Is Joint-Audit Regulation Likely to Mitigate the Audit Market Concentration in the Long Run? The French Experience

26 Pages Posted: 21 Feb 2014

See all articles by Lamya Kermiche

Lamya Kermiche

Grenoble Ecole de Management

Charles Piot

Univ. Grenoble Alpes; University of Angers - Centre de Recherches Appliquées à la Gestion (CERAG)

Date Written: February 19, 2014

Abstract

Policy makers have considered joint-audits as a solution to mitigate the audit market concentration and the “systemic” risk associated with Big 4 auditors. Using the French system as a relevant joint-audit laboratory, we implement a Markovian analysis to infer the long-term market structure by considering that audit clients chose between different types of joint-audit combinations. Main findings support the view that the French joint-audit system is effective in maintaining market openness, and in mitigating the Big 4 domination in the long run. The “mixed” joint-audit arrangement remains the choice of a majority of audit clients. Also, joint-audits involving two non-Big 4 auditors would outperform those made of two Big 4 auditors, and Mid-Tier auditors seem to play a significant role on that point. Overall, this study supports the European Commission’s (2011) position on the potential benefits of joint-audits in mitigating the market concentration; it also suggests that it might not be necessary to impose “mixed” joint-audits to achieve that objective.

Keywords: joint-auditing, auditor concentration, Markov chain, France

JEL Classification: M42, M48, L51

Suggested Citation

Kermiche, Lamya and Piot, Charles, Is Joint-Audit Regulation Likely to Mitigate the Audit Market Concentration in the Long Run? The French Experience (February 19, 2014). Available at SSRN: https://ssrn.com/abstract=2398455 or http://dx.doi.org/10.2139/ssrn.2398455

Lamya Kermiche

Grenoble Ecole de Management ( email )

12 Rue Pierre Semard
Grenoble, Cedex 01 38000
France

Charles Piot (Contact Author)

Univ. Grenoble Alpes ( email )

Grenoble Cedex 9, F-38040
France

University of Angers - Centre de Recherches Appliquées à la Gestion (CERAG)

150 rue de la Chimie, BP47
Grenoble Cedex 9, 38040
France

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