Persistent Link:
http://hdl.handle.net/10150/289400
Title:
Reputation building and the demand for auditing
Author:
Mayhew, Brian William, 1967-
Issue Date:
1997
Publisher:
The University of Arizona.
Rights:
Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.
Abstract:
The purpose of this dissertation is to examine the role auditor reputation plays in the demand and supply of audits and to examine the process by which an auditor builds a reputation for audit quality. The goal is to begin to develop a comprehensive theory of the demand for auditing and the incentives this demand creates for the supply of audits. Scott (1984) cites a lack of theory capturing the precise nature of the auditor's contribution to a production and exchange economy. This paper uses an experimental economy and related model to examine the role of an auditor's reputation for delivering high quality audits in such a multiple period economy. A theory of the demand and supply of audits is necessary to help assess the need for regulation of the audit market. The need for regulation in existing audit markets has been questioned by some members of the auditing profession (Arthur Andersen, et. al. 1992). In response, experimental economic markets (EEM) research has examined different regulatory regimes (Dopuch and King 1992, Dopuch et. al., 1994). However, this research has not examined whether reputation can serve as a substitute for regulation in motivating the supply of high quality audits. Existing EEM research has provided some evidence of reputation effects in general (DeJong, et. al., 1985, Dopuch and King 1991) but has produced limited evidence of auditor reputation. Unlike prior EEM research, this paper explicitly examines auditor reputation. Three different experimental treatments were used to test the derived model: one treatment with robot investors and two treatments with human investors. The robot investor replications produced strong support for an auditor reputation model. Two of six human investor replications supported an auditor reputation model while the other four collapsed into markets for lemons. The markets suggest that the managers' demand for audit quality drove the level of audit quality supplied by auditors. When the managers did not demand and auditors did not supply high quality audits, the markets collapsed.
Type:
text; Dissertation-Reproduction (electronic)
Keywords:
Business Administration, Accounting.; Economics, Theory.
Degree Name:
Ph.D.
Degree Level:
doctoral
Degree Program:
Graduate College; Industrial Management
Degree Grantor:
University of Arizona
Advisor:
Felix, William L., Jr.

Full metadata record

DC FieldValue Language
dc.language.isoen_USen_US
dc.titleReputation building and the demand for auditingen_US
dc.creatorMayhew, Brian William, 1967-en_US
dc.contributor.authorMayhew, Brian William, 1967-en_US
dc.date.issued1997en_US
dc.publisherThe University of Arizona.en_US
dc.rightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.en_US
dc.description.abstractThe purpose of this dissertation is to examine the role auditor reputation plays in the demand and supply of audits and to examine the process by which an auditor builds a reputation for audit quality. The goal is to begin to develop a comprehensive theory of the demand for auditing and the incentives this demand creates for the supply of audits. Scott (1984) cites a lack of theory capturing the precise nature of the auditor's contribution to a production and exchange economy. This paper uses an experimental economy and related model to examine the role of an auditor's reputation for delivering high quality audits in such a multiple period economy. A theory of the demand and supply of audits is necessary to help assess the need for regulation of the audit market. The need for regulation in existing audit markets has been questioned by some members of the auditing profession (Arthur Andersen, et. al. 1992). In response, experimental economic markets (EEM) research has examined different regulatory regimes (Dopuch and King 1992, Dopuch et. al., 1994). However, this research has not examined whether reputation can serve as a substitute for regulation in motivating the supply of high quality audits. Existing EEM research has provided some evidence of reputation effects in general (DeJong, et. al., 1985, Dopuch and King 1991) but has produced limited evidence of auditor reputation. Unlike prior EEM research, this paper explicitly examines auditor reputation. Three different experimental treatments were used to test the derived model: one treatment with robot investors and two treatments with human investors. The robot investor replications produced strong support for an auditor reputation model. Two of six human investor replications supported an auditor reputation model while the other four collapsed into markets for lemons. The markets suggest that the managers' demand for audit quality drove the level of audit quality supplied by auditors. When the managers did not demand and auditors did not supply high quality audits, the markets collapsed.en_US
dc.typetexten_US
dc.typeDissertation-Reproduction (electronic)en_US
dc.subjectBusiness Administration, Accounting.en_US
dc.subjectEconomics, Theory.en_US
thesis.degree.namePh.D.en_US
thesis.degree.leveldoctoralen_US
thesis.degree.disciplineGraduate Collegeen_US
thesis.degree.disciplineIndustrial Managementen_US
thesis.degree.grantorUniversity of Arizonaen_US
dc.contributor.advisorFelix, William L., Jr.en_US
dc.identifier.proquest9738920en_US
dc.identifier.bibrecord.b37455606en_US
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