The Theory of Auditing Economics: Evidence and Suggestions for Future Research

127 Pages Posted: 8 Mar 2021 Last revised: 10 May 2023

Multiple version iconThere are 2 versions of this paper

Date Written: May 9, 2023


Analytical auditing research provides underlying theory for the economic analysis of auditing. Despite its importance, there have been no papers that provide a comprehensive review of research conducted in this area. This paper reviews existing analytical auditing research. I identify the assumptions and key economic forces addressed in selected papers and provide suggestions for future research by summarizing and critiquing the existing research. I develop a framework that incorporates the demand for and supply of audits and considers the economic incentives and strategic interactions of individuals or organizations involved in the audits. Using this framework, I
examine three questions: Why do we need financial statement audits? What determines the assurance production and reporting? How do parties interact within an audit and in markets? This paper intends to stimulate further analytical auditing research and help guide research using other methodologies.

Keywords: review; analytical auditing; strategic audit; markets; regulation

JEL Classification: M42, M48

Suggested Citation

Ye, Minlei, The Theory of Auditing Economics: Evidence and Suggestions for Future Research (May 9, 2023). Available at SSRN: or

Minlei Ye (Contact Author)

University of Toronto ( email )

105 St George Street
Toronto, Ontario M5S 3G8

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