What question did this study set out to answer?

This article aims to explain why corporations seek audit services even without mandatory regulations.

External Audit and Asymmetric Information.

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Model demonstrates demand for audit despite lack of regulatory requirement, influencing corporate decisions.

This article aims to explain why corporations seek audit services even without mandatory regulations.
Developed a simple economic model to analyze the relationship between audit demand and manager quality.
Examined the cost-benefit analysis of hiring an auditor versus the potential price increment from owner shares.
Corporations will hire auditors if the additional price from ownership share exceeds the audit fee.
There exists a minimum manager quality threshold below which auditing is not financially viable.

Moore et al. (1990) studied this question.

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