INTERNAL AUDITING AND VOLUNTARY COOPERATION IN FIRMS - A CROSS-CULTURAL EXPERIMENT

Firms expend costly resources on audit-based monitoring schemes to imp rove interdivisional coordination, This study investigates the premise that the effectiveness of and demand for audit-based monitoring may b e sensitive to societal factors, Data from a between-subjects experime nt involving 60 compensated groups of four (a total of 240 subjects) i ndicates an interaction between the experiment's two factors: (1) coun try (20 groups conducted in Canada, 20 in Hong Kong and 20 in the Peop le's Republic of China (PRC)), and (2) the degree of anonymity in inte rnal reporting, Specifically, we find that audit-based monitoring is l ess effective and less demanded in Hong Kong and the PRC than in Canad a, but this difference arises only in a setting with a low degree of a nonymity, The interaction with anonymity supports the attribution of r esults to differing cultural values.