| No | SDES-2014-1 |
|---|---|
| Title | A theory of strategic auditing: How should we select one member from a homogeneous group? |
| Author | Yoshio Kamijo |
| Abstract | This paper theoretically analyzes an audit rule that selects a taxpayer for an audit based on the reported income profile and creates strategic interdependence. Such strategic auditing contrasts with the random auditing rule. This paper proposes the lowest-reporter-audited rule. This rule ensures that the taxpayer with the lowest reported income is inspected from a group of taxpayers that are categorized according to factors such as social status, income level, occupation, and place of residence. We show that, under a realistic penalty rate condition, the lowest-reporter-audited rule is superior to the random audit rule. |
| Revised version published in |