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Behind the Audit Report: A Descriptive Study of Discussions and Negotiations Between Auditors and Directors

Behind the Audit Report: A Descriptive Study of Discussions and Negotiations Between Auditors and... This paper presents direct evidence concerning the extent, nature, and outcome of interactions between the two primary parties in the auditor‐client relationship — finance directors (FDs) and audit engagement partners (AEPs). A questionnaire instrument is used to elicit the frequency with which, over a three year period, an extensive set of 46 audit and audit‐related issues is discussed, is negotiated, and results in a change to either the accounting numbers or disclosures. Three hundred FDs and 307 AEPs of listed UK companies are surveyed, with response rates of 51% and 80%, respectively. Principal findings are that: (i) compliance issues dominate discussions, while accounting and fee issues dominate negotiations; (ii) audit committees generally reduce the level of negotiation and increase the level of discussion, suggesting that the overall degree of confrontation declines; and (iii) in the majority of cases (57%), negotiation results in a change to the financial statements, providing evidence of the auditor's influence on the financial statements. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Auditing Wiley

Behind the Audit Report: A Descriptive Study of Discussions and Negotiations Between Auditors and Directors

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Publisher
Wiley
Copyright
Copyright © 2000 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1090-6738
eISSN
1099-1123
DOI
10.1111/1099-1123.00312
Publisher site
See Article on Publisher Site

Abstract

This paper presents direct evidence concerning the extent, nature, and outcome of interactions between the two primary parties in the auditor‐client relationship — finance directors (FDs) and audit engagement partners (AEPs). A questionnaire instrument is used to elicit the frequency with which, over a three year period, an extensive set of 46 audit and audit‐related issues is discussed, is negotiated, and results in a change to either the accounting numbers or disclosures. Three hundred FDs and 307 AEPs of listed UK companies are surveyed, with response rates of 51% and 80%, respectively. Principal findings are that: (i) compliance issues dominate discussions, while accounting and fee issues dominate negotiations; (ii) audit committees generally reduce the level of negotiation and increase the level of discussion, suggesting that the overall degree of confrontation declines; and (iii) in the majority of cases (57%), negotiation results in a change to the financial statements, providing evidence of the auditor's influence on the financial statements.

Journal

International Journal of AuditingWiley

Published: Jul 1, 2000

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