Abstract
The Competition and Markets Authority (CMA) in the United Kingdom called for the nation’s largest accounting firms to conduct mandatory joint audits of FTSE 350 companies to enhance audit competition, reduce market concentration, and improve audit quality. Using a large sample of European companies, this study estimates the impact of the proposed regulation, leveraging the long-standing mandatory joint audit requirement for French companies and more recent legislation in other European jurisdictions. We empirically examine the influence of joint audits on audit fees, Going Concern Opinions (GCO), and audit risk. We find that higher audit fees for French companies with mandatory joint audits coincide with reduced audit risk, which we theorize is a primary benefit of the regulation. Our tests support the hypothesis that higher joint audit fees reflect additional effort and improved audit quality. We also corroborate this finding in the context of audit quality, using an auditor’s propensity to issue a GCO as a proxy. Our evidence supports the theory that joint audits improve audit quality by reducing audit risk.