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    An Examination of the Effects of Auditor Rank on...
    research summary posted April 23, 2012 by The Auditing Section, last edited May 25, 2012, tagged 05.0 Audit Team Composition, 05.05 Diversity of Skill Sets e.g., Tenure and Experience, 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind, 11.0 Audit Quality and Quality Control, 11.05 Training and General Experience 
    An Examination of the Effects of Auditor Rank on Pre-Negotiation Judgments
    Practical Implications:

    This study provides evidence that there were significant differences in the pre-negotiation judgments of partners and managers. Since an outcome of an auditor-client negotiation of a contentious issue may have a significant impact on financial reporting quality, the findings of the study suggest that the using partners in the negotiation process is likely to lead to improved reporting quality. The results have implications for audit firms in allocating manager and partner time to handle negotiation.


    Trotman, K. T., A. M. Wright, and S.Wright. (2009). An Examination of the Effects of Auditor Rank on Pre-Negotiation Judgments. Auditing: A Journal of Practice & Theory 28(1): 191-203

    Purpose of the Study:

    Negotiations are pervasive in the auditing environment.  In general, audit firms have choices over what level of staff are involved in the process of negotiation. An important issue is that differences may exist between partner and manager negotiation judgments and strategies. This study focuses on the expectations and assessments that partners and managers take into the negotiation process, specifically the pre-negotiation stage. The authors use negotiation theory as well as other general psychology findings to investigate how rank (partner versus manager) affects the pre-negotiation judgments made by auditors.  The authors suggest and test the following assertions:

    • Partners take a tougher stand than managers in pre-negotiation judgments.
    •  Partners have greater confidence in their ability to negotiate and therefore receive a resolution that is closer to their initial position.
    • Partners’ rank, which reflects both additional experience and power (as compared to the manager), will lead them to believe they are in a better position to negotiate outcomes closer to their initial position.
    Design/Method/ Approach:

    The research evidence was collected prior to September 2007. The authors used responses collected from a computerized case about inventory write-downs, administered to partners and managers at three Big 4 firms in Australia and the U.S.

    • Compared to managers, partners appear to take a tougher stand in the negotiation: they expect a larger initial write-down and require a higher minimum write-down that they would accept.
    • Partners’ estimates of the maximum inventory write-down that a CFO would accept were significantly higher than managers’ estimates.
    • Partners believed they can negotiate a larger amount above the minimum adjustment than managers.
    • There were no differences in negotiation persuasion knowledge between partners and managers.
    Audit Team Composition, Auditor Judgment, Audit Quality & Quality Control
    Diversity of Skill Sets (e.g. Tenure & Experience), Prior Dispositions/Biases/Auditor state of mind, Training & General Experience
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