TITLE:
The Collusion Deterrence with Prisoner’s Dilemma
AUTHORS:
Aidong Liu, Jinfang Liu
KEYWORDS:
Audit Collusion, Prisoner’s Dilemma, Double Auditing, Ethical Constraint
JOURNAL NAME:
Journal of Service Science and Management,
Vol.3 No.4,
December
28,
2010
ABSTRACT: I tried to present a new method to prevent collusion through employing two auditors at the same time and inspiring them provide true report by exploiting their prisoner’s dilemma. But I found this method cannot be put into practice because of the high cost. So I analyzed whether sending the second auditor in a probability, a low cost method, can deter the audit collusion. I find sending the second auditor in a probability, enforcing the rigidly lawful punishment and perfecting the reward mechanism can prevent audit collusion. I also find the auditor’s ethical constraint do good to prevent collusion and the charger of state assets management can play the same role as the real owner of the state-owned enterprise in deterring collusion. This finding provides theory support for the government to implement the publicly audit bidding and random double auditing system on state-owned enterprise. The supervision of PCAOB on auditors is also the operation of this theory.