Joint audit, audit market concentration, and audit quality: Perceptions of stakeholders in the UAE

Yasser Barghathi,Alhashmi Aboubaker Lasyoud,Esinath Ndiweni

doi:10.22495/cocv17i2art3

Yasser Barghathi, Alhashmi Aboubaker Lasyoud + Show 1 more

Open Access

https://doi.org/10.22495/cocv17i2art3

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Abstract

The present study is intended to scholarly explore auditors’ perceptions regarding joint audits; whether it can improve audit quality. To reach this goal, participants were enrolled from Big 4, non-Big 4, and other stockholders. In addition, the present study examines the perception of the same stakeholders in terms of how audit concentration affects the audit market in the UAE. Being a qualitative study, 12 semi-structured interviews were conducted to collect required data; 4 face to face and 8 through using Google forms. The finding of the study revealed mixed perception regarding joint audits; it may improve audit quality at the cost of high fees and free-rider problems. Findings of the study has practical implication for policymakers of emerging economies around the globe, such as policymakers who can make joint audits as compulsory. Another significance of the present work is that it has allowed for the perception of stakeholders, who are at the center of the controversial subject of joint audits and audit market concentration. The study suggests that there is a need for removing language barriers; it will benefit some firms in the form of directly communicating with auditors either in English or in Urdu.

Highlights

In proper response to the financial crises, the European Commission (EC), in October 2010 issued a Green Paper on Audit Policy: Lessons from the Crisis, the paper proposed number of regulatory actions for regaining public trust in auditor independence (Zerni et al, 2012; Haak, Muraz, & Zieseniß, 2018)
The literature revealed that the term audit quality could be defined in a number of ways for some it is the compliance with the professional standards, just as, RG1 has stated: “To me, audit quality is giving the right opinion in accordance with professional standards and simultaneously ensuring that that opinion is properly understood by the reader
Consequent to the persistent failures of audits, both secondary literature, and empirical studies fail to prove the nexus between joint audits and audit quality

Summary

Introduction

In proper response to the financial crises, the European Commission (EC), in October 2010 issued a Green Paper on Audit Policy: Lessons from the Crisis, the paper proposed number of regulatory actions for regaining public trust in auditor independence (Zerni et al, 2012; Haak, Muraz, & Zieseniß, 2018). The paper proposed joint audits as a mechanism for enhancement audit quality (Holm & Thinggaard, 2014; Andre, Broye, Pong, & Schatt, 2016). Big 4 firms account for 94% of audit firms for listed companies in Member States of Europe (European Commission, 2011; Guo, Koch, & Zhu, 2017). This high concentration ratio attracted the concern of EC; the collapse of Big 4 firms will severely affect the audit market (European Commission, 2010). According to Holm and Thinggaard (2014), the EC proposed mechanism of the joint audit was not well received and it has been met with a "fierce opposition"; opponents to this policy based their argument that joint audits will increase audit cost and bureaucracy

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