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GAME THEORY AND THE AUDITOR'S PENALTY REGIME
Author(s) -
Hatherly David,
Nadeau Luc,
Thomas Lyn
Publication year - 1996
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1996.tb00400.x
Subject(s) - audit , outcome (game theory) , set (abstract data type) , accounting , business , joint audit , game theory , microeconomics , economics , computer science , internal audit , programming language
This paper models the audit as a cooperative game played by the auditor and auditee within a penalty regime imposed by a regulatory authority. The paper investigates the relationship between the penalties set by the regulator and the jointly agreed strategy of the auditor and auditee, and discusses how the penalty regime might be employed so as to induce a particular strategic outcome such as high effort levels on the part of the auditee and/or auditor.