Disclosure of conflict of interest is currently seen as an effective tool for reducing threats to auditor independence. Cain, Loewenstein, and Moore (2005) provide evidence for perverse effects of disclosing conflict of interest. Using a controlled laboratory experiment, we replicate their...

Both the US and the EU consider limiting auditor liability in order to ensure the viability of the audit market, but fear its potentially negative impact on audit quality. Our paper discusses the existing empirical results on this topic in the auditing and behavioral economics literature, and...

After having forbidden companies to provide financial forecasts until 1973, the SEC now encourages them to do so because of the relevance of prognosis for investors. As forecasts are inherently uncertain, there is always the risk for the companies to be suit when predictions fail. Therefore the...

The Sarbanes-Oxley Act of 2002 has transformed the institutional environment in the US by making the audit committee responsible for the appointment, compensation and oversight of the auditor. We examine whether this institutional change successfully resolves the alleged problem of an...

Currently, there is an international trend to strengthen independence requirements for auditors. Whether the new rules can be explained from an economic viewpoint is discussed in the first part of the paper. Thereby the conclusion is reached that because of reputation effects, big audit...

In psychological and economic experiments, systematic deviations from rationality - so-called biases - have been observed. Such biases were also researched extensively in the auditing research in the US. The goal of this paper is to give an overview of this research and to show possible research...

The experiment disentangles communication and social effect in face−to−face communication. The results question the previous interpretation of communication effects in ultimatum bargaining, and suggest that separate processes, both of a strategic and of an affective−social nature induce...

In this chapter, we present our empirical investigation of the forecasting accuracy of a prediction market experiment drawn on the outcome of the World Cup 2002. We analyse the predictive accuracy of 64 markets and compare to bookmakers’ quotes and chance as benchmarks. We revisit the...

Bubbles in asset markets have been documented in numerous experimental studies. However, all experiments in which bubbles occur pay dividends after each trading day. In this paper we study whether bubbles can occur in markets without dividends. We investigate the role of two features that are...