Effect of Concession-Timing Strategies in Auditor-Client Negotiations: It Matters Who is Using Them

33 Pages Posted: 14 Jan 2015

See all articles by Yan Sun

Yan Sun

Lanzhou University-School of management

Hun-Tong Tan

Nanyang Business School, Nanyang Technological University

Jixun Zhang

Nankai University-Business School

Date Written: June 22, 2014

Abstract

In this study, we examine how norms about the use of negotiation strategies by different parties in an auditor-client negotiation influence the relative efficacies of these negotiation strategies. We conduct an experiment with experienced auditors/financial managers as participants, who enter into a negotiation on an income-decreasing audit adjustment with a hypothetical client/auditor who uses a strategy where the same concessions are given either at the start, gradually, or the end of the negotiation. We find that the concession-end strategy is more effective than the concession-start strategy when used by auditors; however, the reverse is true when these same strategies are used by financial managers. The concession-gradual strategy leads to superior outcomes when used by either auditors or clients. We also provide evidence that auditors’ and financial managers’ perceptions of the norms relating to the use of these strategies correspond to what we propose in our theory.

Keywords: negotiation strategies, auditors, financial managers, norms

JEL Classification: M41

Suggested Citation

Sun, Yan and Tan, Hun-Tong and Zhang, Jixun, Effect of Concession-Timing Strategies in Auditor-Client Negotiations: It Matters Who is Using Them (June 22, 2014). Available at SSRN: https://ssrn.com/abstract=2548836 or http://dx.doi.org/10.2139/ssrn.2548836

Yan Sun

Lanzhou University-School of management ( email )

NO.222, Tianshui South Road
Lanzhou, Gansu 730000
China

Hun-Tong Tan (Contact Author)

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore
+65 6790 4819 (Phone)
+65 6793 7956 (Fax)

Jixun Zhang

Nankai University-Business School ( email )

94 Weijin Road
Tianjin, 300071
China

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