Firm Corruption in the Presence of an Auditor

Michael Dietrich, Jolian McHardy and Abhijit Sharma (a.sharma2@hud.ac.uk)

Working Paper series from Rimini Centre for Economic Analysis

Abstract: We develop a game theoretic framework exploring firm corruption accounting for interactions with an auditor who provides auditing and other services. A multiplicity of equilibria can exist including stable corruption and auditor controlled corruption. Whilst fining the auditor cannot eliminate all corruption, fining the firm can, but increasing this fine can also have perverse effects. Investing in corruption detection may be effective in deterring auditor corruption but ineffective in deterring firm corruption. Ultimately, policy effectiveness is highly dependent upon several factors which may be hard to observe in practice making general rules about policy interventions to address corruption very difficult.

Keywords: firm corruption; auditor corruption; perfect equilibrium (search for similar items in EconPapers)
JEL-codes: C70 D21 K42 L21 (search for similar items in EconPapers)
Date: 2012-06
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http://www.rcea.org/RePEc/pdf/wp20_12.pdf (application/pdf)

Related works:
Journal Article: Firm Corruption in the Presence of an Auditor (2016)
Working Paper: Firm corruption in the presence of an auditor (2010)
Working Paper: Firm corruption in the presence of an auditor (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:20_12

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