Firm Corruption in the Presence of an Auditor
AbstractWe develop a game theoretic framework exploring firm corruption accounting for interactions with an auditor who provides auditing and other services. A multiplicity of equilibria can exist including stable corruption and auditor controlled corruption. Whilst fining the auditor cannot eliminate all corruption, fining the firm can, but increasing this fine can also have perverse effects. Investing in corruption detection may be effective in deterring auditor corruption but ineffective in deterring firm corruption. Ultimately, policy effectiveness is highly dependent upon several factors which may be hard to observe in practice making general rules about policy interventions to address corruption very difficult.
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Bibliographic InfoPaper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 20_12.
Date of creation: Jun 2012
Date of revision:
firm corruption; auditor corruption; perfect equilibrium;
Other versions of this item:
- Dietrich, Michael & McHardy, Jolian & Sharma, Abhijit, 2010. "Firm corruption in the presence of an auditor," MPRA Paper 24784, University Library of Munich, Germany.
- Michael Dietrich & Jolian McHardy & Abhijit Sharma, 2010. "Firm corruption in the presence of an auditor," Working Papers 2010016, The University of Sheffield, Department of Economics, revised Jul 2010.
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-06-25 (All new papers)
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