Publication Type

Journal Article

Publication Date

12-2012

Abstract

We examine honesty and credible auditing in firm-investor relations in a repeated game of imperfect information, embedded in a general equilibrium framework. Informed auditors enhance credibility over a range of audit fees – despite the auditor’s incentive to collude – provided the probability of detection is imperfectly correlated across clients. Auditing can enhance growth especially for a relatively egalitarian distribution of wealth. We show that audit fees must be neither too high nor too low to enhance client credibility, highlight the role of mandatory audit fee disclosure, interpret international differences in shareholding patterns and uncover a possible rationale for audit industry concentration.

Discipline

Economics

Publication

Seoul Journal of Business

Volume

18

Issue

2

First Page

67

Last Page

105

ISSN

1226-9816

Publisher

Seoul National University Business School

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://cba.snu.ac.kr/en/sjb-recent-issues?year=2012

Included in

Economics Commons

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