Audit Quality in Adverse Selection Markets

24 Pages Posted: 25 Jan 2016

See all articles by Bharat Sarath

Bharat Sarath

Rutgers, The State University of New Jersey - Accounting

Date Written: September 1, 2015

Abstract

Auditing may be viewed as an arrangement for reducing inefficiencies arising from the fundamental market conflict between a seller who wants as high a price as possible and a buyer who wants to pay as low a price as possible. In more general terms, sellers prefer policies that boost the stock price in the short run whereas buyers would prefer the price to peak when they are ready to sell some time in the future. By framing audited financial reports within this context, the paper provides some insights regarding both audit institutions and audit regulation.

Keywords: auditing, markets, adverse selection

JEL Classification: d47,d82,d86

Suggested Citation

Sarath, Bharat Sarrukai, Audit Quality in Adverse Selection Markets (September 1, 2015). Available at SSRN: https://ssrn.com/abstract=2654089 or http://dx.doi.org/10.2139/ssrn.2654089

Bharat Sarrukai Sarath (Contact Author)

Rutgers, The State University of New Jersey - Accounting ( email )

94 Rockafeller Road
Piscataway, NJ 08854
United States

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