The Effects of Performance-based Profit-sharing Schemes and Client Flexibility on Auditors' Judgements
Das, Abhijit (2024) The Effects of Performance-based Profit-sharing Schemes and Client Flexibility on Auditors' Judgements. In: Proceedings of the 20th Asian Academic Accounting Association Annual Conference (FourA 2024) pp. 97-109. From: 20th Asian Academic Accounting Association Annual Conference, 26-28 November 2023, Khon Kaen, Thailand.
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Abstract
Prior studies in auditing have examined the impact performance-based profit-sharing schemes (PES) and client's attitude in terms of flexible attitude and inflexible attitude on auditors’ judgements independently, and there is an ex-ante expectation that these two factors will interact in the context of proposed audit adjustments in a prenegotiation setting. Based on theory of motivated reasoning, this study examines whether client attitude will have a smaller effect when auditors’ PES is based on firm-wide scheme as compared to divisional scheme. The findings show that auditors’ PES and client attitude interact to affect auditors’ negotiated behaviour in a simulated setting. Our results exhibit concessionary (i.e., waiving a material audit adjustment) behaviour of experienced auditors from the US. The findings extend the contemporary research on auditor-client negotiation by providing evidence to the literature that PES schemes influence the behaviour of auditors in a simulated negotiation setting. The findings suggest that auditors do not only act as motivated reasoners due to PES schemes since client's attitude may also influence their behaviour.
| Item ID: | 81763 |
|---|---|
| Item Type: | Conference Item (Research - E1) |
| ISBN: | 9772460509010 |
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| Date Deposited: | 07 May 2024 01:04 |
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