How do experienced auditors react to a contentious client and does the presence of a strict concurring partner strengthen their resolve?

• In Event: Auditing I (100 mins)
  In Paper Session: Auditing

Abstract

In this study, we investigate how auditors react to contentious and concessionary clients during a negotiation and whether existing accountability measures mitigate auditors’ tendencies to waive material adjustments. We conduct an experiment where experienced auditors (mostly partners) respond to clients who are concessionary, neutral, or contentious in the course of a negotiation regarding the posting of adjusting entries. Our results suggest client's contending tactics cause auditors to be more likely to waive material adjustments and that a previously unintroduced theory, the level-of-aspiration theory, accurately predicts how auditors will react. We also find that an existing accountability measure (i.e., the salience of a strict concurring partner) moderates this result.. These results offer additional insights into auditor-client negotiations and reveal that existing quality controls may mitigate auditor biases.

Authors

• Jason M Bergner, University of Nevada, Reno

• Sean A. Peffer, University of Kentucky

• Robert J Ramsay, University of Kentucky