Firm corruption in the presence of an auditor
This paper develops a framework to explore firm corruption taking account of interaction with an auditor. The basic idea is that an auditor can provide auditing and other (consultancy) services. The extent of the other services depends on firm profitability. Hence auditor profitability can increase with firm corruption that may provide an incentive to collude in corrupt practices. This basic idea is developed using a game theoretic framework. It is shown that a multiplicity of equilibria exist from stable corruption, through auditor controlled corruption, via multiple equilibria to honesty on behalf of both actors. Following the development of the model various policy options are highlighted that show the difficulty of completely removing corrupt practices.
|Date of creation:||Jul 2010|
|Date of revision:||Jul 2010|
|Contact details of provider:|| Postal: |
Phone: +44 114 222 3399
Fax: + 44 (0)114 222 3458
Web page: http://www.shef.ac.uk/economics
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marco Pagano & Giovanni Immordino, 2007.
"Optimal Regulation of Auditing,"
CESifo Working Paper Series
1980, CESifo Group Munich.
- Lessmann, Christian & Markwardt, Gunther, 2008.
"One size fits all? Decentralization, corruption, and the monitoring of bureaucrats,"
Dresden Discussion Paper Series in Economics
14/08, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
- Lessmann, Christian & Markwardt, Gunther, 2010. "One Size Fits All? Decentralization, Corruption, and the Monitoring of Bureaucrats," World Development, Elsevier, vol. 38(4), pages 631-646, April.
- Christian Lessmann & Gunther Markwardt, 2009. "One Size Fits All? Decentralization, Corruption, and the Monitoring of Bureaucrats," CESifo Working Paper Series 2662, CESifo Group Munich.
- Ariane Lambert-Mogiliansky & Konstantin Sonin, 2003.
"Corruption and Collusion in Procurement Tenders,"
w0036, Center for Economic and Financial Research (CEFIR).
- Ariane Lambert-Mogiliansky & Konstantin Sonin, 2006. "Collusive Market Sharing and Corruption in Procurement," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 883-908, December.
- Ariane Lambert-Mogiliansky & Konstantin Sonin, 2005. "Collusive market-sharing and corruption in procurement," PSE Working Papers halshs-00590773, HAL.
- Laffont, Jean-Jacques & N'Guessan, Tchetche, 1999. "Competition and corruption in an agency relationship," Journal of Development Economics, Elsevier, vol. 60(2), pages 271-295, December.
- John C. Coffee, 2005. "A Theory of Corporate Scandals: Why the USA and Europe Differ," Oxford Review of Economic Policy, Oxford University Press, vol. 21(2), pages 198-211, Summer.
- Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
- Juan D. Carrillo, 2000. "Graft, Bribes, and the Practice of Corruption," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(2), pages 257-288, 06.
- Mishra, Ajit, 2006. "Persistence of corruption: some theoretical perspectives," World Development, Elsevier, vol. 34(2), pages 349-358, February.
- repec:pse:psecon:2005-25 is not listed on IDEAS
- Juan D. Carrillo, 2000. "Graft, Bribes, and the Practice of Corruption," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 257-286, 06.
- Samuel, Andrew, 2009. "Preemptive collusion among corruptible law enforcers," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 441-450, August.
When requesting a correction, please mention this item's handle: RePEc:shf:wpaper:2010016. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jacob Holmes)
If references are entirely missing, you can add them using this form.