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Multiple stakeholders in the financial reporting process have articulated concerns over the rules-based orientation that U.S. accounting standards have adopted. Many argue that a more principles-based approach to standards setting, typified by international accounting standards, would improve the quality of financial reporting and strengthen the auditor's position when dealing with client pressure, thereby enabling a focus on transparency and fairness of financial reports. In early 2009, the U.S. appeared poised to transition U.S. accounting standards to international accounting standards. The transition decision was made after the recommendations of the SEC Advisory Committee on Improvements to Financial Reporting (i.e., SEC Pozen Committee) publicly expressed strong support in its final report (SEC, 2008a). The SEC in turn issued its “Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by U.S. Issuers on November 14, 2008” (SEC, 2008b) outlining the transition procedures. However, with Shapiro taking over as chairperson of the SEC, this move now appears less likely pending a stronger review of how principles-based international standards may impact the strength of financial regulatory oversight – a potential delay met with disdain by the pro principles-based European regulatory community (Doran, 2009). While transition to international standards continues to progress, little research examining whether principles-based standards affect auditor decision-making has been conducted. The purpose of this study is to explore the impact of principles- vs. rules-based standards on auditors' willingness to allow preparers leeway in reporting practices and to consider how auditors' decision behavior is influenced by potential client pressure and/or opposing pressure from the SEC. Based on a sample of 114 experienced auditors, the results show that auditors are more willing to allow clients to manage earnings under rules-based standards; and, these results are persistent even under external pressure. Results also indicate that more experienced auditors are less willing to allow clients who exert high pressure to report earnings aggressively, while SEC pressure has more affect on less experienced auditors. These results provide important insights to the FASB, SEC, and IASB as they weigh arguments underlying the principles- vs. rules-based debate.

Research has focused on factors causing pressure and impairing auditor independence. These include competition, opinion shopping, client and auditor size, and client financial health. No study has examined the characteristics of the pressures. Responses to case studies sent to auditors in the USA and Australia were analysed via factor analysis. The objective was, first, to increase understanding of the underlying dimensions of pressures faced by these auditors; and second, to examine any similarities between these two countries, similar in culture, but significantly different in such respects as the legal environment. The results indicate two dimensions: pressure to retain the client, and to conform. The first is a more pervasive but subtle pressure while, in the second, the auditor is asked to follow a certain course of action. Pressure to retain the client appears to be greater for auditors in both countries, relative to the pressure to conform. So the underlying dimensions of the pressures in these countries are similar.

The purpose of this paper is to investigate the effect of performance feedback and client importance on auditors' self‐ and public‐focused ethical judgments.

An experiment is conducted in which 71 auditors are assigned to one of four conditions created by fully crossing performance feedback (positive and negative) and client importance (high and low).

Consistent with expectations, auditors who receive positive (negative) feedback make more (less) ethical judgments in a self‐focused task (a judgment that produces consequences that are relevant for the auditor). Auditors also make more (less) ethical judgments in a public‐focused task (a judgment that has consequences for both the auditor and the public) when auditing a less (more) important client. Finally, auditors who receive positive feedback and audit a less important client make more ethical judgments in both tasks than all other auditors.

These findings suggest that auditors are susceptible to pressures from negative feedback and client importance, even in situations where their decisions will have public consequences, despite regulatory changes intended to enhance audit quality.

This is the first paper that provides evidence that different sources of pressure (performance feedback and client importance) differentially affect ethical tasks differing in decision consequences (self‐ and public‐focused). Such evidence suggests the importance of matching pressure source to ethical task type.

This chapter investigates the effect of moral reasoning of tax professionals on the aggressiveness of their reporting recommendations. The findings of the study indicate moral reasoning influences the aggressiveness of tax reporting decisions separate from the influence of client pressure. As the level of moral reasoning increases, the aggressiveness of the reporting position is found to0 decrease. Contrary to prior research, client pressure is not related to tax reporting aggressiveness. Failure to observe this relationship may signal a shift in behavior resulting from the intense public and regulatory scrutiny at the time of data collection which was in the immediate aftermath of the Enron scandal.

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 investigate client influence on mortgage valuation in Nigeria to establish and rank the means of influence clients employ, and the impact of firm characteristics on client influence.

A combination of cross-sectional survey and focus groups research designs was adopted. Questionnaire structured on five-point Likert format was used to collect data from a sample of valuation firms in five Nigerian cities. Descriptive statistics, χ2, and moderated hierarchical linear model were used for data analysis.

Clients’ means of influence on valuation are more of subtle approach than threat or coercion. The most prevalent means are respectively, plea for assistance, promise of continued retainership on banks’ valuer panels, and disclosing the loan amount. Client influence differs across cities; firm characteristics have no influence on client pressure.

The research provides basis for valuation bodies to review practice rules and standards and seek for legislation for valuer independence. It can serve as material for teaching and training in professional ethics.

Biased valuations jeopardises credit risk mitigation process with potential for destabilising banks, finance sector, and consequences for the economy.

The study provides empirical evidence of the nature of client influence across several major Nigerian cities. In contrast to existing Nigerian studies that focus on single cities, the study covers several cities. It therefore provides a broad basis for problem-solving and decision-making.

Documents evidence of a loss of independence in the commercial appraisal industry in the USA. Utilizes a survey methodology to elicit the reactions of commercial appraisers to controlled scenarios of client pressure. This methodology was borrowed from established behavioural research that tested independent auditors for related independence agency issues. Results indicate significant valuation effects related to the amount of business a client brings to the appraisal firm, but no significant effect related to the size of the client‐requested value adjustment, or to the interaction of the amount of client business and the size of the requested value adjustment. Suggests that changes in fee structures and institutional reforms may be necessary to resolve the loss of independence.

This paper aims to explore the common ethical decision-making challenges faced by financial advisers and how they meet these challenges. The purpose is to identify successful decision-making tools used by investment advisers in doing business ethically. Additionally, the authors uncover common challenges and offer decision-making tools to provide support for supplemental ethics training in the future.

Questions were analyzed through a qualitative approach using individual interviews to examine a range of experiences and attitudes of active financial advisers. The sample was represented by 11 practicing financial advisers affiliated with US independent broker-dealers: six women and five men, each with 10 or more years of experience, ranging in age from 35 to 75. Grounded in four ethical decision-making models, this research examines individual ethical decision-making using individual (internal, personal) and organizational (external, situational) factors.

The method used uncovered struggles and revealed strategies used in making ethical decisions. Two research questions were examined: what are the common ethical decision-making challenges faced by financial advisers in the US financial industry? How do financial advisers handle ethical decision-making challenges? Four themes emerged that impacted ethical decision-making: needs of the individual, needs of others, needs of the firm and needs of the marketplace. Financial advisers identified moral obligation, self-control and consulting with others as major considerations when they contemplate difficult decisions.

A limitation of this review is its small sample size. A more robust sample size from investment advisers with a broader range of experiences could have widened the findings from the study.

Investment advisers can use the findings of this study as a tool for improving their own ethical decision-making or designing training for their employees to be better decision-makers.

The study explores the decision-making experiences of investment advisers to reveal multifaceted, often private struggles that qualitative methods can uncover. The study provides support for the development of additional training in ethical decision-making specific to investment advisers.

The literature on appraisal smoothing and valuer behaviour contains frequent references to the “political pressures” faced by valuers. However, the vast majority of these are either unsubstantiated or based on anecdotal evidence or media reports. Recent research focusing on the issue of pressure similarly suffers from either a lack of formal evidence that particular sources of pressure (e.g. client) actually exist or preconceptions concerning the effect of such pressures. This paper reports on the results of a study which seeks to redress these shortcomings by identifying the non‐methodological factors that affect the values reported to, and ultimately accepted by, clients. The study consists of a series of individual in‐depth interviews with senior New Zealand Registered Valuers addressing the topic of “non‐methodological factors affecting reported values to clients”. Our results indicate that the primary factors affecting the degree to which clients influence valuations, are the type of client, the characteristics of valuers and valuation firms, the purpose of a valuation and the information endowments of clients and valuers.

The purpose of this paper is to attempt to analyze client influence on valuation in both Taiwan and Singapore. Both countries are chosen because of the similar level of economic development as well as professionalism amongst valuers. However, although both are Chinese‐dominated by population, the culture and language used are substantially different.

The study uses a survey questionnaire to sample valuers' response to client influence in both Taiwan and Singapore. The questionnaire is organized into five parts: social economic data, client influence situation, potential factors, influence method, and influence abilities. The survey findings were analyzed using SPSS and subjected to a number of standard procedures to check for missing values and multivariate normality. Mean difference and F‐test were used to judge whether the valuers in the two countries have significantly different views on client influence.

The results show that client influence on valuation practices does exist in both Taiwan and Singapore. This is despite the differences in the market structures, development background and modes of doing business. Furthermore, the study finds that the degree and extent of the problem are different. These differences, as reflected in the differing views and opinions on the causes and factors leading to client pressure, are largely due to the systemic differences in the two countries, particularly, in the way businesses are conducted as well as the medium of communication being used.

The paper contributes to the research on client influence on valuation through a comparative study of two countries with substantially different business environments and language of communication. These differences seem to have an impact on how valuers view client influence despite their similar economic, educational and professional backgrounds.