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

TY - JOUR

T1 - Paying for Joint or Single Audits? The Importance of Auditor Pairings and Differences in Technology Efficiency

AU - Holm, Claus

AU - Thinggaard, Frank

PY - 2016/3/1

Y1 - 2016/3/1

N2 - 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.

AB - 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.

KW - Joint audits, auditor pairings, audit technology efficiency, audit fees, B4

UR - http://www.scopus.com/inward/record.url?scp=84957847120&partnerID=8YFLogxK

U2 - 10.1111/ijau.12050

DO - 10.1111/ijau.12050

M3 - Journal article

SN - 1090-6738

VL - 20

SP - 1

EP - 16

JO - International Journal of Auditing

JF - International Journal of Auditing

IS - 1

ER -