The Effect of Joint Auditor Pair Composition on Audit Quality: Evidence from Impairment Tests

Gerald J. Lobo, Luc Paugam, Dana Zhang and Jean-François Casta
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Gerald J. Lobo: C. T. Bauer College of Business - University of Houston
Luc Paugam: ESSEC Business School
Dana Zhang: C. T. Bauer College of Business - University of Houston
Jean-François Casta: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: Using a sample of firms from France, where the law requires the use of two auditors, we study the effect of auditor pair composition on audit quality by examining a specific account, goodwill impairment. We document that firms audited by a Big 4–non‐Big 4 auditor pair (BS) are more likely to book an impairment and book a larger impairment than firms audited by a Big 4–Big 4 auditor pair (BB) when low‐performance indicators suggest a greater likelihood of impairment. Moreover, firms audited by a BB pair reduce impairment disclosures when they book impairments, while firms audited by a BS pair do not, suggesting lower transparency for firms audited by a BB pair. Our results inform investors and firms in mandatory joint audit regimes, as well as regulators who are considering requiring joint audits.

Keywords: Joint Audit; Audit Quality; Conservatism; Impairment Testing (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (10)

Published in Contemporary Accounting Research, 2017, 34 (1), ⟨10.1111/1911-3846.12244⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01821839

DOI: 10.1111/1911-3846.12244

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