How Client Advocacy Attitudes and a Foreign Decision Environment Affect Auditor Judgement

The purpose of this study is to investigate potential reasons for the heterogeneity of audit judgments when auditors are assigned to a foreign country. Drawing on prior judgment-and-decision-making (JDM) research, we predict that client advocacy attitudes and local firm policies influence auditor judgment – despite the auditors being part of the same global network. Using a sample of experienced auditors from the US and The Netherlands, we measure client advocacy attitudes and manipulate the local office's firm policy decision environment (principles-oriented, rules-oriented, control [no manipulation]). Results show that client advocacy attitudes impact disclosure recommendations and this relationship is moderated by decision environment. Specifically, auditors possessing a higher level of advocacy attitudes hold more client-favorable judgments than those with lower advocacy levels. Moreover, at the higher level of advocacy attitudes, auditors in the rules-oriented environment have more client-favorable judgments than those either in a principles-oriented environment or in the control condition. Our context involves a foreign country audit and findings extend the JDM, accounting standard, and decision environment literatures