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The Effect of Clients’ Auditing Experience and Concession-Timing Strategies on Auditor-Client Negotiations

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  • Anna Che Azmi

    (University of Malaya)

  • Yuen Hoong Voon

    (University of Malaya)

Abstract

The objective of this study was to examine the role of auditing experience, in auditor-client negotiations, in determining the value of the negotiated outcome. We also assessed whether it alters the effect of auditors’ concession timing-strategies on this outcome. Using an experimental method, we selected our respondents from two groups of financial officers (clients), those with and those without auditing experience. To determine the effect of the financial officers’ auditing experience and the concession-timing strategies adopted by their auditors, we measured the magnitude of the audit adjustment in an auditor-client negotiation. Our findings showed that auditing experience and concession-timing strategies affect the magnitude of the audit adjustments separately, but that auditing experience has no moderating effect on the relationship between concession timing and the final audit adjustment of the financial officers. A practical implication of this study is that it identified the ways in which auditor-client negotiations actually work. It is important that auditors obtain background information about their clients before they start a negotiation, as this information may affect its outcome.

Suggested Citation

  • Anna Che Azmi & Yuen Hoong Voon, 2016. "The Effect of Clients’ Auditing Experience and Concession-Timing Strategies on Auditor-Client Negotiations," Group Decision and Negotiation, Springer, vol. 25(5), pages 1049-1069, September.
    • Handle: RePEc:spr:grdene:v:25:y:2016:i:5:d:10.1007_s10726-016-9474-x
    DOI: 10.1007/s10726-016-9474-x
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    References listed on IDEAS

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    1. Bame-Aldred, Charles W. & Kida, Thomas, 2007. "A comparison of auditor and client initial negotiation positions and tactics," Accounting, Organizations and Society, Elsevier, vol. 32(6), pages 497-511, August.
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    3. Gary Kleinman & Dan Palmon, 2000. "A Negotiation-Oriented Model of Auditor-Client Relationships," Group Decision and Negotiation, Springer, vol. 9(1), pages 17-45, January.
    4. Hun†Tong Tan & Ken T. Trotman, 2010. "Effects of the Timing of Auditors’ Income†Reducing Adjustment Concessions on Financial Officers’ Negotiation Judgments," Contemporary Accounting Research, John Wiley & Sons, vol. 27(4), pages 1207-1239, December.
    5. Gary Kleinman & Dan Palmon & Kyunghee Yoon, 2014. "The Relationship of Cognitive Effort, Information Acquisition Preferences and Risk to Simulated Auditor–Client Negotiation Outcomes," Group Decision and Negotiation, Springer, vol. 23(6), pages 1319-1342, November.
    6. Richard C. Hatfield & Christopher P. Agoglia & Maria H. Sanchez, 2008. "Client Characteristics and the Negotiation Tactics of Auditors: Implications for Financial Reporting," Journal of Accounting Research, Wiley Blackwell, vol. 46(5), pages 1183-1207, December.
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