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Do Joint Audits Cost More?

Sat, January 19, 7:30 to 8:30am, TBA

Abstract

In its recent ‘Green Paper’ on audit policy (October 2010), the European Commission suggested that joint audits might be a way of improving the audit market in Europe. However, some participants consider that joint audits are not an efficient solution because they would significantly increase audit fees paid by companies. We compare audit fees paid by listed companies in France in 2007, 2008 and 2009, where joint audits are mandatory, with those paid by Italian and British companies and find significantly higher audit fees in France after controlling for well documented auditor, client and engagement attributes. Because theoretical models and empirical results in cross country studies suggest higher fees in countries such as the UK with a stronger legal liability regime and greater investor protection, and likely similar fees in countries with similar legal environments like France and Italy, we conclude that joint audits lead to significantly greater audit fees.

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