Auditor Negotiations: An Examination of the Efficacy of Intervention Methods

Negotiations are a pervasive feature of the audit process (e.g., the resolution of proposed audit adjustments and disclosures). The results of such negotiations are of great importance to the capital markets, the client, and the auditor. The purpose of this study is to examine the effectiveness of three promising, pragmatic intervention methods for enhancing auditor negotiation performance: a role‐playing intervention—assuming the client's position in a mock negotiation; a passive intervention—explicitly considering the client's interests and options; and a practice intervention—engaging in a mock negotiation prior to the client negotiation. We posit that the role‐playing intervention will improve negotiation results, because this approach requires direct experience in considering and arguing the client's position and more cognitive effort in obtaining an understanding of the counterpart's position, a critical factor identified in the negotiation literature for successful performance. Forty‐five audit man...

[1]  H. Raiffa.  The Art & Science of Negotiation , 1983 .

[2]  M. Bazerman,et al.  Cognition and Rationality in Negotiation , 1991 .

[3]  R. Hastie,et al.  Social perception in negotiation , 1990 .

[4]  S. Plous.  The psychology of judgment and decision making , 1994 .

[5]  Patrick M. Wright,et al.  Productivity and extra-role behavior: The effects of goals and incentives on spontaneous helping. , 1993 .

[6]  Max H. Bazerman,et al.  The Role of Perspective-Taking Ability in Negotiating under Different Forms of Arbitration , 1983 .

[7]  R. Cialdini.  Influence: The Psychology of Persuasion , 1993 .

[8]  J M Phillips,et al.  The role of justice in team member satisfaction with the leader and attachment to the team. , 2001, The Journal of applied psychology.

[9]  L. DeAngelo,et al.  Auditor size and audit quality , 1981 .

[10]  M. Gelfand,et al.  Culture and Negotiator Cognition: Judgment Accuracy and Negotiation Processes in Individualistic and Collectivistic Cultures. , 1999, Organizational behavior and human decision processes.

[11]  R. Fisher,et al.  Getting to Yes: Negotiating Agreement Without Giving in , 1981 .

[12]  Kathryn Kadous,et al.  The Effect of Quality Assessment and Directional Goal Commitment on Auditors' Acceptance of Client‐Preferred Accounting Methods , 2003 .

[13]  V. Beattie,et al.  Behind the Audit Report: A Descriptive Study of Discussions and Negotiations Between Auditors and Directors , 2000 .

[14]  A. Galinsky,et al.  First offers as anchors: the role of perspective-taking and negotiator focus. , 2001, Journal of personality and social psychology.

[15]  Barry Z. Posner,et al.  Designing Meaningful Learning Situations In Management: A Contingency, Decision-Tree Approach , 1979 .

[16]  Siew Hong Teoh,et al.  Are Accruals during Initial Public Offerings Opportunistic? , 1998 .

[17]  G. Loewenstein,et al.  Egocentric Interpretations of Fairness and Interpersonal Conflict , 1992 .

[18]  Mark E. Peecher,et al.  Judging Auditors Technical Knowledge , 1997 .

[19]  G. Northcraft,et al.  Experts, amateurs, and real estate: An anchoring-and-adjustment perspective on property pricing decisions , 1987 .

[20]  M. Bazerman,et al.  The Effects of Framing and Negotiator Overconfidence on Bargaining Behaviors and Outcomes , 1985 .

[21]  W. Bottom,et al.  Negotiator Risk: Sources of Uncertainty and the Impact of Reference Points on Negotiated Agreements. , 1998, Organizational behavior and human decision processes.

[22]  H. Raiffa.  The art and science of negotiation , 1983 .

[23]  R. Iman,et al.  The Use of the Rank Transform in Regression , 1979 .

[24]  Christine M. Haynes,et al.  The Relationship between Client Advocacy and Audit Experience: An Exploratory Analysis , 2002 .

[25]  Steven E. Salterio.  The effects of precedents and client position on auditors' financial accounting policy judgment☆ , 1996 .

[26]  A. Galinsky,et al.  Perspective-taking: decreasing stereotype expression, stereotype accessibility, and in-group favoritism. , 2000, Journal of personality and social psychology.

[27]  Sally Wright,et al.  An Examination of Factors Affecting the Decision to Waive Audit Adjustments , 1997 .

[28]  D. G. Pruitt,et al.  Development of integrative solutions in bilateral negotiation. , 1975 .

[29]  Leigh Thompson,et al.  LOSE-LOSE AGREEMENTS IN INTERDEPENDENT DECISION MAKING , 1996 .

[30]  Bryan K. Church,et al.  Bargaining behavior and payoff uncertainty: Experimental evidence , 1999 .

[31]  Ivo Welch,et al.  Earnings Management and the Long-Run Market Performance of Initial Public Offerings , 1998 .

[32]  W. C. Howell,et al.  Essentials of Industrial and Organizational Psychology , 1976 .

[33]  T. Cook,et al.  Quasi-experimentation: Design & analysis issues for field settings , 1979 .

[34]  Tenbrunsel,et al.  The Negotiation Matching Process: Relationships and Partner Selection. , 1999, Organizational behavior and human decision processes.

[35]  Robert S. Baron,et al.  The forgotten variable in conformity research: Impact of task importance on social influence. , 1996 .

[36]  Linda DeAngelo,et al.  Auditor independence, ‘low balling’, and disclosure regulation , 1981 .

[37]  Michael Gibbins,et al.  Evidence About Auditor-Client Management Negotiation Concerning Client's Financial Reporting , 2000 .

[38]  Scott Highhouse,et al.  Fear of conflict and empathic buffering : Two explanations for the inflation of performance feedback , 1997 .

[39]  Ping Zhang.  A Bargaining Model of Auditor Reporting , 1999 .

[40]  M. W. Nelson,et al.  Evidence from Auditors About Managers' and Auditors' Earnings-Management Decisions , 2001 .

[41]  Lisa Koonce,et al.  The persuasiveness of audit evidence: The case of accounting policy decisions☆ , 1997 .

[42]  Colin Camerer.  Behavioral Game Theory , 1990 .