28 Oct Collusion in Auditing – Thakur Chabert Limited
Collusion in Auditing, Collusion ensues when two or more parties that ordinarily compete covertly decide to work together to achieve an advantage. The usual approach is to either curb supplies of goods in order to drive up prices or to set artificially high prices.
Cases of Collusion in Auditing are regularly illegal since they are administered by antitrust laws. The consequence of collusion is that the consumer ends up paying higher prices than would have been the case if there had been an amplified level of competition.
Collusion is hard to coordinate if there are numerous competitors in a marketplace. Therefore, it is most frequently found in oligopoly situations where there are just a few competitors, or where just a few competitors have a maximum market share.
Indicators of Collusion in Auditing
There are a number of signs that collusion might be present. One instance is when a group of suppliers sets prices at a consistently high or low level.
Another pointer is when suppliers decline to sell in each other’s territories, thus efficiently creating regional monopolies. Yet another indicator is when some suppliers routinely deny bidding in competitive bidding situations, which facilitates the remaining bidder to bid at a remarkably high price.
Examples of Collusion in Auditing are:
- Numerous high-tech firms go along with not hiring each other’s employees, thus keeping the cost of labor down.
- Numerous high-end watch companies agree to confine their output to the market in order to keep prices high.
- Numerous airlines agree not to bid routes in each other’s markets, thus restricting supply and keeping prices high.
- Numerous investment banks decide to refrain from bidding on particular deals with clients, thus reducing the number of bids and keeping prices high.