Auditing, Auditor size, Audit fees, Audit partnerships

In this paper, a service department chooses a fixed/variable cost combination based on the forecasts of two operating departments. The operating departments then make service usage decisions, and the service department provides the level of service demanded. The allocation of fixed and variable service department costs is used to: (1) encourage efficient short term use of the service and (2) encourage accurate forecasting by the operating departments. Three approaches are used to achieve these objectives — incentive compatible allocations, a modified Soviet incentive scheme, and a Groves allocation scheme — and we discuss conditions under which these schemes are successful. Résumé. Dans cet article, un atelier de service retient une combinaison de coûts fixes/ variables fondée sur des prévisions de deux ateliers de fabrication. Par la suite, les ateliers de fabrication prennent des décisions relatives à leurs besoins de services, et l'atelier de service fournit le niveau de service exigé. La répartition des frais fixes et variables de l'atelier de service vise à: (1) favoriser une utilisation efficace de l'atelier de service à court terme et (2) favoriser l'élaboration de prévisions précises de la part des ateliers de fabrication. Trois approches sont utilisées pour atteindre ces objectifs — la compatibilité des répartitions et des mesures incitatives, un système incitatif soviétique modifié et un système de répartition de Groves — et nous examinons les conditions nécessaires au bon fonctionnement de ces systèmes.

This paper uses computable general equilibrium models to demonstrate that partial-equilibrium welfare measures can offer reasonable approximations of the true welfare changes for large exogenous changes. With consistency in the size and direction of the indirect price effects associated with large shocks, single-sector partial-equilibrium measures will exhibit small errors. Otherwise the errors can be substantial and difficult to sign.

Anjan V. Thakor, Asset Writedowns: Managerial Incentives and Security Returns: Discussion, The Journal of Finance, Vol. 42, No. 3, Papers and Proceedings of the Forty-Fifth Annual Meeting of the American Finance Association, New Orleans, Louisiana, December 28-30, 1986 (Jul., 1987), pp. 661-663

The authors examine equilibrium credit contracts and allocations under different competitivity specifications and explain the economic roles of collateral under these specifications. Both moral hazard and adverse selection are considered. The principal message is that how a competitive equilibrium is conceptualized significantly affects the characterization of equilibrium credit contracts. Specifically, some well-known results in the rationing literature are shown to rest delicately on the adopted equilibrium concept. Two somewhat surprising results emerge. First, high-quality borrowers with unlimited collateral may be priced out of the market despite the bank having idle deposits. Second, high-quality borrowers may put up more collateral.