FAQs on joint audit

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FAQs on joint audit

Often misunderstood, our aim is to demystify joint audit by addressing some frequently asked questions.

Will joint audit translate into additional costs for audited companies?

  • Joint audits are not more expensive than solo audits.
  • A study published by the International Journal of Auditing claims that audit fees of a balanced joint audit arrangement are not higher than those of a Single Audit. For more information, please refer to Paying for Joint or Single Audits? The importance of Auditor Pairings and Differences in Technology Efficiency
  • For joint audit fees not to exceed single audit fees, it is important that the share of one audit firm in the mandate is not too low in order to avoid the risk of free-riding and subsequently higher costs. Working on a leveled playing field, next to a balanced level of technology standards employed by both firms are minimum requisites for a cost efficient and high quality joint audit. 

Will joint audit create an additional burden on audited companies?

  • Not if the scope of the joint audit is well defined from the beginning to avoid any duplication of tasks.
  • Additional work only involves coordination meetings between the two auditors to plan the auditors’ responses to the assessed risks, finalizing audit conclusions and forming an opinion.

Will joint audit damage audit quality?

  • Joint audit promotes quality through the “four eyes principle”, and provides PIEs with the expertise of two firms, each having different corporate cultures.
  • Joint audit reinforces independence, as it enables joint auditors to stand stronger together in the event of a difference in opinion with the audited entity.
  • Joint audit promotes continuity of service, allowing the smooth and sequenced rotation of audit firms. Staggering the two firms’ rotation periods allows the incumbent firm to help bring the incoming firm up to speed. 
  • A study published by the International Business Journal of Business Research and Development confirms that joint audit does positively affect earnings quality and the reliability of firms’ financial statements. For more information, please refer to Voluntary Joint Audit and Earnings Quality: Evidence from Italian SMEs

Will joint audit restrict the choice of available audit firms?

  • Joint audit promotes a multi-player audit market providing an incentive for new audit firms to invest in expertise and geographic coverage, a powerful capacity-building measure.
  • As evidence, after several decades of joint audit in France, 308 audit firms serves 678 companies, whereas in the UK only 68 firms serve a market comprising of 1, 631 companies. http://www.auditanalytics.com/blog/eu-auditor-market-share-2016/
  • Companies can still choose a Big 4 as their auditor combined with the expertise of another audit firm.

Publications

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A guide to Joint Audit

There is now unanimous agreement that the overwhelming dominance of just four firms in the global audit market is unsustainable and that reform is required to go from “four to more”. Unfortunately, and even though it is still in its early stages, there are clear signs already that the 2014 EU Audit Regulation and other interlinked initiatives are not going to achieve their desired objectives of reducing...

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