Auditing Section Research Summaries Space

A Database of Auditing Research - Building Bridges with Practice

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  • The Auditing Section
    The Impact of Auditor Rotation on Auditor-client Negotiation1
    research summary posted May 4, 2012 by The Auditing Section, tagged 04.0 Independence and Ethics, 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind, 10.0 Engagement Management, 10.04 Interactions with Client Management, 15.04 Audit Firm Rotation 
    Title:
    The Impact of Auditor Rotation on Auditor-client Negotiation
    Practical Implications:

    The study investigates how mandatory audit firm rotation may affect the process of auditor-client negotiations that produce financial statements observed by the public.  Standard setters should be cognizant of the possible implications of mandating rotation.  Mandatory rotation will likely change the auditors’ and clients’ incentives and auditors and clients will likely change their negotiation strategies.  This may result in less cooperation between auditors and clients and in fewer negotiations that end to the satisfaction of both parties (not only in the final audit year prior to rotation but also in non-final years).

    Citation:

    Wang, K. J. and B. M. Tuttle. 2009. The Impact of Auditor Rotation on Auditor-client Negotiation. Accounting, Organizations, and Society 34 (2): 222-243.

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  • Jennifer M Mueller-Phillips
    The Impact of the Timing of a Prior Year’s Auditor C...
    research summary posted April 19, 2017 by Jennifer M Mueller-Phillips, tagged 10.0 Engagement Management, 10.04 Interactions with Client Management 
    Title:
    The Impact of the Timing of a Prior Year’s Auditor Concessions on Financial Officers’ Judgments
    Practical Implications:

    The authors examine an important aspect of audit-client history and provide evidence on how the timing of auditor concessions in one period affects financial officers’ negotiation judgments in the subsequent period. They also show the importance of incorporating this variable into auditor-client negotiation studies. 

    Citation:

    Cheng, M. M., H. T. Tan, K. T. Trotman, and A. Tse. 2017. The Impact of the Timing of a Prior Year’s Auditor Concessions on Financial Officers’ Judgments. Auditing: A Journal of Practice and Theory 36 (1): 43 – 62. 

  • Jennifer M Mueller-Phillips
    Concession, Contention, and Accountability in Auditor-Client...
    research summary posted November 15, 2016 by Jennifer M Mueller-Phillips, tagged 10.0 Engagement Management, 10.04 Interactions with Client Management, 11.0 Audit Quality and Quality Control, 11.03 Management/Staff Interaction 
    Title:
    Concession, Contention, and Accountability in Auditor-Client Negotiations
    Practical Implications:

    This paper extends previous work by examining how clients’ use of contending tactics affect auditors’ decisions during a negotiation, which separates itself from the research of the past by investigating the clients’ current negotiation tactics, not the tactics of the past. This paper also introduces the level-of-aspiration theory into consideration for auditor negotiation literature.

    Citation:

    Bergner, J. M., S. A. Peffer and R. J. Ramsay. 2016. Concession, Contention, and Accountability in Auditor-Client Negotiations. Behavioral Research in Accounting 28 (1): 15-25

  • Jennifer M Mueller-Phillips
    Managers’ Strategic Reporting Judgments in Audit N...
    research summary posted August 31, 2016 by Jennifer M Mueller-Phillips, tagged 10.0 Engagement Management, 10.04 Interactions with Client Management, 13.0 Governance, 13.05 Board/Audit Committee Oversight, 14.0 Corporate Matters, 14.11 Audit Committee Effectiveness 
    Title:
    Managers’ Strategic Reporting Judgments in Audit Negotiations
    Practical Implications:

     The results of this study are important to consider when examining the effects of the audit committee on managers’ judgments. This study identifies the changes to the reporting environment stemming from the implementation of SOX, particularly with respect to communications between auditors and the audit committee and the authority and responsibility of the audit committee. This study adds insight to prior archival research that suggests that audit committees considered to be effective are associated with greater financial reporting quality. Further, these findings suggest that managers act as if auditors and audit committees that jointly resist management pressures to engage in aggressive reporting play important roles in ensuring high financial reporting quality.

    Citation:

     Brown-Liburd, H., A. Wright and V. Zamora. 2016. Managers’ Strategic Reporting Judgments in Audit Negotiations. Auditing, A Journal of Practice and Theory 35 (2): 47-64.

  • Jennifer M Mueller-Phillips
    Effect of Concession-Timing Strategies in Auditor–Client N...
    research summary posted January 20, 2016 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 10.0 Engagement Management, 10.04 Interactions with Client Management 
    Title:
    Effect of Concession-Timing Strategies in Auditor–Client Negotiations: It Matters Who Is Using Them.
    Practical Implications:

    The results of this paper are of interests to both the management and the auditors in practice. While there are various concession-timing strategies, it is normal for the auditors to make a large concession towards the end of the negotiation and for the management to make a large concession at the start of the negotiation. Violating these norms will lead to ineffective outcomes. However, both the parties can make small, gradual concessions along the negotiation process and this gradual strategy will lead to the most effective outcomes. The findings can be generalized to other negotiation settings, such as the negotiation between the buyer and seller in transfer pricing settings.

    Citation:

    Sun, Y., H. T. Tan, and J. Zhang. 2015. Effect of ConcessionTiming Strategies in AuditorClient Negotiations: It Matters Who Is Using Them. Contemporary Accounting Research 32 (4): 14891506.

  • Jennifer M Mueller-Phillips
    The Effect of Deadline Pressure on Pre‐Negotiation P...
    research summary posted January 20, 2016 by Jennifer M Mueller-Phillips, tagged 10.0 Engagement Management, 10.01 Budgeting and Audit Time Management, 10.04 Interactions with Client Management 
    Title:
    The Effect of Deadline Pressure on Pre‐Negotiation Positions: A Comparison of Auditors and Client Management.
    Practical Implications:

    This paper provides a more complete analysis on the concessionary behaviors and planned negotiation tactics of both the auditors and the client management in the same negotiation context. The findings can improve auditor practitioners’ self-awareness in the audit adjustment negotiation process and help them better consider the effect of deadline pressure on negotiations. The result that auditors react differently than the clients under the deadline pressure is particularly useful for auditor practitioners to predict the behavior of their clients and to design effective negotiation trainings.  

    Citation:

    Bennett, G. B., R. C. Hatfield, and C. Stefaniak. 2015. The Effect of Deadline Pressure on PreNegotiation Positions: A Comparison of Auditors and Client Management. Contemporary Accounting Research 32 (4): 15071528.

  • Jennifer M Mueller-Phillips
    Technology-Facilitated Contribution Behavior: An...
    research summary posted July 20, 2015 by Jennifer M Mueller-Phillips, tagged 10.0 Engagement Management, 10.03 Interaction among Team Members, 10.04 Interactions with Client Management 
    Title:
    Technology-Facilitated Contribution Behavior: An Experimental Investigation.
    Practical Implications:

    The results speak to the importance of recruiting competent professionals to the workforce and making specific requests for assistance that include required deliverables. As individuals build confidence in their expertise and understand exactly how to assist, they will be able to provide higher-quality responses to share knowledge. This study extends the literature by operationalizing and studying mediating mechanisms to motivation to contribute and contribution quality separately. This study extends this research in an experimental setting to analyze factors expected to affect the motivation to contribute and contribution quality. By incorporating a collaboration platform included in the Microsoft Office Suite (i.e., a single technology), the effect of technology was controlled in the research design.

    Citation:

    Du, H., Lehmann, C. M., & Willson, V. L. 2014. Technology-Facilitated Contribution Behavior: An Experimental Investigation. Behavioral Research In Accounting 26 (2): 97-130.

  • Jennifer M Mueller-Phillips
    Do Manages Intend to Use the Same Negotiation Strategies as...
    research summary posted November 5, 2014 by Jennifer M Mueller-Phillips, tagged 10.0 Engagement Management, 10.04 Interactions with Client Management, 11.0 Audit Quality and Quality Control, 11.05 Training and General Experience 
    Title:
    Do Manages Intend to Use the Same Negotiation Strategies as Partners?
    Practical Implications:

    The findings of this study are important for audit firms to consider when resolving financial reporting issues with client management. The overall pattern of our results illustrates that audit managers and audit partners intend to use different negotiation strategies and, therefore, substituting managers for partners in order to increase audit efficiency may in some contexts undermine audit effectiveness. Indeed, concern is warranted based on these results that suggest that a manager’s intended strategy entering negotiations with client management may be, pending context, substantially different and more client-outcome-oriented than the partners’ intended strategy would be. This could be worrisome for audit partners if they are not aware of negotiations that managers are undertaking on their own while out in the field. From a practice perspective, partners need to be aware of circumstances where managers negotiate with client management, since the tactics employed and potentially the outcomes obtained by the manager may be different than if the partner had been involved. Thus, based on our findings, audit partners may be the more effective negotiators and, thus, will have better negotiated outcomes than less experienced managers.

     

    For more information on this study, please contact Susan McCracken.

    Citation:

    McCracken, S., S.E. Salterio, and R.N. Schmidt. 2011. Do managers intend to use the same negotiation strategies as partners? Behavioral Research in Accounting 23 (1): 131-160.

  • Jennifer M Mueller-Phillips
    Auditor Perceptions of Client Narcissism as a Fraud Attitude...
    research summary posted June 7, 2014 by Jennifer M Mueller-Phillips, tagged 06.0 Risk and Risk Management, Including Fraud Risk, 06.01 Fraud Risk Assessment, 06.04 Management Integrity, 10.0 Engagement Management, 10.04 Interactions with Client Management 
    Title:
    Auditor Perceptions of Client Narcissism as a Fraud Attitude Risk Factor
    Practical Implications:

    The results of this study offer initial evidence that manager narcissism is an observable measure of elevated fraud risk. These findings have clear implications for audit practice. The results suggest that auditors are aware of the link between client narcissism and increased fraud attitude risk. Public accounting firms should emphasize the linkage between specific client manager personality traits and the increased likelihood of fraud-related behaviors in fraud risk assessment training. This study may also be useful to standard setters and auditing firms as a means to improve professional guidance regarding how to assess fraud attitude and the resulting effect on auditors’ fraud risk assessments.  

    Citation:

    Johnson, E. N., J. R. Kuhn, B. A. Apostolou, and J. M. Hassell. 2013. Auditor Perceptions of Client Narcissism as a Fraud Attitude Risk Factor. Auditing 32 (1).

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  • Jennifer M Mueller-Phillips
    Auditor Commitment to Privately Held Clients and its Effect...
    research summary posted May 25, 2014 by Jennifer M Mueller-Phillips, tagged 10.0 Engagement Management, 10.04 Interactions with Client Management 
    Title:
    Auditor Commitment to Privately Held Clients and its Effect on Value-Added Audit Service
    Practical Implications:

    The results of this study highlight the important role that perceptions of client fairness play in endangering social exchange relationships between individual auditors and clients. Client commitment, endangered by perceived client fairness and support, can result in higher levels of value-added audit service. This study also has practical implications for accounting firms. Firms can encourage clients to treat their auditors fairly by including language in the engagement letter describing the importance of the timely provision of audit request, adequate working conditions, and other efforts to ensure a smooth audit process. Future research could also examine the costs and benefits associated with value-added audit service from the client’s perspective.  

    Citation:

    Herda, D. N., and J. J. Lavelle. 2013. Auditor Commitment to Privately Held Clients and its Effect on Value-Added Audit Service. Auditing 32 (1).

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