L3 Notes_Part_16 - talk and the seriousness of the omitted...

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Information Asymmetry Info asymmetry gives rise to perceived opportunity which can lead to omitted negative disclosures or misrepresentations by the seller about a product Two common problems: adverse selection moral hazard.
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Information Asymmetry: Adverse Selection The online seller may have knowledge that the used car had been in an accident, had the odometer rolled back, and has bad brakes (Scienter). Both seller and online intermediary have incentives to omit these negative disclosures. The buyer forms rational expectations about the cheap
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Unformatted text preview: talk and the seriousness of the omitted disclosures and discounts the price accordingly. The seller benefits from an audit. Why? Information Asymmetry: Dealing with Risk b. Describe how you are able to reduce the risks associated with information asymmetry under each condition. Provide numerous applications of agency theory within the auditing environment. How does the concept of rational expectations play a role in agency theory? Suppose no conflict of interest existed or information was symmetric (i.e., continuous monitoring is costless)?...
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This note was uploaded on 10/05/2011 for the course ACG 5637 taught by Professor Monikacaushoulli during the Fall '08 term at University of Florida.

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L3 Notes_Part_16 - talk and the seriousness of the omitted...

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