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  • The Auditing Section
    Negotiations Over Accounting Issues: The Congruency of Audit...
    research summary last edited May 25, 2012 by The Auditing Section, tagged 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind, 10.0 Engagement Management, 10.04 Interactions with Client Management 
    Title:
    Negotiations Over Accounting Issues: The Congruency of Audit Partner and Chief Financial Officer Recalls
    Practical Implications:

    The results of this study are important for auditors and managers to consider when negotiating.  For example, the authors propose that auditors must take the initiative if they hope to achieve a “win-win” compromise because CFOs view negotiation as surrounding one issue, while audit partners view negotiations as involving multiple issues at once.  Findings from negotiation research shows that “win-win” solutions are more likely when issues are integrated than when they are isolated.  Furthermore, the authors propose that audit partners should be trained to recognize that CFOs are more likely to view the negotiation as a “win-lose” negotiation.  As a result, auditors must be trained to use tactics to achieve good outcomes under a “win-lose” scenario or to purposefully change the negotiation to a “win-win” style of negotiation when the potential for such an outcome exists.  Finally, the authors propose that auditors should be trained to understand that CFOs have different perspectives on the context of the negotiation (such as differing opinions of staff expertise), and reaching good outcomes is partially dependent on understanding the perspective of the other party.

    Citation:

    Gibbins, M., S. A. McCracken, and S.E. Salterio. 2005. Negotiations Over Accounting Issues: The Congruency of Audit Partner and Chief Financial Officer Recalls. Auditing: A Journal of Practice and Theory 24 (Supplement): 171-193.

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  • The Auditing Section
    Exploring Trust and the Auditor-Client Relationship: Factors...
    research summary last edited May 25, 2012 by The Auditing Section, tagged 08.0 Auditing Procedures – Nature, Timing and Extent, 08.04 Auditors’ Professional Skepticism, 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind, 10.0 Engagement Management, 10.04 Interactions with Client Management 
    Title:
    Exploring Trust and the Auditor-Client Relationship: Factors Influencing the Auditor’s Trust of a Client Representative
    Practical Implications:

    The findings provide evidence that auditors do hold a level of trust in client representatives and that the level of trust is associated with commonplace behaviors of client representative that attract trust.  The results of this study are important to make auditors and auditing standards setters aware of factors that may lead to greater auditor trust of client management and perhaps consider whether there may be a potential for excessive trust to overwhelm the auditor’s professional skepticism. Note that the study was unable to determine whether the levels of trust that the auditors had for the client were such that auditor judgment would be compromised.

    Citation:

    Rennie, M. D., L. S. Kopp, and W. M. Lemon. 2010. Exploring Trust and the Auditor-Client Relationship: Factors Influencing the Auditor’s Trust of a Client Representative. Auditing: A Journal of Practice and Theory 29 (1): 279-293

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  • The Auditing Section
    Auditor-Client Management Relationships and Roles in...
    research summary last edited May 25, 2012 by The Auditing Section, tagged 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind, 10.0 Engagement Management, 10.04 Interactions with Client Management 
    Title:
    Auditor-Client Management Relationships and Roles in Negotiating Financial Reporting
    Practical Implications:

    The results of this study identify that the “shadow” negotiation exists and provides insights into how the roles and relationships are negotiated.  This research identifies the CFO as having the commanding position in the negotiation process and identifies the “turns” available to the auditor in the process. The authors indicate that the Sarbanes-Oxley Act may provide that auditor with a new “move” by requiring the auditor to disclose the “preferred” accounting method to the audit committee.

    Citation:

    McCracken, S., S.E. Salterio, and M. Gibbins. 2008. Auditor-client management relationships and roles in negotiating financial reporting. Accounting, Organizations and Society 33 (4-5): 362-383

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  • The Auditing Section
    Auditor Negotiations: An Examination of the Efficacy of...
    research summary last edited May 25, 2012 by James L Fuehrmeyer, tagged 10.0 Engagement Management, 10.04 Interactions with Client Management 
    Title:
    Auditor Negotiations: An Examination of the Efficacy of Intervention Methods
    Practical Implications:

    The results of this study are important for audit firms to consider when determining if and how the firm should utilize negotiation trainings and interventions.  Since the results indicated that larger write-downs were obtained in the role-playing strategy, the authors suggest that this may be the best of the three methods for auditors to utilize when preparing for a significant negotiation.  It also appears that this results in a “win-win” for both the client and auditor.  The auditor was able to obtain an adjustment to the financial statements that reflects the greatest accounting conservatism.  Additionally, the evidence suggests that the role play intervention also resulted in increased levels of satisfaction with the negotiation and a willingness to work together in the future.  Therefore, this strategy results in both increased levels of accounting quality and higher levels of some metrics of client satisfaction.

    Citation:

    Trotman, K. T., Wright, A. M. and S. Wright. 2005. Auditor Negotiations: An Examination of the Efficacy of Intervention Methods. The Accounting Review 80 (1): 349-367

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  • The Auditing Section
    A Comparison of Auditor and Client Initial Negotiation...
    research summary last edited May 14, 2012 by Judy Cothern, tagged 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind, 10.0 Engagement Management, 10.04 Interactions with Client Management 
    Title:
    A Comparison of Auditor and Client Initial Negotiation Positions and Tactics
    Practical Implications:

    This study provides a more complete examination of auditor-client pre-negotiation decisions and negotiation tactics when confronted with an ambiguous accounting issue.  Because auditors and clients approach conflict resolution and make negotiation decisions in very different ways, the results should be of interest to auditors. 

    Citation:

    Bame-Aldred, C. W. and T. Kida. 2007. A Comparison of Auditor and Client Initial Negotiation Positions and Tactics. Accounting, Organizations, and Society 32 (6): 497-511.

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