Transnational Audit: The Differences of National Environments Have Challenged the Auditors in Providing Quality Auditing

Multi-National Companies (MNCs) have become veritable and most vital instruments and institutions for economic development, social change, technology, dynamism and in essence, new ideas. MNCs operate within the contexts of environmental variables in locations other than their home-base countries. In today's tight business world, accounting and audit firms keep up with this competitive environment by expanding their operations worldwide due to globalization (OECD, 2009). This issue raises challenges for audit quality and consistency by an auditor when there is a difference in the national environments. Despite the significant contribution of archival and other studies that have looked for systematic evidence that audit quality is influential in audit contracts from a rationalist economics perspective, few studies have argued that this approach disregards the wider social, political, and historical contexts of auditing (Humphrey & Owen, 2000), whilst Elmghaamez (2022) studied on audit quality from cultural, educational, legal and political factors. This study focuses on the national environment affecting the political, economic, and business environments, the legal framework, and culture in developing a quality audit.
A transnational audit is the process of examining the financial statements and accounting practices of a multinational corporation. The process entails analyzing the company's financial records, internal controls, and other pertinent information to ensure compliance with accounting rules and standards in each country in which the company operates. According to Naik (2021) transnational audit describes an audit of financial statements which are or may be relied upon outside the audited entity's home jurisdiction for purposes of important lending, investment or regulatory decisions. This would include audits of all financial statements for companies having publicly traded equity or debt, as well as other public interest companies that attract special public attention due to their size, products or services provided.
Individuals often refer to the reliability of audited financial statements in terms of whether the audit report accurately represents financial statements that are free of material misstatements when they discuss audit quality. Focusing on the quality of audit process inputs and what auditors must do to provide an appropriate professional opinion on a specific set of financial statements is one way to make the concept of audit quality better. The Institute of Chartered Accountants in England and Wales (2010) reports that audit practitioners, standard-setters, and regulators have taken major steps in recent years to strengthen confidence in the quality of financial statement audits. Further explained by Australian Securities and Investments Commission (2022), the quality of financial reporting is critical for markets and investors to be confident and informed. The goal of the independent audit is to develop trust in the quality of financial reports. Therefore, this paper specifically looks at the challenges posed for the difference of the national environment towards audit quality. The analysis of national environment differences is not meant to be conclusive; rather, it is supposed to stimulate discussion and debate about whether and how differences are being addressed. The auditor is also required to review analyses of significant issues in financial
reporting and judgments made in preparing the financial statements, including the effects of alternative GAAP (Generally Accepted Accounting Principles) methods. This discussion may also be held during the review of the quarterly financial statements. It is also significant to auditor to sure the standard and regulations is followed as per required. Therefore, we discuss and point out areas where auditors can take action. This study will be help auditor to aware the current issues is related with compliance.