Are Joint Audits Associated with Higher Audit Fees?

52 Pages Posted: 12 Apr 2012 Last revised: 17 Mar 2017

See all articles by Paul André

Paul André

HEC Lausanne

Géraldine Broye

EM Strasbourg Business School

Christopher K. M. Pong

Heriot-Watt University - School of Management and Languages

Alain Schatt

University of Lausanne, HEC-Lausanne

Multiple version iconThere are 2 versions of this paper

Date Written: December 5, 2014

Abstract

In its October 2010 Green Paper on audit policy, the European Commission suggested that joint audits might be a way of improving the audit market in Europe. However, some parties consider that a joint audit system is not an efficient solution because the perceived improvements in audit quality, if any, are not commensurate with the significant increase in audit fees. We compare audit fees paid during the years 2007-2011 by listed companies in France, where joint audits are mandatory, with those paid by British and Italian companies. Theory suggests that audit fees in countries with high investor protection, such as the UK, are likely to be greater than those in countries with lower investor protection, such as France and Italy, ceteris paribus. However, we find significantly higher audit fees in France after controlling for well-documented auditor, client, and engagement attributes, which vary across countries. Further, since we do not find statistically significant differences in the magnitude of abnormal accruals, the higher audit fees observed in France do not appear to be associated with higher audit quality.

Keywords: Joint Audits, Audit fees, Audit quality, Legal regime, France, UK, Italy

JEL Classification: M40, M41, M49, K20, G18, G38

Suggested Citation

Andre, Paul and Broye, Géraldine and Pong, Christopher K.M. and Schatt, Alain, Are Joint Audits Associated with Higher Audit Fees? (December 5, 2014). Available at SSRN: https://ssrn.com/abstract=2039001 or http://dx.doi.org/10.2139/ssrn.2039001

Paul Andre (Contact Author)

HEC Lausanne ( email )

UNIL-Dorigny
Anthropole
Lausanne, 1015
Switzerland

Géraldine Broye

EM Strasbourg Business School ( email )

PEGE
61 avenue de la Forêt Noire
Strasbourg, 67000
France

Christopher K.M. Pong

Heriot-Watt University - School of Management and Languages ( email )

Edinburgh EH14 4AS, Scotland
United Kingdom

Alain Schatt

University of Lausanne, HEC-Lausanne ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland

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