The national assurance service line leader at Grant Thornton, Jeremy Jagt, commenting on the deficiencies the CPAB found in audits of companies in emerging markets, suggested that issues around cultural difference could account for differences in professional judgment.

Below is a summary of the various views from that article discussing audits in foreign jurisdictions.

• Critics argue that, given it was affiliates of the six major global networks that were under scrutiny in each of the CPAB reports and that they use the same methodology throughout the world, one would expect the same audit results.

• The OSC argued that the blame can be shared by both Canadian auditors and the auditors in the emerging market. Canadian auditors often did not have sufficient understanding of the legal environment or how permits and licenses are obtained in emerging markets. Regarding the auditors located in the emerging market, the OSC also observed: "In some cases auditors appeared to accept certain information provided by management at face value without performing any procedures to support those representations with independent external information."

• Greg Shields, from CPA Canada, highlighted the problems with multi-jurisdictional audits: "Some companies may maintain key business relationships through actions that would be considered unethical or even illegal in Canada," said Shields. "Also, a company's governance structures and internal controls might not be as robust as would normally be expected in Canada. Pervasive issues of this nature, as well as many other potential issues associated with the way business is done in some jurisdictions, can be quite difficult for a Canadian auditor to deal with effectively."

REQUIRED

a. Based upon your understanding of the professional judgment process and judgment traps, what judgment traps do you think these auditors may have fallen into?

b. What types of processes can firms put in place to prevent these types of problems from occurring?

c. Comment on Shields's observation that what are considered to be ethical versus unethical practices is dependent upon national context.