Hilary Maxson, Executive Vice-President, and Global CFO at Schneider Electric. Mandatory joint audit is not a bad idea for companies if they can manage their costs and also if there are good enough quality auditors in the economy, according to Hilary Maxson, Executive Vice-President, and Global CFO at France-headquartered energy management major Schneider Electric. The finance leader feels two eyes are better than one and mandatory joint audits, therein, can help improve audit quality.
We are not averse to mandatory joint audit if the costs can be managed. But the biggest challenge in joint audits is that there are not many companies left that really have high-end auditors. Today with a lot of regulations, that governments around the world are putting on in the markets, it is not easy for professionals to get into the audit. Also, today there exist other avenues, so the world of auditors is really getting very small.Hilary Maxson, Executive Vice-President, and Global CFO at Schneider Electric
In joint audits, two auditors carry out the statutory audit and prepare a joint audit report as compared to one single auditor.
Improving audit qualityThe CFO’s comments came in the backdrop of several governments around the world like the UK and India mulling a mandatory joint audit rule amid rising corporate failures as a way to improve audit quality, enhance independence as well as improve competition in the markets, which are currently dominated by the Big Four auditors-Deloitte, EY, PwC, and KPMG.
Already, joint audits are used internationally. In France, joint audits became a legal requirement in 1966, while in South Africa, it is mandatory for firms operating in the financial services sector. In the US and the UK, joint audits are not mandatory. In India, voluntary adoption of joint audits is already provided under section 139(3)(b) of the Companies Act, 2013, and Companies (Audit and Auditor) Rules, 2014. The standard on auditing (SA299) “joint audit of financial statements” also provides guidance on joint audit.Schneider Electric, which has a presence in over 100 countries, including India, is listed in France. The company, which clocked over Euros 34,176 million in 2022, is jointly audited by PwC and Mazars.Experts say mandatory joint audits can reinforce audit quality as they could be beneficial in reducing the risk of over-familiarity through rotating the allocation of fieldwork between the joint auditors after a set number of years. Also, they add, joint audits could boost competition. But at the same time, joint audits could also have disadvantages like higher audit fees, lack of accountability, and difficulty for companies to appoint specialist auditors with sufficient expertise, among others, they say.
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