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: 9 Mappin Street, SHEFFIELD, S1 4DT|
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.:
- Giovanni Immordino & Marco Pagano, 2005.
"Optimal Regulation of Auditing,"
CSEF Working Papers
133, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 May 2007.
- repec:cup:cbooks:9780521632935 is not listed on IDEAS
- repec:cup:cbooks:9780521659123 is not listed on IDEAS
- 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.
- Ariane Lambert-Mogiliansky & Konstantin Sonin, 2006. "Collusive market sharing and corruption in procurement," Post-Print halshs-00754175, HAL.
- Ariane Lambert-Mogiliansky & Konstantin Sonin, 2003. "Corruption and Collusion in Procurement Tenders," Working Papers w0036, Center for Economic and Financial Research (CEFIR).
- repec:pse:psecon:2005-25 is not listed on IDEAS
- Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
- Lessmann, Christian & Markwardt, Gunther, 2010.
"One Size Fits All? Decentralization, Corruption, and the Monitoring of Bureaucrats,"
Elsevier, vol. 38(4), pages 631-646, April.
- Lessmann, Christian & Markwardt, Gunther, 2008. "One size fits all? Decentralization, corruption, and the monitoring of bureaucrats," Dresden Discussion Paper Series in Economics 14/08, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
- Christian Lessmann & Gunther Markwardt, 2009. "One Size Fits All? Decentralization, Corruption, and the Monitoring of Bureaucrats," CESifo Working Paper Series 2662, CESifo Group Munich.
- Mishra, Ajit, 2006. "Persistence of corruption: some theoretical perspectives," World Development, Elsevier, vol. 34(2), pages 349-358, February.
- Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
- Michel Aglietta & Antoine RebÃ©rioux, 2005. "Corporate Governance Adrift," Books, Edward Elgar Publishing, number 3675.
- 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.
- 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.
- Samuel, Andrew, 2009. "Preemptive collusion among corruptible law enforcers," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 441-450, August.
- 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.
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.