Auditors’ Customer Relationship Management and Managers’ Cooperation with Auditor Evidence Requests

• In Event: Managing the Auditor-Client Relationship

Abstract

Auditors use customer relationship management (CRM) strategies, such as minimizing disruptions and communicating clearly, to maintain or increase customer satisfaction of client managers. The conventional perspective is that CRM is either benign or can even threaten audit quality by reducing independence and objectivity. However, using Social Exchange Theory, we predict and find that CRM improves one aspect of audit quality, managers’ cooperation with auditor evidence requests. In an experiment, we show that compared to managers experiencing lower quality CRM, managers experiencing higher quality CRM are more cooperative throughout the evidence provision process. They assign higher priority to auditor evidence requests, work harder to gather audit-relevant information, are more forthcoming with this information, and convey an openness to future rounds of negotiation. Importantly, we find that managers experiencing higher quality CRM are even more forthcoming with information that contradicts their preferred accounting position. Our findings have implications for audit quality because managers’ provision of evidence in a more timely and forthcoming manner improves auditor-manager interactions and better positions auditors to evaluate evidence.

Authors

• Kris Hoang, University of Alabama-Tuscaloosa

• Richard Hatfield, University of Alabama-Tuscaloosa

• Edward Thomas, Georgia College & State University

• Michael Ricci, University of Florida