From Joint to Single Audits – Audit Quality Differences and Auditor Pairings

Accounting and Business Research (2018 Forthcoming)

44 Pages Posted: 15 Sep 2017

See all articles by Claus Holm

Claus Holm

Aarhus University - Department of Economics and Business

Frank Thinggaard

University of Aarhus - Aarhus School of Business

Date Written: September 13, 2017

Abstract

This study analyses audit quality differences between audits by a single big audit firm and joint audits with either one or two big audit firms. We exploit the unique situation in Denmark beginning on 1 January 2005, at which time a long-standing mandatory joint audit system for listed companies was replaced by a voluntary joint audit system. First, we report the results of a survey of Danish CFOs’ views on and their experiences with the choice of single or joint audits and their perceptions of audit quality. Second, based on data from the mandatory joint audit abolition year and the following two years, we test the audit quality differences using abnormal accruals. Most CFOs perceive that audit quality by a single big four audit firm is the same as it is in joint audits with either one or two big four audit firms. The results of our empirical analysis are in line with the perceptions. We find no evidence of audit quality differences between audits made by a single big four firm and those conducted by either of the two combinations of joint audits.

Keywords: Joint audits, audit pairings, audit quality, auditor choice

JEL Classification: M42, L84

Suggested Citation

Holm, Claus and Thinggaard, Frank, From Joint to Single Audits – Audit Quality Differences and Auditor Pairings (September 13, 2017). Accounting and Business Research (2018 Forthcoming), Available at SSRN: https://ssrn.com/abstract=3036465

Claus Holm (Contact Author)

Aarhus University - Department of Economics and Business ( email )

Fuglesangs Alle 4
Aarhus University
Aarhus C, Danmark DK-8210
Denmark
40422778 (Phone)
40422778 (Fax)

Frank Thinggaard

University of Aarhus - Aarhus School of Business ( email )

Nordre Ringgade 1
Aarhus C, DK-8000
Denmark

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