Struggle over joint audit: on behalf of public interest?

Cédric Lesage, Sabine Ratzinger and Jaana Kettunen
Additional contact information
Cédric Lesage: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique
Sabine Ratzinger: Department of Orthopaedics - UR - Universität Regensburg
Jaana Kettunen: JYU - University of Jyväskylä

Post-Print from HAL

Abstract: European Commission (EC 2011) has recently suggested joint audit - broadly defined as an audit where two independent auditors are jointly liable for the audit report - as a way a way to increase audit quality after the financial crisis and to mitigate audit market concentration, by enlarging the audit offer. Big 4 audit firms have fought this proposal by arguing its unbearable cost while 2nd Tier audit firms have supported it by arguing its added quality. This conflicting position leads us to question their claim of public interest concern. As group-interest economic regulation theories predict that the absence of any effect of a new regulation (here: joint audit) is an evidence of a group rather than a public-interest concern, we test both cost and quality arguments. We perform our main analysis on Denmark (2002-2010), which gave up the mandatory joint audit in 2005. We test the impact of joint audit on both audit costs proxied by audit fees or total fees and audit quality proxied by abnormal accruals. Our results confirm 1) the non-significance association between fees (either audit fees or total fees) and joint audit, and 2) the non-significance association between abnormal accrual and joint audit. We then apply the same approach on a matched French-German sample to assess the arguments based on the French case, as France is characterized by a long tradition of joint audit. We find 1) similar results for audit quality (no significant differences between both countries regarding abnormal accrual in France); and 2) higher fees (audit fees and total fees) in France. However, as given the impossibility to disentangle the effect of joint audit from other institutional differences (as for instance the ban of joint provision of audit and non-audit services in France), we conclude that any argument based on the French case only is dubious. As given the non significance of the hypothesized positive association between joint audit and audit cost or quality, we conclude that arguments raised by both parties relate more to the defense of their private interest than the public (firms or shareholders') interests. The results are of interest for regulators and actors in the audit market.

Keywords: joint audit; economic regulation; fees; accruals; audit quality (search for similar items in EconPapers)
Date: 2012-05-21
Note: View the original document on HAL open archive server: https://hal.science/hal-00935004v1
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Comptabilités et innovation, May 2012, Grenoble, France. pp.cd-rom

Downloads: (external link)
https://hal.science/hal-00935004v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00935004

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().