a
fly-in basis. Such arrangements should be avoided wherever possible.
(iii) Knowledge of the Company’s Industries. Knowledge of the company’s industries
rarely rates below the highest level when considering criteria for the selection of au-
ditors. Such knowledge is vital to assessing risk in the audit process and understand-
ing management’s perspective in addressing issues and challenges they face.
If the auditors understand the critical success factors in the company’s industries
as well as the company’s specific operations, they are better able to assess audit risk
with respect to the company’s reported financial position, results of operations, and
cash flows. Further, this knowledge contributes directly to the auditor’s ability to pro-
vide valued business advice, as discussed above.
It is not reasonable to expect the same depth and breadth of industry and business
knowledge at every company location around the world. However, the auditors
should have or be willing to relocate such experience to directly serve the parent
company. In addition, it is important to identify backup capability within the audi-
tor’s organization in the event that the company should need to draw on that capa-
bility for whatever reason.
(iv) Communications Capabilities. As stressed throughout this chapter, communica-
tions are the most important link for international companies in having a successful
relationship with their auditors. Electronic mail, facsimile and phone mail communi-
31 • 12 MANAGING THE AUDIT RELATIONSHIP IN AN INTERNATIONAL CONTEXT