0000000000204929
AUTHOR
Steven E. Salterio
Effects of Client Pressure and Audit Firm Management Control Systems on Auditor Judgments
We examine the effects of pressures from client management and the audit firm’s own management control systems (MCS) on auditors’ willingness to accept an aggressive accounting that is preferred by client management. We find that auditors perceiving more pressure from client management to accept the client’s aggressive accounting react by increasing the size of the proposed adjustment needed to bring the client’s accounting into conformity with GAAP. However, we find that when client management promotes the jointness of interests they share with the auditor or the audit firm’s MCS focuses the auditor more on client service quality the auditor experiences increased affinity for the client an…
The Effects of Auditor Affinity for Client and Perceived Client Pressure on Auditor Proposed Adjustments
ABSTRACT This paper examines how auditors' judgments about accounting policies may differ when experiencing different levels of affinity for client management and facing different levels of pressure from client management. The theory of motivated reasoning is employed to analyze the effects of these two factors that should lead individual auditors to adopt as a directional goal the acceptance of client management's aggressive accounting. Accordingly, we predict and find that auditors experiencing greater client affinity and facing explicit client pressure suggest lower adjustments to clients' aggressive accounting, consistent with motivated reasoning's goal-related predictions. But our stud…