Disclosing Conflict of Interest - Do Experience and Reputation Matter?

41 Pages Posted: 8 Sep 2006 Last revised: 21 Jul 2022

See all articles by Christopher Koch

Christopher Koch

Johannes Gutenberg University Mainz - Gutenberg School of Economics and Management

Carsten Schmidt

University of Mannheim - Sonderforschungsbereich 504

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Date Written: May 1, 2009

Abstract

In a controlled laboratory experiment, we investigate the effects of disclosing conflicts of interest on the reporting of information providers. First, we replicate the findings of Cain, Loewenstein, and Moore (2005) that such disclosure makes misreporting more likely as it removes moral concerns. Second, we observe that these effects diminish given experience and find, to the opposite, that disclosure reduces bias in auditors' reporting as predicted by economic theory. Third, we identify disclosure of conflicts of interest as a potential impediment to reputation formation.

Keywords: Auditor Independence, Audit Fees, Nonaudit Fees, Reputation, Experience, Experimental Economics

JEL Classification: C91, D82, D83, G28, M42

Suggested Citation

Koch, Christopher and Schmidt, Carsten, Disclosing Conflict of Interest - Do Experience and Reputation Matter? (May 1, 2009). Available at SSRN: https://ssrn.com/abstract=928927

Christopher Koch (Contact Author)

Johannes Gutenberg University Mainz - Gutenberg School of Economics and Management ( email )

Mainz
Germany
+49 (6131) 3929990 (Phone)

HOME PAGE: http://https://www.cg.bwl.uni-mainz.de/

Carsten Schmidt

University of Mannheim - Sonderforschungsbereich 504 ( email )

Mannheim 68131
Germany

HOME PAGE: http://www.sfb504.uni-mannheim.de/~cschmidt

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