Optimal Audit Policy and Heterogenous Agents

Marisa Ratto and Thibaud Vergé

The Centre for Market and Public Organisation from The Centre for Market and Public Organisation, University of Bristol, UK

Abstract: Frauds can be explained not only in terms of individual willingness to cheat, but may also be driven by opportunities to behave dishonestly. The audit policy should therefore be different for different categories of agents. This paper focuses on the optimal audit policy when there are two categories of agents and shows that the auditor adopts different policies depending on its budget. When resources are quite limited, the auditor sets identical audit probabilities for both types. On the other hand, in most of the cases, the authority should first ensure that people with lower opportunities choose not to commit an offence.

Keywords: fraud; audit; opportunities; budget allocation (search for similar items in EconPapers)
JEL-codes: D81 G22 H26 K42 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2002-12
New Economics Papers: this item is included in nep-mfd
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Working Paper: Optimal Audit Policy and Heterogenous Agents (2003)
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