Experimental evidence of differential auditor pricing and reporting strategies

Michael J. Calegari, Jeffrey W Schatzberg, Galen R. Sevcik

Research output: Contribution to journalArticle

26 Citations (Scopus)

Abstract

This study tests the competitive equilibrium predictions of a multi-period model of audit pricing and independence in two sets of laboratory markets: a control set consisting of human subjects in the role of auditors contracting with robot clients, and a treatment set in which both auditors and clients are human subjects. The results in all the control-set markets and some of the treatment markets support the predictions of "lowball" pricing and that heterogeneous beliefs among auditors regarding the treatment of a client-reporting issue is a necessary condition for independence impairment. By contrast, several treatment-set markets exhibit cooperative behavior between auditors and clients to achieve jointly beneficial outcomes. This behavior deviates from the price-independence relationship predicted in the competitive equilibrium, exhibiting instead a price-independence relationship that is characterized by an absence of lowballing and frequent independence impairment, even when auditors have homogeneous beliefs.

Original languageEnglish (US)
Pages (from-to)255-275
Number of pages21
JournalAccounting Review
Volume73
Issue number2
StatePublished - Apr 1998
Externally publishedYes

Fingerprint

Auditors
Pricing
Competitive equilibrium
Prediction
Impairment
Audit pricing
Cooperative behavior
Contracting
Heterogeneous beliefs
Robot

Keywords

  • Auditing
  • Competitive equilibrium
  • Cooperation
  • Independence
  • Pricing
  • Signaling

ASJC Scopus subject areas

  • Accounting
  • Economics and Econometrics
  • Finance

Cite this

Experimental evidence of differential auditor pricing and reporting strategies. / Calegari, Michael J.; Schatzberg, Jeffrey W; Sevcik, Galen R.

In: Accounting Review, Vol. 73, No. 2, 04.1998, p. 255-275.

Research output: Contribution to journalArticle

Calegari, Michael J. ; Schatzberg, Jeffrey W ; Sevcik, Galen R. / Experimental evidence of differential auditor pricing and reporting strategies. In: Accounting Review. 1998 ; Vol. 73, No. 2. pp. 255-275.
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