How Client Advocacy Attitudes and a Foreign Decision Environment Affect Auditor Judgement

38 Pages Posted: 25 Oct 2015

See all articles by Robin Litjens

Robin Litjens

Tilburg University - CentER and Department of Accountancy

Robert E. Pinsker

Florida Atlantic University

Ferdy van Beest

Nyenrode Business University

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Date Written: October 23, 2015

Abstract

The purpose of this study is to investigate potential reasons for the heterogeneity of audit judgments when auditors are assigned to a foreign country. Drawing on prior judgment-and-decision-making (JDM) research, we predict that client advocacy attitudes and local firm policies influence auditor judgment – despite the auditors being part of the same global network. Using a sample of experienced auditors from the US and The Netherlands, we measure client advocacy attitudes and manipulate the local office’s firm policy decision environment (principles-oriented, rules-oriented, control [no manipulation]).

Results show that client advocacy attitudes impact disclosure recommendations and this relationship is moderated by decision environment. Specifically, auditors possessing a higher level of advocacy attitudes hold more client-favorable judgments than those with lower advocacy levels. Moreover, at the higher level of advocacy attitudes, auditors in the rules-oriented environment have more client-favorable judgments than those either in a principles-oriented environment or in the control condition. Our context involves a foreign country audit and findings extend the JDM, accounting standard, and decision environment literatures.

Keywords: JDM, disclosure, decision environment, client advocacy

JEL Classification: M42, J10

Suggested Citation

Litjens, Robin and Pinsker, Robert E. and Beest, Ferdy van, How Client Advocacy Attitudes and a Foreign Decision Environment Affect Auditor Judgement (October 23, 2015). Available at SSRN: https://ssrn.com/abstract=2679103 or http://dx.doi.org/10.2139/ssrn.2679103

Robin Litjens (Contact Author)

Tilburg University - CentER and Department of Accountancy ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Robert E. Pinsker

Florida Atlantic University ( email )

Boca Raton, FL 33431
United States

Ferdy van Beest

Nyenrode Business University ( email )

Straatweg 25
P.O. Box 130
Breukelen, 3620 AC
Netherlands

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