This paper studies the strategic effect of a difference in timing of verification in an agency model. A principal may choose between two equally efficient verification procedures: monitoring and auditing. Under auditing the principal receives additional information. Due to a double moral hazard...

This paper considers a principal-agent model with auditing and collusion, in which the audit costs are a convex function of the audit reliability. The focus of interest is the question of the audit reliability chosen by the principal. It turns out that the optimal audit reliability strongly...

This paper examines factors affecting the owner-manager's voluntary decision to hire an auditor in small firms. Using a random sample of 412 small private companies in Finland responding to an Internet survey, we first probe the institutional boundaries of a prior UK study [Collis et al., 2004]...