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Research Article Open access CC BY 4.0

Are Joint Audits a Proper Instrument for Increased Audit Quality?

Patrick Velte, Jamel Azibi

Current Journal of Applied Science and Technology · pp. 528–551 · Published 11 Mar 2015

10.9734/BJAST/2015/15599

Abstract

Joint audits are recently controversial discussed to increase audit quality and decrease audit market concentration in Europe, complementing the existing and future rotation rules by the 8th EC directive. First, this article presents a theoretical foundation of joint audits. In this context, the main influences on low balling are presented. The link between joint audits and audit quality is still controversial. Then, the main results of empirical research on joint audit are focused. A clear positive link between joint audits and audit quality cannot be found, but there is strong evidence for higher audit costs which could lead to an increased price competition. Insofar, a lower audit market concentration by joint audits is not generally connected with higher audit quality, because there are many corporate governance interactions. To test this hypothesis, we use a sample of 306 Germany and French companies between 2008 and 2012. Empirical results demonstrate unclear effect of the joint audit on audit quality in these two countries.

Low balling audit quality empirical audit research accounting policy auditor independence audit market concentration

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