The Effect of Joint Audit on Audit Quality: Empirical Evidence from Companies Listed On the Egyptian Stock Exchange

Abstract

The purpose of this paper is to investigate the effect of joint audit on earnings conservatism, our proxy for audit quality, of companies listed on the Egyptian stock exchange, by examining whether companies audited by two independent auditors are more conservative than companies audited by a single auditor. In addition, we investigate whether this relationship is affected by the type of joint audit regimes (i.e., voluntary versus mandatory), and the mix of joint auditors appointed (i.e., two big 4 auditors, or two non-big 4 auditors, or one Big 4 auditor paired with one non-big 4 auditor). To test our hypotheses, we use a sample of 32 companies listed on the Egyptian stock exchange during the period 2009 through 2013. The results of our multiple regression analyses show that companies audited by joint auditors are more conservative than companies audited by single auditors. However, we find no significant difference in levels of earnings conservatism between companies audited by joint auditors mandatorily and companies audited by joint auditors voluntarily. We also find no significant difference in levels of earnings conservatism between companies audited by two big4 auditors and companies audited by two non-big4 auditors, or by one big4 auditor paired with one non-big4 auditor.

The effect of auditor type on audit quality in emerging markets: evidence from Egypt

“…2. To understand the effects of joint audits and dual audit on audit quality, reader may refer to Mandour et al (2018); El-Dyasty (2017); El Assy (2015).…”

Using Joint Audits to Support the Auditor's Independence "A Field Study"

“…In order to cope with this crisis, many new mechanisms were adopted for more control to solve the problem and regain confidence in the quality of published financial statements through improving the audit quality (Al Haridy, 2015). One of the first attempts which aimed to enhance audit quality and support the independence of auditors was Sarbanes-Oxley Act (SOX) by U.S. Congress in 2002 to improve corporate governance, enhance the quality of audit and ensure auditor independence through providing a group of mechanisms such as (Auditor Rotation which means replacing the auditor with another after a certain period of time) according to Al Assy (2015). The European commission suggested a group of actions to deal correctly with the audit market concentration and a lack of confidence in the independence of auditor; one of these actions was audit committee, auditor rotation and finally joint audit programs (Al Assy, 2015).…”

“…One of the first attempts which aimed to enhance audit quality and support the independence of auditors was Sarbanes-Oxley Act (SOX) by U.S. Congress in 2002 to improve corporate governance, enhance the quality of audit and ensure auditor independence through providing a group of mechanisms such as (Auditor Rotation which means replacing the auditor with another after a certain period of time) according to Al Assy (2015). The European commission suggested a group of actions to deal correctly with the audit market concentration and a lack of confidence in the independence of auditor; one of these actions was audit committee, auditor rotation and finally joint audit programs (Al Assy, 2015). A lot of researchers paid attention to the joint audit entrance and defended it at all levels, as they thought its role in supporting audit quality and independence of auditor.…”

“…( 2015), there are some factors affecting the company's decisions to implement joint audit programs as follows (see figure 1): -The big size companies may activate the joint audit programs because of having high levels of financial leverage in comparison with small size companies (Al Assy, 2015;Maggina, 2012). -Audit committee as one of corporate governance mechanisms can exert pressure on the company management to deal with the big-4 auditors in order to guarantee audit quality improvements (Marmousez, 2012;Al Assy, 2015). (Albaqali and Kukreja., 2017).…”

اثر المراجعة المشترکة على اشتراطات منح الائتمان المصرفی:هل هناک تأثیر لمشارکة کبرى مکاتب المراجعة(منهج امبریقی على الشرکات المساهمة المصریة)

“…)(Li et al , 2010)(Bisogno and Deluca, 2016; Ittonen et al, 2012; Zerni et al, 2010;Francis et al, 2009)(Lobo et al, 2017;Ittonen and Trønnes , 2015;El Assy, 2015)(Baldauf and Steckel, 2012) (Andre et al, 2016;Velte and Azibi, 2015; André et al, 2015;Zerni et al, 2012;Holm and Thinggaard, 2010) (Al-Hadi et al, 2017) (Alsadoun and Aljabr, 2016) (Al-Hadi et al, 2017) (Reichelt and Wang, 2010; Balsam et al, 2003) (De Angelo, 1981) Big4 (Aljabr and Alsadoun, 2014; Lesage et al ,2012; Marmousez, 2009) (Andre et al, 2016; Velte and Azibi, 2015; André et al, 2015; Zerni et al, 2012; Holm and Thinggaard, 2010) (Ittonen and Trønnes, 2015; Holm and Thingaard, 2014; Ittonen and Peni, 2012) Big 4 (Deng et al, 2014) Big 4 Big 4 (BB) a Single Big-Firm Auditor(B) Big 4 Non Big 4 (BS) B (Gonthier-Besacier and Schatt, 2007) Big 4 (Audousset-Coulier, 2015) (Francis et al, 2009) (Bedard et al 2012) (Lobo et al,…”