ERROR: relation "aaa191801_proceeding_action_tracker" does not exist LINE 1: INSERT INTO aaa191801_proceeding_action_tracker(action_track... ^There was an unexpected database error.ERROR: relation "aaa191801_proceeding_action_tracker" does not exist LINE 1: INSERT INTO aaa191801_proceeding_action_tracker(action_track... ^There was an unexpected database error.Accounting Behavior and Organizations Section Meeting: Interactive Auditor-Client Negotiations: Investigating the Roles of Blame and Conservatism
Individual Submission Summary
Share...

Direct link:

Interactive Auditor-Client Negotiations: Investigating the Roles of Blame and Conservatism

Sat, October 5, 3:30 to 5:00pm, TBA

Abstract

In this study we consider how social interactions that occur during negotiations between auditors
and their clients can impair compliance with regulatory guidance regarding the posting of
material misstatements. Specifically, we consider how the direction and accumulating nature of
misstatements influence agreed upon adjustments to the financial statements. To test the effect of
these characteristics, we construct experimental dyads consisting of audit partners and financial
officers, allowing them to interact via a web-based instrument, to reach a mutually agreed upon
audit adjustment. As predicted, these misstatement characteristics alter the positions of the
negotiators and negotiated outcomes. Specifically, auditors impound a sense of blame when
negotiating accumulated audit differences, given their role in passing on adjustments in the past,
leading to smaller agreed-upon adjustments. Further, dyads determine smaller adjustments when
considering an income increasing, versus decreasing, difference due to financial officers’
perception of auditors’ lack of concern over income increasing adjustments. Additionally, we
describe the content of the communications between auditor and client management participants
to demonstrate how these parties strategically use the manipulated differences in the negotiation
context in efforts to persuade the other party. Finally, we provide evidence that this interactive
setting provides different inferences than would be obtained from a traditional, non-interacting,
experimental setting.

Authors