| Summary: | 碩士 === 國立臺北大學 === 會計學系 === 92 === The agency problems in the corporation can be mitigate by attestation information provided by CPAs. However, the rapid growth of lawsuit in the United States and the Europe in 80’s and 90’s has led to enthusiastic debates about CPAs’ legal liabilities. Recent revisions of CPA laws in Taiwan also focused on CPA’s legal liabilities and whether to establish the requirement about liability insurance.
This research analyzes the interaction among CPAs’ audit effort, legal liabilities, and insurance company’s action using the game-theoretic approach. We found that pure strategy equilibrium can exist only when insurance company’s monitoring cost is extremely high, and therefore the CPAs wii not provide high effort in this case. On the other hand under moderate monitoring cost, we can derive several mixed strategy equilibria, which means the CPAs and insurance companies will choose to randomize between their actions. Generally, the probability for the CPAs to provide high effort is positive related to the cost of effort and negative related to the insurance companies monitoring cost. Conclusively the necessity of insurance requirement depend on the relevant range of CPA’s cost of effort and insurance companies monitoring cost.
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