Journal article
Auditing for Performance Evaluation
The Accounting review, Vol.65(3), pp.520-536
07/01/1990
Abstract
The internal audit function as a scarce economic resource and the use of that resource for the provision of incentives are modeled. Information useful for incentives is assumed to be limited to verified information. The quantity of verifiable information produced by the internal audit function is constrained by 2 factors: 1. the time an internal auditor can spend verifying evidence, and 2. the time employees have to make such evidence verifiable. It is shown that the internal audit function produces near first-best solutions in a principal-agent model with very simple contracts that use a small fraction of all available information. Attaining such efficiency depends on the level of management to which the internal auditors report. If their independence is compromised, their ability to provide information is impaired, and the firm must resort to other sources of contracting information, such as its financial reports.
Details
- Title: Subtitle
- Auditing for Performance Evaluation
- Creators
- Mark Penno
- Resource Type
- Journal article
- Publication Details
- The Accounting review, Vol.65(3), pp.520-536
- ISSN
- 0001-4826
- eISSN
- 1558-7967
- Publisher
- American Accounting Association
- Language
- English
- Date published
- 07/01/1990
- Academic Unit
- Accounting
- Record Identifier
- 9984963195302771
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