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    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 
    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.  


    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.

    pre-negotiation judgments, time pressure, auditor-client negotiation, concessionary behavior
    Purpose of the Study:

    Prior research on auditor-client negotiation mainly focuses on one side of the negotiation. This paper complements prior literature by comparing the pre-negotiation judgments: 1) initial positions and 2) concession behaviors between the auditors and their clients in the same negotiation setting. Because the recent regulatory change on accelerated deadlines of the SEC filings imposes time pressure on both parties, the authors further investigate whether the effect of deadline pressure on the two parties are different. The authors motivate their expectations based on an analysis of economic consequences, prior findings from the audit-client negotiation literature and the flexible rigidity hypothesis of negotiation behavior. Specifically, they examine whether:

    • The clients make more concessions in determining the pre-negotiation positions (i.e., rst oer, goal, and limit) than the auditors. The authors argue the clients will concede more because the costs of no agreement to the clients are substantially higher than the costs to the auditors. In addition, prior auditor-client negotiation research shows the auditors’ negotiation ranges are smaller than managers’ and the auditor concessionary behavior is limited by professionalism.
    • The increase in the pre-negotiation concession behavior due to time pressure is greater for the auditors than the clients. The general negotiation literature finds negotiation parties tend to concede more when time pressure increases. The authors argue the clients will not change their pre-negotiation strategy or positions that much under time pressure because they already expect to concede a greater amount than the auditors.
    Design/Method/ Approach:

    The authors collected the evidence via an experiment conducted during the early 2010s. The authors solicit auditors from the AICPA’s mailing lists and CFOs from an online repository of executive biographies to be the experiment participants and ask them to prepare for an upcoming negotiation about a disagreement on the inventory obsolescence account. The auditors (CFOs) first state their goal for the estimate, the minimum (maximum) amount to accept (i.e., limit), and their initial offer, and then indicate their preferences on specific negotiation tactics.

    • The authors find the concessions on the initial offer, goal estimate and limit are all greater for the CFOs than the auditors. This indicates the client management in general concede more than the auditors in pre-negotiation positions.
    • The authors find auditors concede more on the initial offer, goal estimate and limit in high time pressure state than in low time pressure state. On the contrary, the difference between the concession amounts in the two states is not significant for the management. This indicates when facing time pressure, auditors are likely to make more concessions and the increased concessions are greater than that of the management.
    • The authors find auditors like to use contentious (i.e., remaining firm) tactics in negotiations when time pressure is low but move away from these tactics when time pressure is high.
    Engagement Management
    Budgeting & Audit Time Management, Interactions with Client Management