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What is a Joint Audit?

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  • Written By: Jessica Ellis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 17 November 2016
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A joint audit refers to a tax review process in which two independent auditors share the responsibility for completing an audit report on a single entity. A joint audit may sometimes be conducted on individual taxpayers, but are more often used in the business world and with large corporations. Multi-national joint audits are sometimes used to help compile an audit report on corporations that operate across borders.

There are several reasons why a joint tax audit may be useful. First, it can help split up the work of an audit across multiple firms, which may reduce the overall time needed to complete the auditory process. Second, it may increase accuracy in reporting, since each participating auditor has the opportunity to review the work of the other. Some experts suggest that it may also guard against corruption within the auditing industry, by allowing independent review of reports by another auditing firm.

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Criticisms of the joint audit process include the fact that it can significantly increase the cost of an audit. Using two auditors or auditing teams from competing firms instead of one single auditor can strain the resources of tax bureaus and may slow the process of completing all required audits. The amount of people involved in the audit may be confusing to auditees, who may not know which auditor is handling which segment of the business. The efficiency and timeliness of the process also relies on the extent to which the auditors cooperate, a factor which cannot always be monitored or enforced. For these reasons, many joint audit sessions begin with a lengthy series of meetings between the auditors and with the auditee to outline the protocol of the process and set guidelines, time frames, and milestones.

Not all countries permit the use of joint audits. Participating nations include Japan, the United States, Mexico, Spain, and Turkey. Both France and Africa have laws that require joint audits in certain situations, such as the auditing of financial institutions. Countries that allow joint auditing also sometimes allow bilateral audits to be prepared by teams composed of auditors from other participating nations.

The practice of multinational joint auditing has lead to some controversy over the management of conflicting tax laws. On an international level, cooperation and communication become key factors in the process of a joint audit. The teams must be able to establish an appropriate degree of information sharing and protocol that assists both nations. As a result of varying degrees of cooperation between participating nations, international joint auditing can be a lengthy process.

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