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Deterring fraud by looking away
Author(s) -
Okat Deniz
Publication year - 2016
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12140
Subject(s) - audit , exploit , business , face (sociological concept) , computer security , accounting , actuarial science , computer science , social science , sociology
Individuals being audited potentially learn how to exploit the weaknesses inherent in any audit methodology if they face the same method many times. Hence, an auditor better deters fraud by randomizing her choice of methodology over time, thereby frustrating a would‐be fraudster's ability to learn. In the extreme, an auditor benefits from refusing to audit, even though audits are costless to her.