The Effect of National Culture on Auditor-in-Charge Involvement

Regulators and professional accounting bodies have identified auditor-in-charge involvement as one of the key indicators of audit quality. A potentially important, yet overlooked, issue is that auditor-in-charge involvement is affected by numerous contextual factors. In this study, we aim at advancing our understanding of what affects differences in auditor-in-charge involvement by focusing on the influence of national culture in general and power distance, (in-group) collectivism, and uncertainty avoidance in particular. Based on archival, proprietary data from a Big 4 audit firm comprising time-record data of 2,251 individual audit engagements in 50 countries, we find robust evidence supporting our expectations that differences in the extent of auditor-in-charge involvement are negatively associated with power distance and (in-group) collectivism, and positively with uncertainty avoidance. An implication of our findings is that, while the extent of auditor-in-charge involvement may serve as a relevant audit quality indicator, regulators, firms' management, and academics need to take culture into account and may want to consider different thresholds for different regions in the world. Hence, unless the role of culture is well understood, the use of auditor-in charge involvement as an audit quality indicator could be uninformative or even misleading.