A critical and pervasive component of firm-specific audit firm inspection reports is the inclusion of detailed descriptions of the deficiencies uncovered by inspection teams. Prior research in psychology indicates that people are likely to focus on such anecdotal information without adequately...

Analytical procedures require that auditors develop and test hypotheses about possible fluctuations in a firm's financial data. Research in psychology suggests that the initial information ambiguity that exists prior to hypothesis generation may affect not only the initial hypothesis set, but...

This study examines the negotiation decisions made by professional auditors and clients when facing a revenue recognition conflict. Specifically, we investigate the degree of flexibility inherent in auditor and client negotiation decisions, whether auditors and clients accurately perceive the...

Since most audit engagements identify multiple proposed audit adjustments, auditors must decide how best to present and negotiate these adjustments with their clients. Auditors may negotiate adjustments individually as they are uncovered (a sequential strategy) or they may aggregate identified...

This study examines an aspect of earnings management that we refer to as audit management. We define audit management as a client’s strategic use of diversions to decrease the likelihood that auditors will discover earnings management during the audit. Specifically, we examine whether...