Regulating the Market for Audit Services: A Game Theoretic Approach

IF 2.5 4区 管理学 Q2 BUSINESS, FINANCE
Konstantinos Eleftheriou, Iliya Komarev, Paul Klumpes
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引用次数: 0

Abstract

We apply game theory to model how alternative mandatory audit firm rotation regimes can affect the strategic interaction between auditee and auditor firms, and analyze potential consequences on detection risk and impairment of auditor scepticism. The major results suggest that: (1) relative to an initial state with no rotation requirement but high probability for impaired auditor scepticism, imposing either short‐term or long‐term mandatory audit firm rotation will remove the threat to auditor scepticism and lead to higher audit fees and lower detection risk; (2) relative to long‐term mandatory audit firm rotation, imposing a short‐term rotation will lead to lower audit fees and higher detection risk, resulting from greater informational frictions. We further find that imposing supplementary regulatory instruments, such as increased regulatory scrutiny of the auditee and/or auditor, can be used to lower the detection risk and increase audit quality. We discuss implications of these findings for empirical research.
监管审计服务市场:一种博弈论方法
我们运用博弈论来模拟替代性强制性审计事务所轮转制度如何影响被审计单位和审计事务所之间的战略互动,并分析对发现风险和审计师怀疑态度损害的潜在后果。主要结果表明:(1)相对于没有轮换要求但审计师怀疑主义损害的初始状态,实施短期或长期强制性审计事务所轮换将消除对审计师怀疑主义的威胁,并导致更高的审计费用和更低的发现风险;(2)相对于长期的强制性审计事务所轮岗制度,实行短期轮岗制度将导致更低的审计费用和更高的检测风险,从而导致更大的信息摩擦。我们进一步发现,实施补充监管工具,如加强对被审计单位和/或审计师的监管审查,可用于降低发现风险并提高审计质量。我们讨论了这些发现对实证研究的意义。
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来源期刊
CiteScore
3.30
自引率
4.80%
发文量
25
期刊介绍: Since 1965 Abacus has consistently provided a vehicle for the expression of independent and critical thought on matters of current academic and professional interest in accounting, finance and business. The journal reports current research; critically evaluates current developments in theory and practice; analyses the effects of the regulatory framework of accounting, finance and business; and explores alternatives to, and explanations of, past and current practices.
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