Lee, J. Z., Chen, H. C., and Tsai, T. Y. 2020. The Relationship between Shared Audit Opinions and the Audit Quality of Group Enterprises’ Financial Statements – Based on the Audit Adjustment. NTU Management Review, 30 (2): 37-70. https://doi.org/10.6226/NTUMR.202008_30(2).0002
Jan-Zan Lee, Department of Accountancy, National Taipei University
Hsin-Chi Chen, Department of Accounting, Tunghai University
Tsung-Yi Tsai, Department of Accounting Information, Southern Taiwan University of Science and Technology
Abstract
The Taiwan Statements of Auditing Standards No. 54 “Special Consideration – Audits of Group Financial Statements” severely restricts the shared-opinion audit reports on group financial statements. The restriction implies that engaging with the same audit firm in the group company can result in better audit quality for the group financial statements. To evaluate the argument of this restriction, this study examines whether group companies with component firms in Taiwan have higher audit quality when engaging with the same audit firm than those engaging with different audit firms. Using audit adjustment as a proxy for audit quality, this study finds that group companies with component firms engaging with different audit firms have higher audit adjustment (better audit quality), especially when a greater proportion of group assets are audited by other audit firms. The results indicate that engaging with the same audit firm in the group company may impair auditor independence and increase the auditor’s economic dependence on the group company.
Keywords
group enterprisesaudit qualityshared audit opinionaudit adjustment