International and U.S. accounting and auditing standard setters have focused considerable attention and rule making around group audits and in particular the reporting quality of subsidiary entities. We examine how membership in a consolidated group and the related group audit affects the...

In a large sample of private Spanish subsidiaries, we observe a significantly greater incidence of modified audit reports in foreign than in local group subsidiaries. Results are consistent with foreign group subsidiaries having lower incentives to avoid receiving modified audit opinions (MAOs)...