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Do Joint Audits Improve or Impair Audit Quality?

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  • MINGCHERNG DENG
  • TONG LU
  • DAN A. SIMUNIC
  • MINLEI YE

Abstract

Conventional wisdom holds that joint audits would improve audit quality by enhancing audit evidence precision because “Two heads are better than one.” Our paper challenges this wisdom. We show that joint audits by one big firm and one small firm may impair audit quality, because, in that situation, joint audits induce a free‐riding problem between audit firms and reduce audit evidence precision. We further derive a set of empirically testable predictions comparing audit evidence precision and audit fees under joint and single audits. This paper, the first theoretical study of joint audits, contributes to a better understanding of the economic consequences of joint audits on audit quality.

Suggested Citation

  • Mingcherng Deng & Tong Lu & Dan A. Simunic & Minlei Ye, 2014. "Do Joint Audits Improve or Impair Audit Quality?," Journal of Accounting Research, Wiley Blackwell, vol. 52(5), pages 1029-1060, December.
    • Handle: RePEc:bla:joares:v:52:y:2014:i:5:p:1029-1060
    DOI: 10.1111/1475-679X.12060
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    3. Marcel Haak & Michelle Muraz & Roland Zieseniß, 2018. "Joint Audits: Does the Allocation of Audit Work Affect Audit Quality and Audit Fees?," Accounting in Europe, Taylor & Francis Journals, vol. 15(1), pages 55-80, January.
    4. Kovermann, Jost & Velte, Patrick, 2019. "The impact of corporate governance on corporate tax avoidance—A literature review," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 36(C), pages 1-1.
    5. Mohamed M. El-Dyasty & Ahmed A. Elamer, 2022. "Multiple audit mechanism, audit quality and cost of debt: empirical evidence from a developing country," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 19(3), pages 264-281, September.
    6. Sabine Graschitz & Marcel Steller, 2025. "Audit fees and audit quality in Austria—a replicatory study in the wake of the EU audit reform," Journal of Business Economics, Springer, vol. 95(2), pages 295-332, April.
    7. Liu, Desheng & Wang, Yiqing & Li, Mingsheng, 2024. "Comparable but is it informative?Accounting information comparability and price synchronicity," Journal of Financial Stability, Elsevier, vol. 73(C).
    8. Bhambhwani, Siddharth M. & Huang, Allen H., 2024. "Auditing decentralized finance," The British Accounting Review, Elsevier, vol. 56(2).
    9. Florian Hoos & Jorien Louise Pruijssers & Michel W. Lander, 2019. "Who’s Watching? Accountability in Different Audit Regimes and the Effects on Auditors’ Professional Skepticism," Journal of Business Ethics, Springer, vol. 156(2), pages 563-575, May.
    10. Asaad Wahhab & Amna Ibrahim Obaid, 2023. "Adoption of the ISA 500 and its Impact on Audit Quality and Fraud Reduction: Evidence from Iraq," Technium Social Sciences Journal, Technium Science, vol. 45(1), pages 30-48, July.
    11. Quick, Reiner & Schmidt, Florian, 2018. "Do audit firm rotation, auditor retention, and joint audits matter? – An experimental investigation of bank directors' and institutional investors' perceptions," Journal of Accounting Literature, Elsevier, vol. 41(C), pages 1-21.
    12. Qiang Guo & Christopher Koch & Aiyong Zhu, 2017. "Joint audit, audit market structure, and consumer surplus," Review of Accounting Studies, Springer, vol. 22(4), pages 1595-1627, December.
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    14. Nan, Lin & Tang, Chao & Zhang, Gaoqing, 2024. "Whistleblowing bounties and informational effects," Journal of Accounting and Economics, Elsevier, vol. 77(1).

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