Journal of Business Ethics 41 (1-2):1 - 11 (2002)
This paper uses the intuition from the game of chickento model client-auditor financial reporting and audit effort strategies. Within an ethical context, our model is concerned with the client misreporting and its detection by the auditor. The paper uses a welfare game(similar to the game of chicken) to more formally model client-auditor strategies. The welfare game is then extended to provide additional insight into ethical and audit effort issues.Such a welfare gameprovides equilibrium in mixed strategies. This mixed strategy solution makes possible four outcomes from the game: 1) Financial Statements are fairly presented by client and the auditor performs a normal audit, 2) Financial Statements are fairly presented by client and the auditor performs an extended audit (over auditing), 3) Financial State-ments are misstated by client and detected by the auditor, and 4) Financial Statements are misstated by client and not detected by the auditor (audit failure despite no intended unethical action on the part of the auditor).
|Keywords||auditing ethics game theory|
|Categories||categorize this paper)|
References found in this work BETA
No references found.
Citations of this work BETA
No citations found.
Similar books and articles
The Good Auditor – Skeptic or Wealth Accumulator? Ethical Lessons Learned From the Arthur Andersen Debacle.Ronald Duska - 2004 - Journal of Business Ethics 57 (1):17 - 29.
The Impact of Ethical Development and Cultural Constructs on Auditor Judgments.Cynthia Jeffrey, William Dilla & Nancy Weatherholt - 2004 - Business Ethics Quarterly 14 (3):553-579.
The Effects of Moral Reasoning and Self-Monitoring on CFO Intentions to Report Fraudulently on Financial Statements.Nancy Uddin & Peter R. Gillett - 2002 - Journal of Business Ethics 40 (1):15 - 32.
Management Attempts to Avoid Accounting Disclosure Oversight: The Effects of Trust and Knowledge on Corporate Directors' Governance Ability. [REVIEW]Anna M. Rose & Jacob M. Rose - 2008 - Journal of Business Ethics 83 (2):193 - 205.
The Effects of Satisfaction with a Client's Management During a Prior Audit Engagement, Trust, and Moral Reasoning on Auditors' Perceived Risk of Management Fraud.William A. Kerler & Larry N. Killough - 2009 - Journal of Business Ethics 85 (2):109-136.
An Examination of Auditor Independence Issues From the Perspectives of U.K. Finance Directors.Roger Hussey & George Lan - 2001 - Journal of Business Ethics 32 (2):169 - 178.
Enhancing Perceptions of Auditor Independence.Michael A. Pearson - 1985 - Journal of Business Ethics 4 (1):53 - 56.
Ethical Issues Related to the Provision of Audit and Non-Audit Services: Evidence From Academic Research. [REVIEW]Hollis Ashbaugh - 2004 - Journal of Business Ethics 52 (2):143-148.
Added to index2009-01-28
Total downloads46 ( #114,608 of 2,178,178 )
Recent downloads (6 months)1 ( #316,504 of 2,178,178 )
How can I increase my downloads?