The principal-agent game analysis among accounting firm, enterprise customer and government

Abstract

The common fraud events between the public accounting firm and the audited enterprise have occurred frequently, coupled with the lack of supervision and punishment, so that the quality of accounting information is constantly seriously questioned by the public. In this paper, I establish the principal-agent model of uncertainty and without supervision between the accounting firm and enterprise by making use of principal-agent theory, analyze the model's participation constraint and incentive compatibility constraint, and establish the benefit matrix between the accounting firm and government by applying the related game theory. Thus the related decision-making recommendations for the current situation are drawn.