Legal Regimes, Damage Apportionment Rules, and Auditor Independence - Theory and Experimental Evidence

摘要: This paper reports the results of four laboratory experiments designed to examine whether an appropriate legal system, which is a combination regime (strict vs. negligence) and damage apportionment rule (joint-and-several proportionate), may serve as effective mechanism enhance auditor independence. I adopt test series hypotheses derived from one-period game theoretic model in commit either technical or independence audit failure. Several important findings are documented. First, experimental confirm analytical model's prediction that there trade-off among auditor's effort, failure, firm's new investments. implies no single system can induce higher quality, reduce improve independence, encourage investment simultaneously. For regulatory purpose, strict together with proportionate effectively decrease despite fact hat quality also decreases. accentuates importance incorporating strategy into examination liability. Second, auditors' impaired less often than because they recognize compromise be unethical. In addition, auditors exert more high effort under joint-and-several perceive former relatively fair occurrence Finally, emphasis on by itself not enough motivate investment. A replacement negligence seems useful achieving these goals.