Managers’ Fair Value Estimates and Auditing

43 Pages Posted: 21 Jan 2021 Last revised: 13 Jan 2022

See all articles by Lisa Koonce

Lisa Koonce

University of Texas

Ben W. Van Landuyt

University of Arizona

Date Written: January 2022


In this paper, we conduct an experiment using professionals with over 18 years of experience to examine when the anticipation of an audit heightens versus constrains manager bias in fair value estimates. Considering a pending audit leads to heightened bias in fair value estimates, but only when prior-year auditor negotiations have favored the auditor (versus the manager). This result obtains whether the auditor is an expert or non-expert, indicating that heightened bias when prior negotiations favor the auditor outweighs the potential for high auditor expertise to constrain management bias. Results also reveal that even though managers believe that prior negotiation outcomes and auditor expertise work differently in affecting final post-audit fair value estimates, the vast majority of managers do not expect auditing to be a determining factor in whether or not their company will meet or miss analysts’ consensus forecasts.

Keywords: Accounting Estimates, Fair Value, Management Bias, Auditing, Negotiations, Expertise

JEL Classification: C91, D81, M41, M43

Suggested Citation

Koonce, Lisa L. and Van Landuyt, Ben W., Managers’ Fair Value Estimates and Auditing (January 2022). Available at SSRN: or

Lisa L. Koonce

University of Texas ( email )

Dept. of Accounting
McCombs School of Business
Austin, TX 78712
United States
512-471-5576 (Phone)
512-471-3904 (Fax)

Ben W. Van Landuyt (Contact Author)

University of Arizona ( email )

Tucson, AZ 85721
United States

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