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    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 
    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.


    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

    auditor-client negotiations, accountability, concurring partner review, and level-of-aspiration theory.
    Purpose of the Study:

    This study focuses on investigating how tactics employed by a client during negotiations impact experienced auditors’ propensity to waive material adjustments and whether the salience of a concurring partner review (CPR) can affect these negotiations. The audit profession as a whole remains fixated upon auditor independence and financial statement quality, so it is important to examine potential tactics by a client since negotiations directly affect the resulting financial statements. The authors of this study hope to expound upon existing literature by examining how a client who is concessionary or contentious during the negotiation may affect its outcome. In addition, they study whether a CPR reduces auditors’ propensities to waive material adjustments. 

    Design/Method/ Approach:

    The authors conduct an online experiment in which auditors make decisions about the audit of a hypothetical client. They manipulate two independent variables: client tactics and CPR salience.

    • The authors find that auditors are more likely to waive material adjustments when clients use contending tactics during negotiations. This particular results varies from previous studies that examined negotiation outcomes involving contentious clients. The former studies examine pre-negotiation situations where the client has been contentious in the past, this study finds that auditors react differently when the client is being contentious during the current negotiation.
    • The authors find that the level-of-aspiration (LOA) theory may describe auditors’ decisions regarding contentious clients. Reciprocity theory has been used in the past but does not explain these results. Reciprocity theory predicts that auditors will respond to a contentious client by becoming more contentious, while LOA predicts the opposite. Because this study finds that the auditor conceded to the wishes of the contentious client, the results follow LOA.
    • The authors find that the presence of an existing quality control procedure mitigates the auditors’ propensity to waive material adjustments.
    Audit Quality & Quality Control, Engagement Management
    Interactions with Client Management, Management/Staff Interaction