Impact of Joint Audit on Audit Quality – An Indian Scenario

Abstract

Better audit quality gives stakeholders some reassurance that the auditee companies' financial statements accurately portray their current situation. This study examines the impact of joint audits on audit quality. It is inspired by the ongoing discussion where a government panel has recommended a mandatory joint audit regime for public interest companies in India. In April 2021, the Reserve Bank of India (RBI) mandated the use of joint audits for financial entities with assets size above INR 15,000 crore to improve the quality of audits. In this study, a new audit quality metric is evaluated, and it shows that joint audit enhances audit quality. Additionally, I find a negative impact of joint audits on audit quality using a common proxy for audit quality (ratio of audit fees to total fees). I, therefore, highlight those different measures of audit quality exhibit the opposite effects of a joint audit.