Agenda

Economics Seminars are study seminars held on current research proposals or on studies carried out by eminent international researchers and teachers. They are an opportunity for discussion of new theories, developments, models and debates, focussing on various current economics topics.

Economics Seminars are generally held on Mondays at 12:15 in Meeting Room 1 (Complex A – San Giobbe Economics Campus – map).

Upcoming event:

Guglielmo Barone (University of Bologna) - Auditors’ conflict of interest: does random selection work?

Abstract
Auditors’ independence is a key component in the auditing process. Yet, in most cases auditors are chosen - and paid - by the actor they audit. This may lead to potential collusion between auditors and the audited body, which ultimately affects auditing quality. But what happens when auditors are randomly selected? We investigate the causal effect of such a selection technology by leveraging the staggered adoption of a reform that introduced random auditors’ appointment across Italian municipalities. The random auditor allocation severs the potential social ties or conflict of interest in the relationship between auditors and the audited body. We find that under the new regime municipalities’ reported public finances deteriorates, leading to an increase in financial distress, deficit and debt per capita. The empirical evidence shows that the worsening of public finances is due to lower auditors’ leniency in the audit process, as the higher independence induced by the reform is reflected in more accurate audited balance sheets.