Honesty and Intermediation: Corporate Cheating, Auditor Involvement and the Implications for Takeoff
Publication Type
Journal Article
Version
publishedVersion
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
Citation
GUHA, Brishti.
Honesty and Intermediation: Corporate Cheating, Auditor Involvement and the Implications for Takeoff. (2012). Seoul Journal of Business. 18, (2), 67-105.
Available at: https://ink.library.smu.edu.sg/soe_research/1444
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
http://cba.snu.ac.kr/en/sjb-recent-issues?year=2012