An Analysis of the Formation Mechanism of Audit Quality Based on the Game Equilibrium Theory
LU Ningwen · Shenji yu jingji yanjiu · 2012
The fundamental goal of audit is to provide assurance for the reliability of an entity's financial statements.The behavior of auditors determines the audit quality.This paper establishes incomplete information game models to analyze the behavioral selections of capital market participants.The result shows that the auditors' behavioral choices will be influenced by the benefits provided by the auditees for auditors,the probability and scope of regulation,and the punishment severity by supervisors on the auditors who issue fraud reports.The paper concludes that the audit quality is the equilibrium of a mutual game among investors,management,auditors,and supervisors.