In a costly state veri cation model under commitment, the paper shows that jointly fi nancing multiple independent projects reduces the deadweight loss of ine¢ cient audits. This is true for both simultaneous and sequential audit, since each system reveals the same information about the project outcomes at the same cost. Moreover, the audit combination under sequential audit is indeterminate. Audits are decreasing in the reported income and, for sufficiently high projects pro tability, deterministic for lower income reports.
Efficient audits by pooling projects
Anna Maria C. Menichini
Membro del Collaboration Group
;
2017
Abstract
In a costly state veri cation model under commitment, the paper shows that jointly fi nancing multiple independent projects reduces the deadweight loss of ine¢ cient audits. This is true for both simultaneous and sequential audit, since each system reveals the same information about the project outcomes at the same cost. Moreover, the audit combination under sequential audit is indeterminate. Audits are decreasing in the reported income and, for sufficiently high projects pro tability, deterministic for lower income reports.File in questo prodotto:
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