Efficient Committed Budget For Implementing Target Audit Probability For Many Inspectees
Strategic models of auditor-inspectee interaction have neglected implementation details in multiple-inspectee settings. With multiple inspectees, the target audit probability derived from the standard analysis can be implemented with sampling plans differing in the budgets committed to support them. Overly-committed audit budgets tie up unneeded resources that could have been allocated for better uses. This paper studies the minimum committed budget required to implement a target audit probability when the audit sample can be contingent on "Red flags" due to signals of inspectees' private information (e.g., from self-reporting) and the number of inspectees is large.