That is auditors audited more and the managers chose

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Unformatted text preview: ease in audit levels in the resolution phases 0.01). This suggests that information about managers’ choices affects auditors’ (p strategies. Analysis of the average fraud index (Panel B of Table 5) indicates that managers chose significantly less fraud in the resolution phase of the YP/WG setting, suggesting that managers were aware that they used puffery to condition auditors’ expectations during the regular play phase, and expected retribution during the resolution phase. In addition, the average payoff differences (Panel C of Table 5) are significantly higher in the regular play than in the resolution phases for the NP/WG, YP/WG, and YP/SG settings. That is, auditors audited more and the managers chose less fraud in the resolution phase, so the auditors had a lower payoff disadvantage in the resolution phase. VI. DISCUSSION For independent auditors to enhance the credibility of financial statements, auditors must represent the interests of external parties, not those of management. For the past 30 years, policymakers have debated the extent t...
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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.

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