Concession, Contention, and Accountability in Auditor-Client Negotiations

ABSTRACT: This study investigates how tactics employed by a client during negotiations impact experienced auditors' propensity to waive material adjustments and whether the salience of a strict concurring partner review affects the decision to waive. Different psychological theories predict that auditors may either become more contentious or more concessionary when facing a contentious client. Our results suggest that auditors are more likely to waive material adjustments when clients use contending tactics, but not concessionary tactics. However, we also find that making a strict concurring partner review salient reduces this propensity. Further, we find that a theory not previously applied to this line of research, the level-of-aspiration theory, may predict how auditors react. These results offer additional insights into auditor-client negotiations and reveal that existing quality controls can influence these negotiations.