The Effectiveness of Joint Audits in Improving Financial Statement Assurance in Large Corporations

Posted: May 23, 2022

• Ronan Chavez
• Kendall Pierce
• Isla Ford

Abstract

The landscape of corporate financial reporting has undergone significant transformation in the post-Sarbanes-Oxley era, with increasing demands for enhanced transparency and reliability of financial statements. Joint audits, wherein two or more audit firms collaborate to express a unified opinion on financial statements, represent an innovative approach to addressing these demands. While several European countries mandate joint audits for certain entities, their voluntary adoption in global capital markets remains limited despite potential benefits. This research addresses a critical gap in the auditing literature by systematically examining the effectiveness of joint audit arrangements through a novel methodological lens that transcends traditional audit quality metrics. Contemporary auditing research has predominantly focused on single-auditor models, examining factors such as auditor independence, expertise, and tenure. However, the complex dynamics of multi-auditor collaborations remain underexplored, particularly regarding how joint audits influence the cognitive processes, evidence evaluation techniques, and professional skepticism application that underpin financial statement assurance. Our research introduces an original framework that conceptualizes joint audits not merely as a structural arrangement but as a complex system of professional interactions, knowledge sharing, and complementary skill utilization. The central research questions guiding this investigation are threefold. First, how do joint audit arrangements influence the depth and breadth of audit procedures compared to single-auditor models? Second, what specific mechanisms within joint audits contribute to enhanced detection of material misstatements and fraud? Third, what are the optimal conditions and partner selection criteria that maximize the effectiveness of joint audit arrangements? These questions are addressed through an innovative methodology that combines quantitative analysis of audit outcomes with qualitative assessment of audit processes. This research makes several distinctive contributions to the auditing literature. Methodologically, we develop and validate novel metrics for assessing audit quality that capture dimensions previously unmeasured in the literature. Theoretically, we advance understanding of how multi-auditor collaborations