The Research On The Independent Auditing Reputation Mechanism In China From The Perspective Of Game Theory

Reputation is the symbol of identifying human behavioral characteristics. In the currentmarket economy environment, it not only has the spiritual value but also the economic value.Under the condition of mature market, reputation mechanism plays an important role in ensuringthe realization of economic value of reputation and maintaining positive operation of marketeconomy. In the auditing industry, independent auditing reputation mechanism also ensures therealization of independent auditing reputation. However, as financial fraud cases occurfrequently in our capital market, the status of integrity in auditing industry has been questionedseriously, and the value of reputation and the function of reputation mechanism have never beengiven full play. Based on that, this paper elaborates the relevant questions of independentauditing reputation mechanism in China by analyzing the game model.Firstly, this paper elaborates the fundamental theory of independent auditing reputation.From macro perspective of reputation, it defines the definition and basic value of reputation, andstudies on the connotation of reputation. Then it explores the basic content of reputationmechanism which guarantees the role of reputation, points out the mechanism of action and itsfunction of stimulating, restricting and reducing the public costs. On the basis of that, it focuseson independent auditing reputation and related contents of reputation mechanism. This partprovides a theoretical basis for the following parts.Secondly, this paper introduces the game theory and its application in reputation mechanismbriefly. It builds the single and repeated game model between the reputation subject andreputation receiver by using game theory and obtains the equilibrium condition of both sides.Then it investigates the demand and supply situation of reputation in our auditing marketaccording to that model so that it concludes the barrier which influences the operation ofreputation mechanism.Finally, it analyzing the present status of reputation in our auditing market and puts forwardsome improvement measures. And the author also proposes some related suggestions aboutsub-mechanisms of independent auditing evaluation, delivery, Incentive and restraint in order toprovide relevant reference for our auditing market.