How higher performance on client service affects auditors’ willingness to challenge management’s preferred accounting
Ricci, Michael Anthony
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Satisfying the client and performing a high quality audit are important goals for auditors. However, these goals often conflict (e.g., when management has aggressive reporting preferences). This conflict is an ongoing concern of regulators and academics because auditors motivated to satisfy the client may be more likely to inappropriately accept management’s preferred accounting, impairing audit quality. However, accepting management’s preferred accounting is not the only way for auditors to pursue their client satisfaction goals. Auditors can also satisfy the client by performing client service activities, such as communicating effectively and being accessible to clients (Hoang et al. 2017, Koch and Salterio 2017). I address auditors’ competing client satisfaction and audit quality goals by experimentally examining how higher performance on client service affects auditors’ willingness to challenge management’s preferred accounting. I draw on theory from psychology (Fishbach et al. 2009) explaining that people can focus on monitoring their goal progress (i.e., moving forward on a goal) or their goal commitment (i.e., the importance of a goal). I expect and find that when auditors monitor their progress toward (commitment to) their client satisfaction goals, auditors who perform higher on client service make judgments that are more (less) challenging of management’s preferred accounting than auditors who perform lower on client service. This challenges the conventional wisdom that the pursuit of client satisfaction goals necessarily undermines audit quality.