Examining the pros and cons of audit regulation from a theoretical perspective which include:

- Regulator’s response to accounting frauds

- Principle-agent theory

- Fundamentals of game theory

- Some theoretical studies on pros and cons of audit regulation

80 % Attendance is required.

--> Case study and presentation accompanied by a one page report (all assignments are done in groups).

Case study: a game with two players is defined and the students have to find the payoff matrix, players’ actions and payoff functions, equilibrium strategies, and the financial reporting quality in the equilibrium. The goal of this task is to understand the basics of game theory and to observe the forces behind the economic consequences of regulation. The case study will be explained to each group in a separate and individual meeting.

Presentation and report: A theory paper on economic consequences of audit regulation is assigned to each group where they have to present (using slides) a summary of the paper, its research question, the findings, and critically analyse the counter effect affecting the equilibrium. A one page report should also be submitted before the presentation.