2004 Fiscal Year Final Research Report Summary
A Experimental Study of Auditing Effectiveness
| Project/Area Number |
15530308
|
|---|
| Research Category |
Grant-in-Aid for Scientific Research (C)
|
| Allocation Type | Single-year Grants |
|---|
| Section | 一般 |
|---|
| Research Field |
Accounting
|
|---|
| Research Institution | Meiji University |
|---|
Principal Investigator |
KATO Tatsuhiko Meiji University, School of Commerce, Professor, 商学部, 教授 (20204480)
|
|---|
| Project Period (FY) |
2003 – 2004
|
| Keywords | Experimental Accounting / Game Theory / Experimental Economics / Lemon Market / Signaling Game / Auditing |
|---|
| Research Abstract |
The aim of this research is to examine how far the information transmission through the audit purchase works between a manager and investors. We propose a simple model based on signaling and cheap talk games. What we try to do is to demonstrate to what degree the audit unreliability will be acceptable and how much the environmental change affects the audit credibility. We also examine how the different audit purchasings costs influence the behavior of investors and managers. It predicts that the higher the audit purchasings cost is, the easier is it to obtain the separating equilibrium, in which any manager who makes no effort no longer purchases an audit. We also investigate it in two laboratory settings, first in two laboratory markets ; whether auditing is available or not, second in three markets : whether auditing is unavailable or available but at two different audit purchasings costs. In both experiments managers in the market where auditing available have chosen much more effort than where auditing unavailable. Investors in the former market have invested more often than in the latter. It shows that the managers give much trust to the audit purchase, despite of investors doubt about its reliability. In the second experiment, contrary to our prediction, investors invest less often at the high audit purchasings cost. Managers also make an effort less frequently. They try to cheat more often the investors, who turn out to be defensive and refrain from the investment. Perhaps managers find too high the total incremental costs of inducing trust on the part of the investors. They thus want to spare the cost of effort or audit purchase. Facing with this alternative, what they have chosen is to cut down on the former, more essential one. That causes investor's defections.
|
