The forensic accounting literature (e.g., Albrecht et al., 2010) places a great deal of importance on the so-called fraud triangle of motive-means-opportunity. Wolfe and Hermanson (2004) presents a cognitive analysis of factors that may impact the motivation element in the fraud triangle,...

We extend and refine the welfare game developed by Coate et al. (2002) in two directions. First, by allowing the client and auditor to choose their strategies sequentially, we show that the most efficient equilibrium is that the client moves first to honestly report earnings, which is followed...

Auditor independence is a guiding principle of the relationship between auditors and clients, and a key component of outsiders' acceptance of firms' financial statements. As recent accounting scandals have illustrated, the audit process is meaningless without the auditor's impartial judgement....