Social Motive Expectations and the Concession Timing Effect

Kwan, Seungwoo; Weingart, Laurie R.

doi:10.2139/ssrn.1298619

Cited by 1 publication

(3 citation statements)

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“…This study integrates and augments several literature streams. First, the study contributes to the broader negotiation literature (Kwon and Weingart, 2004; Kwon and Weingart, 2005; van Kleef and De Dreu, 2010; Heerdink et al , 2013) by demonstrating negotiation spillover effects to downstream, non-negotiated judgments. Second, we contribute to auditing negotiation literature (Sanchez et al , 2007; Hatfield et al , 2008; Tan and Trotman, 2010; Salterio, 2012; Schmidt and Cross, 2014; Sun et al , 2015; Svanberg et al , 2018; MacTavish, 2018) by showing that auditors make inferences from the client’s negotiation strategy and this affects their downstream judgments.…”

Section: Introductionmentioning

confidence: 84%

“…That is, in an integrated audit, auditors’ discovery of a misstatement (even one that is not material) triggers an ensuing judgment regarding the severity of the ICD to comply with PCAOB auditing standards (PCAOB, 2007, 2009) [1]. Existing auditing and psychology research shows that negotiation strategy can affect judgments and decisions related to the issue under negotiation (Kwon and Weingart, 2004, 2005; Tan and Trotman, 2010; Sun et al , 2015; MacTavish, 2018); the integrated audit presents an ideal setting to examine whether and how the impact of negotiation timing can persist to affect downstream judgments.…”

Section: Introductionmentioning

confidence: 99%

“…Thus, auditors are likely to be attuned to the negotiating behavior of the client and its implications for client retention. Psychology research finds negotiators demand less in a subsequent negotiation from a counterparty who evidenced anger because they infer that the other party has tough limits and may be easily provoked (van Kleef and De Dreu, 2010; Kwon and Weingart, 2004; Kwon and Weingart, 2005). Accounting research provides some evidence of better (in terms of negotiation outcome and satisfaction) auditor–client negotiation after-effects for the party on the receiving end of a gradual versus an immediate concession strategy.…”

Section: Introductionmentioning

confidence: 99%

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Client negotiation strategy spillover to integrated audit judgments

Aghazadeh

Lambert

2020

MAJ

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Purpose This study aims to explore the effect of negotiating audit differences on auditors’ internal control deficiency (ICD) severity assessments, an ensuing, non-negotiated judgment, in an integrated audit. Design/methodology/approach The experiment manipulates the client’s concession timing strategy as either immediate or gradual, holding the outcome constant. A total of 34 auditors (primarily managers) resolve an audit difference with the client. Findings The client’s concession timing strategy during the negotiation of an audit difference spills over to affect auditors’ severity assessment of a related ICD. Auditors judged the ICD severity to be higher (lower) in the immediate (gradual) condition. Client retention risk inferences mediate this effect. Research limitations/implications The effect on auditors’ ICD severity assessments may not ultimately affect the audit report. Participants did not control their negotiation strategy, allowing the client’s negotiation strategy and the outcome to be held constant; it is possible that interactive effects between the client and auditor’s strategy might affect the study’s implications. Practical implications Features of the auditor–client negotiation process may influence auditors’ downstream, post-negotiation judgments and may therefore help to explain empirical evidence and Public Company Accounting Oversight Board inspection findings that show auditors often fail to identify an internal control material weakness after identifying a financial statement misstatement. Originality/value This paper expands current negotiation research by exploring the impact of inferences made based on counterparty concession strategy for downstream, non-negotiated judgments and current integrated audit research by identifying client retention perceptions as a driving factor of lower ICD severity assessments.

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