The Interplay of Client Management and the Audit Committee on Auditor Performance

SUMMARY: This article summarizes “The Interplay of Management Incentives and Audit Committee Communication on Auditor Judgment” (Brown and Popova 2016), which investigates the influence that client management and the audit committee have on auditor judgments and behavior. We find that additional, informal audit committee communication with the auditor, as directed under the recently issued Auditing Standard No. 16, Communications with Audit Committees, has a significant and positive impact on auditors' evidence evaluation and related judgments under certain conditions. Specifically, when client management has greater incentives to try to unduly influence the auditor, this additional communication has a significant, positive impact on auditors' evidence evaluation and related judgments. However, when client management is perceived as having lower incentives, management becomes more persuasive than the audit committee and is able to influence the auditors into accepting an aggressive, management-preferred a...