Executive Takeaways
■ Local auditors audit the foreign subsidiaries of a multinational corporation (MNC). ■ Not every foreign country allows PCAOB inspections of its local auditors' work. ■ As a result, some MNCs have poorer quality of audited financial statements. ■ MNCs operating in no-inspection countries issue more restatements. ■ The US stock market reacts less to the earnings of MNCs that operate in no-inspection countries.
Duanping Hong, Assistant Professor of Accounting
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