The Good, the Bad, and the Regulator: An Experimental Test of Two Conditional Audit Schemes

Jeremy Clark, Lana Friesen and Andrew Muller

Economic Inquiry, 2004, vol. 42, issue 1, 69-87

Abstract: Conditional audit rules are designed to achieve regulatory compliance with fewer inspections than required by random auditing. A regulator places individuals into audit pools that differ in probability of audit or severity of fine and specifies transition rules between pools. Future pool assignment is conditional on current audit results. We conduct an experiment to compare two specific schemes--Harrington's Past-Compliance Targeting and Friesen's Optimal Targeting--against random auditing. We find a production possibility frontier between compliance and minimizing inspections. Optimal targeting generates the lowest inspection rates as predicted, but random auditing the highest compliance. Past-compliance targeting is intermediate. (JEL C91, H26, K42, L51) Copyright 2004, Oxford University Press.

JEL-codes: C91 H26 K42 L51 (search for similar items in EconPapers)
Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (26)

Downloads: (external link)
http://hdl.handle.net/10.1093/ei/cbh045 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:ecinqu:v:42:y:2004:i:1:p:69-87

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

Access Statistics for this article

Economic Inquiry is currently edited by Preston McAfee

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