Abstract
Using a principal–agent model, we study the structure of an optimal audit policy when it is not contractible. In our model, auditing technologies are distinguished according to the accuracy and the frequency of audits. Our analysis reveals that audits take place with the highest frequency, but the accuracy of audits is compromised in equilibrium. We also find that without commitment to the audit policy, the first-best outcome cannot be achieved even when auditing is costless.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
