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Evaluation of fraud examinations: a principal-agent study of private internal investigations

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  • Petter Gottschalk

Abstract

Agency theory suggests that problems in terms of conflicting preferences, knowledge asymmetry and different attitudes towards risks can have a negative impact on work outcome from the agent to the principal. In private internal investigations, the client is the principal, while the fraud examiner is the agent. Based on a sample of 49 reports of investigation from Norway, this article presents empirical results testing agency theory. Results indicate that agency issues do have a significant influence on the contribution from internal investigations, but the influence is not necessarily negative. While different attitudes towards risk have a negative impact, knowledge asymmetry has a positive impact on the contribution from an investigation. A possible explanation for this surprising result is that examiners are experts in other areas than the client, which is the reason why examiners are hired by clients.

Suggested Citation

  • Petter Gottschalk, 2018. "Evaluation of fraud examinations: a principal-agent study of private internal investigations," International Journal of Business Continuity and Risk Management, Inderscience Enterprises Ltd, vol. 8(1), pages 36-48.
    • Handle: RePEc:ids:ijbcrm:v:8:y:2018:i:1:p:36-48
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