An inspection game of internal audit and the influence of whistle-blowing

Benjamin Florian Siggelkow (), Jan Trockel () and Oliver Dieterle ()
Additional contact information
Benjamin Florian Siggelkow: University of Hagen
Jan Trockel: University of Hagen
Oliver Dieterle: Bundesagentur für Arbeit

Journal of Business Economics, 2018, vol. 88, issue 7, No 4, 883-914

Abstract: Abstract In this paper we analyse how whistle-blowing affects fraudulent behaviour of managers while the company instigates imperfect internal audit to detect the fraud. To do so, we employ in a first step a non-cooperative inspection game to analyse fraudulent behaviour of a manager controlled by an internal auditor. In a second step we introduce exogenous whistle-blowing of a manager’s employee to aid the auditor to reveal the fraud. In a third step, the two-person inspection game is extended to a three-person approach with endogenous whistle-blowing. Our novel results are that the intensity of internal audit is always lower with whistle-blowing than without and that whistle-blowing renders the manager to act less fraudulently than compared to the basic inspection game if and only if she is unaware of the whistle-blower’s expected pay-off and the efficacy of internal audit is sufficiently low.

Keywords: Whistle-blowing; Inspection game; Three-preson game; C72; G39 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11573-018-0893-9 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:jbecon:v:88:y:2018:i:7:d:10.1007_s11573-018-0893-9

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/11573

DOI: 10.1007/s11573-018-0893-9

Access Statistics for this article

Journal of Business Economics is currently edited by Günter Fandel

More articles in Journal of Business Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().