Does Pressure to Satisfy Clients Influence How Auditors Perceive and Respond to Client Persuasion?

• In Event: Audit Quality 2

Abstract

Researchers and regulators have raised concerns that audit quality suffers from auditors’ overreliance on clients’ explanations. Our experiment investigates how auditors respond when client management uses persuasive language (expressions of confidence) in explaining a material revenue increase. To test whether the auditor-client relationship influences auditors’ perceptions and behaviors in response to management persuasion, we also manipulate the strength of pressure on auditors to achieve high client service satisfaction. We find that auditors under stronger client service pressure perceive management’s expression of confidence as a persuasion attempt, consistent with auditors’ use of persuasion knowledge (Friestad and Wright 1994). However, compared to auditors under weaker service pressure, they are less likely to act upon persuasion by pursuing more powerful audit evidence. These findings suggest that service pressure produces an inconsistency between auditors’ activation of persuasion knowledge and their application of this knowledge to minimize the influence of persuasion. We discuss implications for auditors’ professional skepticism and accounting firms’ emphasis on client service.

Authors

• Kristina J. Hoang, Tulane University

• Sanaz Aghazadeh, Lehigh University