Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 10, 2012 erstellt
Description:
This paper studies the claimed costs and benefits of joint audit that has recently been suggested by the European Commission (EC 2011) as a way to increase the market efficiency. This initiative has raised a vivid debate between the Big and the 2nd Tier audit firms. While both claim acting on behalf of public interest protection, the former fight the proposal by arguing its unbearable cost while the latter support it by arguing its added quality. This conflicting position leads us to question their claim of public interest concern. As group-interest economic regulation theories predict that the absence of any effect of a new regulation (here: joint audit) is an evidence of a group rather than a public-interest concern, we test both cost and quality arguments. We perform our analysis on Denmark (2002-2010), which gave up the mandatory joint audit in 2005. We test the impact of joint audit on both audit costs surrogated by audit fees or total fees and audit quality surrogated by abnormal accruals. Our results confirm 1) the non-significance association between joint audit and fees (either audit fees or total fees), and 2) the non-significance association between joint audit and abnormal accrual. As given the non-significance of the hypothesized positive association between joint audit and audit cost or quality, we conclude that arguments raised by both parties relate more to the defense of their private interest than the public (firms’ or shareholders’) interests. The results are of interest for regulators and actors in the audit market