Robert R. Tucker

Second Partner Review: An Analytical Model:

This paper develops an analytical model to examine the role that second partner review plays in promoting accurate, unbiased decisions by an engagement partner who possesses imperfect information and is subject to economic pressures to bias judgment. Optimal strategies are derived in a single-period model. The model includes an engagement partner and a second partner who both choose a sample size and a qualified or unqualified audit report. The analysis identifies conditions under which second partner review induces the engagement partner to report with greater independence. In addition to providing predictions immediately testable in an experimental context, the comprehensive example demonstrates that second partner review can cause the engagement partner not only to report with greater independence but also to sample more. Central to our analysis is a general audit reporting model that applies to both one-partner and two-partner situations. This model provides definitions and demonstrates the effect of auditor independence and competence and the sufficiency and competence of evidential matter, audit risk, client pressure, and societal penalties (e.g., legal and reputational costs) on an audit partners reporting decision. Moreover, it demonstrates the importance of the engagement partners competence and work effort, as well as the reduction of underlying audit risk, in countering client pressure and promoting independent reporting. Because of the rigorous definitions of auditing concepts and the number of variables included, the model provides a flexible structure for studying other auditor reporting situations.

Security in a Web-Based Environment

Emphasizes that although electronic commerce continues to grow, with it come many problems including the worry of security over the Internet. Presents a systematic approach to developing and continuously improving Web security systems — allowing for enterprise‐wide controls regarding security risks. Goes into much detail regarding systems, security and design.

An Experimental Investigation into Reputation Effects and the Demand for Auditing Services

This research investigates the relationship between reputation and two types of agency costs, namely those associated with auditing and those associated with value-reducing activities of management resulting from their capitalizing on asymmetric information by misreporting income. A competitive-market model is used as a basis for developing and empirically testing hypotheses using an experimental-markets approach. This model includes (1) contracting between risk-neutral owners and risk-averse managers that allows risk sharing, (2) information asymmetry favoring managers over owners, (3) public financial reporting by managers, (4) the presence of endogenously-priced costly auditing that can be demanded by either management or owners, and (5) opportunities for managers to engage in value-reducing activities that are not directly observable by the owners. Two main hypotheses are set forth, both of which are found to be supported by formal statistical tests based on the data from the experimental markets as conducted in this study: (1) reputation effects reduce total agency costs. Further, these results show that agency cost reductions from reputation effects include both an increased rate of honest reporting by managers and a reduction in the demand for auditing by owners; and (2) the market rewards honesty and penalizes dishonesty in reporting.

Multinationality of US corporations: the auditing implications

Explains the auditing problems encountered by multinational companies under the US Foreign Corrupt Practices Act and the Regulation of Technology Transfers and the complications of resource allocation in countries with different cultures to the USA. Highlights currency fluctuations, human resources and environmental audit. Lists some of the differences between US and foreign auditor independence and auditing standards. Lays down the requirements for an auditor on foreign assignment.