Joint audit

A joint audit is an audit on a legal entity (the auditee) by two or more auditors to produce a single audit report, thereby sharing responsibility for the audit. A typical joint audit has audit planning performed jointly and fieldwork allocated to the auditors. The auditors are typically not individuals, but auditing firms. This work allocation may be rotated after a set number of years to mitigate the risk of over-familiarity. Work performed by each auditor is reviewed by the other, in most cases by exchanging audit summary reports. The critical issues at group level, including group consolidation, are reviewed jointly and there is joint reporting to the legal entity's management, its audit committee, a government entity, or the general public. A joint audit is an audit on a legal entity (the auditee) by two or more auditors to produce a single audit report, thereby sharing responsibility for the audit. A typical joint audit has audit planning performed jointly and fieldwork allocated to the auditors. The auditors are typically not individuals, but auditing firms. This work allocation may be rotated after a set number of years to mitigate the risk of over-familiarity. Work performed by each auditor is reviewed by the other, in most cases by exchanging audit summary reports. The critical issues at group level, including group consolidation, are reviewed jointly and there is joint reporting to the legal entity's management, its audit committee, a government entity, or the general public. A joint audit is different from a dual audit, where a dual audit is performed by two independent auditors issuing their own separate reports, which are then used by another auditor that ultimately reports on the entity as a whole. Joint audits are used internationally, including in India, Denmark, Germany, Switzerland and the UK. In France, joint audit became a legal requirement in 1966, while in South Africa, a joint audit is mandatory for firms operating in the financial services sector. In the United States, a joint audits are performed by the Internal Revenue Service (IRS) by using various specialists and agents simultaneously in a single tax audit. The state of Maryland has a joint audit committee, composed of members of the State House of Representatives and State Senate, responsible for reviewing the legislative audit. Joint audit addresses two underlying principles of audit quality: auditors’ competence and independence. It enables a benchmarking of audit approaches and affords audit committees the opportunity to pick and choose the best local firms from within two global audit networks. Audit committees and investors have additional assurance that the audit opinion with which they are presented is complete. A joint audit allows rotation of audit firms, and retains knowledge and understanding of group operations in a way that minimizes the disruption caused when a single audit firm is changed. The rotation of audit firms is equally likely to mitigate the risk of over familiarity. Two firms can also stand stronger together against aggressive accounting treatments. In this way, joint audit effectively becomes a guardian for audit quality. The benchmarking that takes place between the two firms raises the level of service quality. In India, members of the company has the liberty to choose joint auditors.<Companies Act</ref> A joint audit has a further benefit in that it can encourage more competition between audit firms. Despite the fact that two Big Four firms can still be used on a joint audit, there is an opportunity for companies to be more willing to engage other firms in the process. The Big Four then becomes the best seven or eight, as more firms are given the opportunity to demonstrate their capabilities, while clients can retain a Big Four signature where they feel it is needed. A recent report produced by consultants London Economics for the European Commission highlighted that France and Denmark (two countries with joint audits) are the two least concentrated audit markets in Europe.