Completing and Corroborating the Model of Auditor-Client Negotiation About Accounting Issues by Comparing Auditor and Chief Financial Officer Views

Abstract

Much attention is beginning to be paid to auditor client management negotiation as a result of recent events in the financial world. Gibbins, Salterio and Webb [GSW 2001] developed an accounting specific negotiation model and gathered collaborative data from audit partners. To lay the basis for further understanding of the dynamics of the negotiation process, our research examines the views of chief financial officers (CFOs) and compares and contrasts those views with GSW's auditors. The results (1) provide additional evidence of the model's generalizability; (2) advance evidence of congruencies and divergences in the recalled negotiations; and (3) allow for model modification and elaboration in light of having the views of both parties. We show a high level of congruency in the two groups in the recall of the issue type, the people and the elements involved in the negotiation process, as well as the relative importance of various accounting contextual features. We also identify some elements and features that may cause auditor client management negotiations to be mainly distributive (win-lose) both in bargaining and in outcomes. The new CFO data and comparisons to the auditor data suggest two principal model revisions: a reduction in the large number of contextual features into a parsimonious set of the most important features; and advice to users of the negotiation model to be sensitive to differences in the parties' interpretations of the model's elements and features.

Keywords: Audit negotiation, Chief Financial Officers, Model corroboration

JEL Classification: M41, M49, D74