臺大管理論叢 NTU Management Review VOL.30 NO.2

61 NTU Management Review Vol. 30 No. 2 Aug. 2020 Though AU-C 600 does not prohibit shared-opinion audit reports, compared to the former standard, it severely restricts the shared-opinion audit reports on the group financial statements. In summary, both IAASB and AICPA consider all the components’ financial statements of a group enterprise audited by the engagement auditor result in better audit quality than those audited by different accounting firms. Aligned to this trend, in 2012, Taiwan’s auditing standard committee issued the auditing standard No. 54 to replace the old auditing standard, No. 15. Both IAASB and AICPA consider the financial statements of all components in a group enterprise audited by the engagement audit firm cause better audit quality than those audited by different accounting firms. However, from the perspective of audit theory, there is still controversy. DeAngelo (1981a) defines audit quality as the joint probability of detecting misstatements in financial statements and reporting these material misstatements and errors. The former refers to the competence of the auditor, while the latter refers to the independence of the auditor. From the perspective of competence, if the components’ financial statements of a group enterprise are audited by the engagement audit firm, the engagement audit team can access the information of each component in a group enterprise and have a better grasp of the integrity of the group information (Benston, 1985; Branson and Breesch, 2004). Therefore, the engagement auditor can easily discover material misstatements in financial statements. In the past, some studies have shown that a group enterprise has lower ERC when component auditors participate in the group enterprise’s audit work. That means that the investors in the stock market perceive shared-opinion audit reports as poor audit quality reports (Dee, Lulseged, and Zhang, 2015; Lee, Chiang, and Chen, 2013). Lyubimov (2011) finds that multinational corporations in the United States that refer to other auditors in the audit reports have higher abnormal accruals. The IAASB and AICPA also tend to support this view so that argument prohibition or severely restricting shared-opinion audit reports issued by the engagement auditor can enhance the audit quality of the group’s financial statements. From the independence perspective, when the financial statements of components for a group enterprise are audited by an audit firm, the economic dependence of an auditor on the single client will increase and lead the auditor to compromise his/her independence (DeAngelo, 1981b). However, as the customer base of an auditor expands, the auditor will be less dependent on a single client. DeAngelo (1981b) further extends this inference from an audit partner to an audit firm, arguing that a single customer has less impact on larger audit firms, so larger audit firms may be more independent and with better audit quality.