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The purpose of this paper is to investigate how competence trust (i.e. trust regarding the ability of the counterpart) and goodwill trust (i.e. trust regarding the benevolence and integrity of the counterpart) affect the probability that the auditor or the client stand up to the respective negotiation partner’s position in situations of disagreement in the auditing relationship.

Two experiments were conducted, one with 149 auditors and one with 116 chief financial officers (CFOs). Both auditors and CFOs had to indicate the likelihood that they stand up to the other party’s preferred position in a disagreement on the materiality of unrecorded liabilities. The data derived from these experiments were analyzed using hierarchical OLS.

The results indicate that both auditors and CFOs who take their respective negotiation partner in the audit for highly competent are less likely to stand up to them in situations of disagreement. Interestingly, goodwill trust appears to be irrelevant for the negotiation outcome.

The findings are highly relevant for regulators, because they inform about the crucial importance of competence trust for the auditing negotiation outcome and thus put the so-called “trust-threat” into perspective.

The study adds to the literature on the role of the context for auditor-client negotiations by exploring the role of two distinct forms of trust on the outcome of these negotiations.

The purpose of this paper is to investigate the connection between the type of negotiation tactics auditors use when they ask their clients to make adjustments to their financial reports, focusing on three distributive and two integrative negotiation tactics, and whether the auditors identify with their clients.

A survey was used to capture 152 experienced Swedish audit partners’ perspectives on what type of negotiation technique they would use thinking about their largest client in a hypothetical situation.

The results show that the more auditors identify with their clients, the more likely they are to adopt two of the distributive negotiation tactics, conceding and compromising.

Building on the findings in the accounting literature that auditors’ identification with clients constrains their judgments, this study finds that auditors’ identification with clients also has an impact on the auditors’ initial selection of negotiation tactics.

This study aims to explore the effect of negotiating audit differences on auditors’ internal control deficiency (ICD) severity assessments, an ensuing, non-negotiated judgment, in an integrated audit.

The experiment manipulates the client’s concession timing strategy as either immediate or gradual, holding the outcome constant. A total of 34 auditors (primarily managers) resolve an audit difference with the client.

The client’s concession timing strategy during the negotiation of an audit difference spills over to affect auditors’ severity assessment of a related ICD. Auditors judged the ICD severity to be higher (lower) in the immediate (gradual) condition. Client retention risk inferences mediate this effect.

The effect on auditors’ ICD severity assessments may not ultimately affect the audit report. Participants did not control their negotiation strategy, allowing the client’s negotiation strategy and the outcome to be held constant; it is possible that interactive effects between the client and auditor’s strategy might affect the study’s implications.

Features of the auditor–client negotiation process may influence auditors’ downstream, post-negotiation judgments and may therefore help to explain empirical evidence and Public Company Accounting Oversight Board inspection findings that show auditors often fail to identify an internal control material weakness after identifying a financial statement misstatement.

This paper expands current negotiation research by exploring the impact of inferences made based on counterparty concession strategy for downstream, non-negotiated judgments and current integrated audit research by identifying client retention perceptions as a driving factor of lower ICD severity assessments.

The purpose of this paper is to examine how audit partner rotation impacts the negotiation strategies client management intends to use to resolve a financial reporting issue.

An experiment that manipulates between participants on whether the audit partner rotates from the prior fiscal year (rotation versus non-rotation) is conducted to test the theoretical implications of rapport. Participants with a high level of business and managerial experience indicate their intended use of 25 reliable negotiation tactics that client management may use to resolve a financial reporting issue with the external auditor. These tactics underlie three distributive (contending, compromising, conceding) and two integrative (problem solving, expanding the agenda) negotiation strategies.

The results of the study indicate that client management is less contentious and more concessionary (i.e. accommodating) to a newly rotated audit partner, as compared to an audit partner that has established rapport with client management. Further, client management is more willing to intend using integrative and compromising (i.e. co-operative) negotiation strategies when negotiating with an audit partner with established rapport in contrast to a newly rotated audit partner.

These findings underscore the merits and costs of audit partner rotation in auditor-client management (ACM) negotiations and document that partner rotation affects not only auditor behaviour, but also the behaviour of client management.

This paper is the first that considers how developing and maintaining rapport impacts ACM negotiations. The study provides empirical evidence to further inform debates over auditor rotation.

Audit negotiations are impacted by many factors. This study aims to investigate how two such factors, communication of the National Office Accounting Consultation Unit (ACU) and the auditor’s approach, affect chief financial officers’ (CFOs’) willingness to adjust the financial statements and satisfaction with the auditor.

This study uses a 2 × 3 between-subjects experimental design. Participants are 169 highly experienced CFOs and financial officers. The experimental design crosses the two multi-dimensional auditor approaches found in the literature with two influence tactics used to communicate ACU involvement, as well as a control condition, with no communication of the ACU involvement.

Communicating the ACU’s involvement as a higher authority (similar to a boss) results in greater willingness to record an adjustment to the financial statements when auditors use a hands-off “compliance-officer” auditor approach, but lower willingness by CFOs to adjust the financial statements when auditors use an expert-advisor auditor approach as compared to when coalition tactics are used. Results also show that communicating the ACU as a higher authority negatively impacts a CFO’s satisfaction with the audit partner. Overall, these results highlight the importance of the auditor’s approach and communication of ACU involvement within the auditor–client relationship. The outcomes of this study are limited to situations where unexpected audit adjustments are found during the year-end process and thus cannot be discussed pre-emptively with clients.

This paper advances the understanding of how the multi-dimensional auditor’s approach can shape and limit the effectiveness of influence tactics. These factors are important, as auditors are tasked with maintaining not only quality audits but also client relationships. However, although rich in detail, factors other than auditor approach may have inadvertently been manipulated and are driving results.

The approach taken by the auditor with a client throughout the audit sets the stage during the auditor–client negotiations. Therefore, audit partners must consider their own approach with the client before communicating the ACU’s involvement as the auditor approach shapes and limits the tactics available for use. Using ill-suited tactics may undermine the client’s willingness to record an adjustment to the financial statements and cause undue harm to the auditor–client relationship.

This paper uses highly experienced CFOs and financial officers to examine how two common elements in the audit negotiation context can significantly affect the outcome to the financial statements and the relationship between the client and audit partner.

This study aims to review the auditor-client relationship (ACR) literature spanning 1976 to 2019 to provide future research directions.

The study analysed 140 articles from the Web of Science database, authored by 259 scholars across 28 countries and published in 47 journals. It identified three major research streams to understand the ACR dynamics: auditor tenure, ACR attributes and auditor-client negotiation.

Three major findings emerged based on this review. First, few studies examine auditor-client negotiation relative to other streams; thus, it offers scope for further research. Second, given that various fields have used diverse frameworks as theoretical underpinnings in prior studies, continuing this trend can better portray ACR from multiple perspectives. Finally, despite strong international regulations on ACR aspects such as auditor independence, tenure and rotation, implementation in several countries warrants special considerations, specifically on legal enforcement and investor protection, given diverse cultures and country-level institutional environments.

This study contributes to the synthesis of existing and emerging research streams and provides future research suggestions.

Auditors and accountants have an accepted reputation of being conservative. However, Antle and Nalebuff (1991) conclude in their analytical model on auditor‐client negotiations that auditors are not conservative and that a conservative audit report is never issued. This paper extends the Antle and Nalebuff (1991) results. By replacing the Antle and Nalebuff (1991) assumption that an auditor has a symmetric loss function (financial statement overstatements have the same impact as financial statement understatements) with the assumption that an auditor has an asymmetric loss function (losses to an auditor for financial statement overstatement are greater than the losses of an equal understatement), I find that auditors can be conservative and that conservative audit reports are issued to the users.

Independence is the cornerstone of the auditing profession. Even so, it is often assumed that acquiescing to the audit client when a disagreement occurs is more beneficial to the auditor-client relationship than asserting one’s independence (e.g., see Wang & Tuttle, 2009). We look more closely at the issue in the context of auditor-client management disagreements as recalled by experienced auditors.

We find that for most disagreements in which the auditor did not make any concession at all, the auditor-client relationship was either unaffected or strengthened. We find that a client’s use of pressure tactics did not appear to influence whether or not the auditor made a concession, but that a client’s use of pressure tactics, was associated with damage to the auditor-client relationship. The importance of the issue causing a disagreement was positively associated with the likelihood of the auditor staying with his/her initial position.

The purpose of this paper is to further the understanding of the determinants of audit report lag, which is the number of days from a company’s fiscal year-end to the date of its auditor’s report, by synthesizing extant literature. Audit report lag has been a variable of interest in many studies due to its use as a proxy for the occurrence of auditor-client management negotiations and audit efficiency and because long audit report lags delay the release of earnings information to the market.

The author uses meta-analysis to examine commonly identified predictors of audit report lag to determine if the prior research provides a consistent portrayal of audit report lag drivers.

The author finds that a number of variables relating to client profitability and financial condition, client complexity and audit opinion modifications increase audit report lag. In addition, audit report lag decreases with client size, when clients have positive earnings news to report and when the auditor has long tenure and provides non-audit services. Several variables, such as those relating to corporate governance and various auditor characteristics, have been little explored and would benefit from future research.

These results will be useful to researchers when selecting control variables for future audit report lag studies and provide insights into the key factors that contribute to the delay in audit reporting.

This paper aims to report the findings of semi‐structured interviews with management, external auditors and audit committee members in Malaysia concerning the role of the audit committee in resolving auditor‐client disagreements.

An exploratory case study method was applied in seven publicly listed companies in Malaysia. In each company interviews were conducted with an audit committee chair/member, the finance manager/CFO and the external auditor.

The study finds that, when the issue is very material, the audit committee plays a mediating role as a third‐party intermediary who provides assistance to resolve the dispute. The authority of the committee to act as a mediator comes from its oversight responsibilities, its understanding and awareness of possible issues and the members' accounting and business expertise. Mediation techniques used include controlling the agenda, gathering information, advising and solving problems. With two exceptions, the interviews indicate that the audit committee does not take sides when helping to resolve a dispute. The outcome from the mediation process is generally a compromise solution.

The study is based on 21 interviews undertaken in Malaysia. Hence, the findings may not be generalizable to other cultures and jurisdictions. Further, while a number of mediation techniques used by audit committees are identified, the paper does not examine in‐depth the mediation processes used in resolving disagreements.

The study extends the auditor‐client negotiation literature by examining whether the audit committee plays a mediating role to help resolve disagreements. The findings demonstrate that audit committee effectiveness can extend beyond a pure oversight role to more active involvement in resolving contentious accounting issues.