How does cross-country variation in auditor regulation affect multinational companies: investigating the case of the EU Audit Reform

The goal of this project is to investigate the impact of the EU Audit Reform on various aspects of multinational group financial reporting: i) auditor choice, ii) financial reporting quality and iii) cost of financing. Multinational groups have an important role in the global economy accounting for about one-third of world GDP (OECD, 2018). Consequently, the truthfulness of their financial statements is of critical importance the entire global economy and therefore the external auditor play a key role assuring that multinational groups are free of material misstatements. However, literature on (multinational) group audits is scarce. The EU has implemented an Audit Reform which is intended to, inter alia, increase audit market competition particularly in the top end of the market and increase informational value of financial statements (European Commission, 2017). However the Audit Reform included several provisions for which Member States had flexibility in how to adopt them leading to various different implementations of the same Audit Reform (Willekens et al. 2019). These differences will impact multinational groups the most as their different subsidiaries have to follow different national legislations. This project aims to make a significant and timely contribution to the literature on multinational group audits and on the impact of the EU Audit Reform.

Keywords:Audit Reform, Multinational companies, Institutional complexity, Financial reporting quality, Competition

Disciplines:Accounting and auditing