The Optimal Auditing Policy under Information Asymmetry

• Main Authors: Chung-Hui Liu, 劉中惠
• Other Authors: Ruey-Ji Guo
• Format: Others
• Language: zh-TW
• Published: 2002
• Online Access: http://ndltd.ncl.edu.tw/handle/25562684127240362578

碩士 === 東吳大學 === 會計學系 === 90 === The rise of franchised stores has aggravated the phenomena of information asymmetry. Facing the moral hazard of underreporting revenues by franchisees, it is important to protect franchisers’ interest. Auditing is one of the instruments to solve the agency problem by both disciplining and deterring franchisees from the immoral behaviors. It is a significant management function to put the contracts into execution. This paper intends to establish a model to analyze optimal auditing policy in order to maximize franchisers’ profits. Most of the past researches didn’t consider the prior behavior of the franchisees. They neglected memory mechanism’s effect on the auditing policy. The potential assumption is inconsistent with instinctive impression and practice, so it’s hard to apply to the common decision situations. This paper uses two-period game to discuss whether memory mechanism should facilitate franchisers to adjust their auditing policy. It first analyzes franchisees’ strategic choices among each situation, and then gets strategic equilibrium between franchisers and franchisees. According to it, this paper provides appropriate audit policy for franchisers. The result shows that franchisers can boost the punishment of underreporting revenues to maximize franchisers’ expected profits. It’s not necessary to adjust auditing probability according to preceding auditing result. In other words, the memory mechanism needn’t function as we expected.