Effects of Auditors' Concession Timing on Financial Officers' Negotiation Judgments

45 Pages Posted: 13 Mar 2007

See all articles by Hun-Tong Tan

Hun-Tong Tan

Nanyang Business School, Nanyang Technological University

Ken Trotman

UNSW Australia Business School, School of Accounting

Date Written: January 2007

Abstract

In this paper, we develop and test a conceptual model that posits how the timing of concessions made by an auditor to auditee management influences negotiation judgments. Our model hypothesizes that auditors' concession timing strategies influence financial officers' offers (given in the round just before the auditor makes a final decision), which affects their satisfaction with the negotiation outcome, and which, in turn, affects their intention to continue their relationship with the auditor. We conduct an experiment where financial officers negotiate with a hypothetical auditor via email over four rounds of negotiation. We manipulate, between-subjects, four negotiation strategies that vary the timing of the auditor concessions given, holding constant the total amount of concessions given. These concessions vary in terms of whether they are given before the start of the negotiation, after one round of negotiation, gradually during the negotiation, or at the end of the negotiation. Our results support the mediation model, and also indicate benefits from the use of gradual or delayed concessions as opposed to early concessions. We also provide evidence on self-reported strategies used by financial officers during the negotiations.

Keywords: auditor-auditee negotiations, financial officers, negotiation strategy, concessions

JEL Classification: M49, M41, G34, C90

Suggested Citation

Tan, Hun-Tong and Trotman, Ken, Effects of Auditors' Concession Timing on Financial Officers' Negotiation Judgments (January 2007). Available at SSRN: https://ssrn.com/abstract=960907 or http://dx.doi.org/10.2139/ssrn.960907

Hun-Tong Tan (Contact Author)

Nanyang Business School, Nanyang Technological University ( email )

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

Ken Trotman

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia

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