Pressures on Audit Partner’s Negotiation Strategy and Decision Making

• In Event: Audit Quality 4

Abstract

In our experiment with highly experienced auditors, we manipulate, as well as measure, different pressures on auditors from client management and the audit firm’s management control systems (MCS). We investigate their effects on auditor decision making about the acceptability of aggressive client preferred accounting and on the strategies the auditor would employ in negotiating that accounting with client management. We find that auditors generally resist relatively more explicit client pressure, but we also find that auditors are more likely to agree to such aggressive accounting when client pressure is subtle or when the auditor is reminded of the audit firm’s use of customer relationship management (CRM) tools (e.g. having client management assess audit team service quality) as part of the audit firm’s MCS. These findings imply that client management, if subtle, can pressure auditors into accepting the accounting management wants. Further, audit firms can act as enablers for such pressure through use of CRM tools that are not designed for professional services with explicit conflicts of interests between the service provider and the purchaser of the service.

Authors

• Christopher Koch, University of Mainz

• Steven E. Salterio, Queen's University, Kingston