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Paying for Joint or Single Audits? The Importance of Auditor Pairings and Differences in Technology Efficiency

Paying for Joint or Single Audits? The Importance of Auditor Pairings and Differences in... In the first theoretical paper on joint audits, Deng et al. predict that the audit fees for joint audits will be lower than those from single audits. However, the prediction depends on the combination of audit firms involved in the joint audit and on their technology efficiency as well as on the liability involved. This paper is the first to empirically test the predictions. Our findings from Denmark do not indicate any general difference in audit fees when two audit firms – regardless of combination and technology efficiency – conduct the statutory audit compared to a single Big audit firm. The results indicate the existence of fixed coordination costs in joint audits. We do, however, find higher audit fees in Big‐Small joint audits when the Small audit firm has a share of less than 25 per cent. This may reflect free‐riding concerns. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Auditing Wiley

Paying for Joint or Single Audits? The Importance of Auditor Pairings and Differences in Technology Efficiency

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References (34)

Publisher
Wiley
Copyright
Copyright © 2016 John Wiley & Sons Ltd
ISSN
1090-6738
eISSN
1099-1123
DOI
10.1111/ijau.12050
Publisher site
See Article on Publisher Site

Abstract

In the first theoretical paper on joint audits, Deng et al. predict that the audit fees for joint audits will be lower than those from single audits. However, the prediction depends on the combination of audit firms involved in the joint audit and on their technology efficiency as well as on the liability involved. This paper is the first to empirically test the predictions. Our findings from Denmark do not indicate any general difference in audit fees when two audit firms – regardless of combination and technology efficiency – conduct the statutory audit compared to a single Big audit firm. The results indicate the existence of fixed coordination costs in joint audits. We do, however, find higher audit fees in Big‐Small joint audits when the Small audit firm has a share of less than 25 per cent. This may reflect free‐riding concerns.

Journal

International Journal of AuditingWiley

Published: Mar 1, 2016

Keywords: ; ; ; ;

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