Analytical auditing research provides underlying theory for the economic analysis of auditing. Despite its importance, there have been no papers that provide a comprehensive review of research conducted in this area. This monograph reviews existing analytical auditing research. I identify the assumptions and key economic forces addressed in selected papers and provide suggestions for future research by summarizing and critiquing the existing research. I develop a framework that incorporates the demand for and supply of audits and considers the economic incentives and strategic interactions of individuals or organizations involved in the audits. Using this framework, I examine three questions: Why do we need financial statement audits? What determines the assurance production and reporting? How do parties interact within an audit and in markets? This monograph intends to stimulate further analytical auditing research and help guide research using other methodologies.
The Theory of Auditing Economics provides a review of existing auditing economic theory, highlights the limitations of the literature, and discusses possible future research. Specifically, the objective of this monograph is two-fold: to provide researchers who are interested in analytical auditing with an overview of the existing literature, and to explain auditing theory to researchers who employ other methodologies, such as archival or experimental, and help guide their research.