Joint Audits

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Where more than one firm is appointed and are both responsible for the opinion

There are several advantages and disadvantages in a joint audit being performed

  • Advantages

    • Efficiency

      The subs auditor will have a good understanding of the business / controls etc so working together will help the principal auditor catch up quicker

      This is a key issue, as the principal auditor needs a thorough understanding of the subsidiary also for risk assessment

    • Resources

      A joint audit allows sufficient resources to be allocated to the subs audit, assuring the quality of the opinion given

    • Quality

      Both auditors can discuss contentious issues together 

      Often a ‘fresh pair of eyes’ helps. 

      It should be easier to challenge management and therefore ensure that the auditors’ position is taken seriously

  • Disadvantages

    • More expensive for the client

      From a cost/benefit point of view there is clearly no point in paying twice for one opinion to be provided. 

      Despite the audit workload being shared, both firms will have a high cost for being involved in the audit in terms of senior manager and partner time

    • Different audit approaches

      Problems could arise in deciding which firm’s method to use, for example, to calculate materiality, sample sizes  etc 

      One firm’s methods may dominate, eliminating the benefit of a joint audit being conducted

    • Working Together

      There may be problems for the two audit firms to work together harmoniously

    • Joint Liability

      Both firms are jointly liable

      They could, however, blame each other, making the litigation process more complex

      However, it could be argued that joint liability is not necessarily a drawback, as the firms should both be covered by professional indemnity insurance.

NotesPaper exam