Optimal Regulation of Auditing

Marco Pagano and Giovanni Immordino

CESifo Economic Studies, 2007, vol. 53, issue 3, 363-388

Abstract: We study regulation of the auditing profession in a model where audit quality is unobservable and enforcing regulation is costly. The optimal audit standard falls short of the first-best audit quality, and it is increasing in the riskiness of firms and in the amount of funding they seek. The model can encompass collusion between clients and auditors, arising from the joint provision of auditing and consulting services: deflecting collusion requires less ambitious standards. Finally, banning the provision of consulting services by auditors eliminates collusion but may not be optimal in the presence of economies of scope. (JEL Classification: G28, K22, M42). Copyright , Oxford University Press.

Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://hdl.handle.net/10.1093/cesifo/ifm016 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Optimal Regulation of Auditing (2007)
Working Paper: Optimal Regulation of Auditing (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:cesifo:v:53:y:2007:i:3:p:363-388

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

CESifo Economic Studies is currently edited by Panu Poutvaara

More articles in CESifo Economic Studies from CESifo Group Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().