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Unformatted text preview: the trust audit, 1 to the Nash audit,
and 2 to the defensive audit. I summed these values over the total number of periods (18
or 19) and then divided by the number of periods. This value is then multiplied by 100 to
yield the audit index for each auditor. For example, consider an auditor who selected the
trust audit nine times, the Nash audit six times, and the defensive audit three times, out of
18 total choices. The audit index of 66.67 is calculated as ((9 0 6 1 3 2)/18).
A lower index score indicates the auditor is more trusting of the manager, and a high index
indicates the auditor is less trusting.
In like fashion, I construct the manager’s fraud index by assigning a value of 0 to the
cooperate fraud level, 1 to the Nash fraud level, and 2 to the cheat fraud level. Thus, a
lower index score indicates the manager is more cooperative, and a high score indicates a
greater propensity to cheat.
The third measure is the ex post payoff difference index. This measure applies to each
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This note was uploaded on 01/27/2014 for the course ACCY 405 taught by Professor Staff during the Fall '08 term at University of Illinois, Urbana Champaign.
- Fall '08