Not your standard audit

Here are four key pieces of advice to help ensure your experience working in another country is a good one.

How do you assess risk and conduct audits that meet professional and industry standards when those audits are taking place in other countries and you aren’t familiar with the culture? It’s a top-of-mind question in today’s increasingly borderless business landscape.

“Even within Canada, as an auditor you need to understand a given company’s culture if you want your client to assist you and to gain access to the information you need. If you don’t understand the office culture, your life can be miserable there,” says Janne Chung, associate professor of accounting at York University’s Schulich School of Business in Toronto. “That’s magnified when you go overseas. You need to be sensitive to the national culture wherever you are.”

Failing to observe cultural differences can have significant consequences. Look at Ernst & Young’s experience auditing China’s failed timber firm Sino-Forest Corp., which led to a $117-million class-action settlement, an $8-million penalty to the Ontario Securities Commission and changes to the firm’s internal policies on emerging markets.

Here are four key pieces of advice to consider to help ensure your experience working in another country is a good one.

Don’t assume that the western business culture or corporate accounting environment is universal. “For example, in China the government sets the accounting standards and many companies are state-owned, run by highly placed government officials,” says Kathryn Bewley, associate professor of accounting at the Ted Rogers School of Management at Ryerson University in Toronto. “It’s only recently that accountants in China are being intensively trained on how to arrive at fair value because IFRS requires it. Do your due diligence on the level and quality of training of local accountants.”

Understand the broader business landscape. “Just as we assess business risk here in Canada when we audit, the same approach applies wherever the client is,” says Chung. “Understand what’s happening on the ground with the economy, the competition, the greater society. The United Nations has country reports and surveys rating ethics, literacy and the level of corruption.”

Tap into your multicultural network in Canada for country-specific insights. Canadian businesses have a real advantage because we have so many cultures represented here, says Bewley. “Speak to someone in your office or network who knows how things work in a given country and how to interact on a business and personal level.” For example, in male-oriented places, such as some countries in the Middle East, it's important to know whom to ask for help, says Chung. “You can’t take a high tone. You have to show a little humility, be courteous and let them know their information is important.” Take cultural cues from what your hosts are doing. “If you have a local person assigned to you, ask them what is considered appropriate.”

Most important: do your research before you engage. Make the most of online resources, such as Export Development Canada, which has a section that offers country snapshots. For more detailed information and country comparisons along culture lines, visit The Hofstede Centre website, which features the pioneering research of Dutch social psychologist and professor Geert Hofstede. “He has identified six dimensions of culture, one of which is power distance,” says Chung. “The greater the distance, the greater the acceptance that all people are not equal. This translates into more hierarchical, authoritarian organizations, for example.”

For more information about issues associated with group audits involving components in emerging markets, see CPA Canada’s Audit Client Briefing — Considerations for Management of Entities with Operations in Emerging Markets; Audit & Assurance Alert: CAS 600 — Challenges in Complying with the Requirements in Group Audits; and visit CPA Canada’s Audit and Assurance web page at cpacanada.ca/en/business-and-accounting-resources/ audit-and-assurance.