Abstract
This study investigates audit quality under joint and single audit regimes with a sample of large European firms. Both, the economic relevance of these companies, and the fact that the impact of joint audit on audit quality should be stronger when the audited company is a blue-chip firm motivate the study. If mandatory joint audit were positively associated with audit quality, French firms, under mandatory joint audit since 1966, should present higher audit quality compared to their European peers. The results do not indicate this to be the case. Specifically, similar levels of discretionary accruals are observed for French and other European firms. Furthermore, for the first time in the literature, evidence is reported indicating that French firms may even present lower audit quality than their European peers, when audit quality is measured by the likelihood of just beating earnings benchmarks. These results are expected to inform the ongoing debate in several countries about joint audits.
Highlights
A joint audit occurs when a client is simultaneously and separately audited by two or more audit firms that sign the audit report (Deng et al, 2014)
Since the aim of this paper is to study whether firms under mandatory joint audit present significantly different levels of audit quality, these firms were included in sample for the main analysis
Even though nowadays joint audit is only mandatory in France, just a few years ago EU regulators seriously considered to impose it in the whole EU
Summary
A joint audit occurs when a client is simultaneously and separately audited by two or more audit firms that sign the audit report (Deng et al, 2014). The convenience of making joint audits mandatory periodically surfaces as a hot issue in the agenda of regulators and policymakers, and it is currently encouraged by the European regulation. Deng et al (2014) notice the stronger difficulties (and higher costs) of “bribing” two auditors instead of one This is the view of Nurunnabi et al (2020), who point out that accounting professionals attribute several benefits to joint audits
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