search query: @indexterm AUDITING / total: 1120
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| Author: | Friesen, L. |
| Title: | The social welfare implications of industry self-auditing |
| Journal: | Journal of Environmental Economics and Management
2006 : MAY, VOL. 51:3, p. 280-294 |
| Index terms: | auditing policy social welfare |
| Language: | eng |
| Abstract: | This paper discusses The Environmental Protection Agency's (EPAs) audit policy, that authorizes reduced penalties for firms that voluntarily undertake compliance audits and then correct and report any discovered violations to the agency. The author develops a game-theoretic model of the audit policy, where the goal of enforcement is remediation and the agency is unable to commit to a pre-announced inspection policy. Self-auditing is beneficial because it permits both self-reporting and self-policing to occur; however additional costs are imposed on firms. Self-auditing is more likely to be socially beneficial when the damages caused by violations are large. When violations are small, as most current disclosures under the audit policy are, firm self-auditing is likely to increase social costs. |
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