Deterring Fraud by Looking Away

28 Pages Posted: 23 Sep 2015

See all articles by Deniz Okat

Deniz Okat

Hong Kong University of Science & Technology (HKUST)

Date Written: September 21, 2015

Abstract

Individuals being audited potentially learn how to exploit the weaknesses inherent in any audit methodology if they face the same method many times. Hence, an auditor better deters fraud by randomizing her choice of methodology over time, thereby frustrating a would-be fraudster’s ability to learn. In the extreme, an auditor benefits from refusing to audit even though audits are costless to her.

Keywords: Audit, learning

JEL Classification: D83, M42

Suggested Citation

Okat, Deniz, Deterring Fraud by Looking Away (September 21, 2015). RAND Journal of Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2663688

Deniz Okat (Contact Author)

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

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