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Multiple audit mechanism, audit quality and cost of debt: empirical evidence from a developing country


This study focuses on the distinctive Egyptian setting, where firms could use multiple audit mechanism voluntarily or mandatory under certain circumstances. We investigate the effects on audit quality and cost of debt. A sample of 1699 firm-year observations of Egyptian listed firms for the 2009–2019 period is used. Abnormal accruals are employed as proxies of audit quality through abnormal working capital accruals and modified Jones models. Results suggest that joint audits are not associated with both proxies of audit quality. In contrast, the dual audit is positively associated with abnormal accruals leading to conclude that dual audits are not providing a high level of audit quality. But this result holds only in companies with income-decreasing discretionary accruals. These results are in line with litigation and reputational risk fears offering motivations for auditors to favour conservative accounting alternatives (i.e. income-decreasing discretionary accruals). This implies that firms opting to employ dual audits have a higher level of earnings conservatism. Our evidence also indicates that the choice of multiple audit mechanisms, especially joint audits, is related to significant increases in the cost of debt, implying a higher perceived level of risk. Further, dual audits decrease the cost of debt only in companies with high earnings management. This study adds to the literature on whether the preference of income-increasing or income-decreasing discretionary accruals is related to multiple audit mechanism and consequently affected the cost of debt. Together, our results support the view that voluntary joint audits are not related to audit quality in Egypt compared to mandatory dual audits, which consequently affect the pricing of debt. Our results have important implications for policymakers, audit firms and investors.

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Data availability

Data are available on request from the authors.


  1. Joint audit is where a company appoint two audit firms to issue a single report. In dual audit, more than one auditor may be allowed to perform the audit. However, each auditor is working separately to issue his own audit report. Therefore, users may receive different audit reports about same firm. We introduce multiple audit mechanism concept to express audit work performed by more than a single audit firm. This mechanism may reflect either joint audits or dual audits.


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Correspondence to Ahmed A. Elamer.

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El-Dyasty, M.M., Elamer, A.A. Multiple audit mechanism, audit quality and cost of debt: empirical evidence from a developing country. Int J Discl Gov 19, 264–281 (2022).

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  • Multiple audit mechanism
  • Joint audits
  • Dual audits
  • Audit quality
  • Cost of debt
  • Accountability state authority
  • Egypt

JEL Classification

  • M42