Essays om revisors vurderinger og beslutninger i forhandlinger og kommunikasjon

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Arizona Mustikarini fra Handelshøyskolen ved UiA disputerer for ph.d.-graden med avhandlingen «Essays on Auditors’ Judgments and Decisions in Negotiation and Communication» tirsdag 10. januar 2023.

Hun har fulgt doktorgradsprogrammet ved Handelshøyskolen ved Universitetet i Agder.

Slik oppsummerer Arizona Mustikarini selv avhandlingen:

Maintaining auditor-client interaction is important, but how it affects auditors’ judgments and decisions?

During the course of an audit, auditors are required by auditing standards to collect sufficient and relevant audit evidence and conduct various audit tasks. They perform these to arrive at an audit opinion regarding whether the financial statements are fairly presented following the applicable financial reporting framework.

In order to do so, it is imperative that auditors maintain good interactions and get familiar with the audit clients. However, maintaining these relationships is not an easy task and often comes with some caveats.

Auditors should understand how maintaining client interactions and relationship-building will affect their professional judgments and decisions.

To address these issues, I carried out three studies in my doctoral dissertation.

First study: Literature review

In the first study, I systematically review the auditing literature on auditors’ interactions and relationships with their clients.

This review takes a bird’s eye view and aims to understand how the auditing literature portrays the dominant elements surrounding auditor-client interaction. This includes whether the interaction engenders audit disputes or conflicts and how these conflicts are resolved between auditors and clients.

Several elements emerge from this review. However, I focus on the two most interesting and relevant elements related to auditor-client interaction, first, how auditors’ negotiation approach affects audit outcomes, and second, how auditors’ communication modes affect their professional skepticism. These topics are empirically investigated in the following studies.

Second study: Auditors’ negotiation approach

The second study focuses on how auditors’ negotiation approach affects audit outcomes.

I extend the focus on auditor-client negotiation using a context where potential fraud may occur in an audit. Specifically, I investigate auditors’ decisions throughout the audit where they are required to identify and investigate potential fraud issues.

Importantly, I also examine how auditors resolve potential fraud issues with their clients from a negotiation lens.

This study is conducted in two developing countries, Indonesia and Ghana. Auditors in these settings may have more experience with fraud because fraud is relatively not a rare occurrence compared to those in developed countries.

A survey of audit partners and managers is conducted, and interesting and novel results are found as follows.

Important finding: Fraud is mostly undertaken by senior management

With regard to identifying potential fraud, auditors in Indonesia and Ghana report that asset misappropriation fraud is mostly undertaken by senior management, whereas literature suggests that this type of fraud is mostly committed by lower-level employees.

This finding is important because policymakers, practitioners, and academics emphasize fraudulent financial reporting more than asset misappropriation fraud due to its severe impact on the overall financial statements.

Nonetheless, because asset misappropriation fraud is committed by senior management, this type of fraud should also receive attention due to its potential to severely impact financial statements.

Regarding auditors’ decisions in investigating potential fraud issues, conducting internal control assessment coupled with utilizing information technology has been an important notion in the academic literature and auditing practices for aiding fraud detection.

However, I find that auditors in this study setting cite little benefits of using these techniques to detect fraud. Once fraud is detected, this study finds that auditors in Indonesia and Ghana modify their audit procedures to respond to fraud.

Although it seems to be aligned with the requirements of auditing standards, this finding is important because prior research conducted in developed countries often reports that auditors generally fail to modify audit procedures effectively. Research often cites this failure stems from auditors’ lack of fraud experience.

Auditors’ strategy for resolving detected potential fraud issues with clients

At the end of the audit, auditors should resolve detected potential fraud issues with audit clients.

By utilizing a negotiation lens, I find that auditors often use a contending negotiation approach when resolving these issues.

However, it is interesting that this contending approach does not lead to favorable outcomes where the client records all the proposed audit adjustments. Instead, the clients would only record the majority of the adjustments.

Despite being the auditor’s preferred negotiation strategy, the contending approach may harm the auditor-client relationship. Therefore, in resolving a sensitive issue like potential fraud, auditors can benefit from finding a balance between using a contending and conceding negotiation approach that may lead to preferred audit outcomes.

Third study: Auditors’ communication modes

The next topic on auditor-client interaction I focus on is how auditors’ communication modes with the client have an impact on their professional skepticism.

In the third study, I empirically investigate auditors’ judgments and decisions in the evidence collection process.

I use a unique setting during the Coronavirus pandemic where auditors are required to conduct the audit remotely. In this remote audit setting, auditors’ interaction with the client changes from the usual face-to-face interaction to mostly utilizing email and video communication like Zoom.

Although the restriction measures are currently eased in the post-pandemic environment, working remotely remains relevant, including for auditors.

As such, the implications of this study are imperative to audit decision-making on how using these modes of communication with different features, textual and audiovisual, have differing impacts on auditors’ judgments and decisions when collecting audit evidence.

Better judgement using video communication than e-mail

Using an experiment, I find that auditors’ judgment is influenced less by prior client reputation when auditors interact with the client by video, compared to by email.

Specifically, when the auditor has a positive impression of the client personnel, using video communication affects better auditors’ judgments compared to email.

Furthermore, results from the experiment also suggest that auditors with a more positive impression of the client are less likely to follow up with the client personnel when they receive the evidence and respond by video than by email.

This means auditors are less likely to take further actions, such as obtaining additional evidence and questioning the evidence they have received.

From a practical perspective, this finding could inform decision-makers, such as audit firms, about a trade-off between the effectiveness and efficiency of gathering sufficient audit evidence.

Given that remote auditing will continue in the foreseeable future, the overall results of this study can aid decision-makers in deciding whether the use of email and video are equally effective for auditors’ judgments and decisions, particularly in the evidence collection process.

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Opponent ex auditorio:

Disputasleder inviterer til spørsmål ex auditorio i innledningen i disputasen. Tidsfrist for å stille spørsmål er senest i løpet av pausen mellom opponentene. Den som stiller spørsmål bør ha lest avhandlingen. Kontaktpersonens e-post er tilgjengelig i chat-funksjonen under disputasen, og spørsmål ex auditorio fra online publikum kan sendes til Gunvor Guttormsen på e-post  gunvor.guttormsen@uia.no  Ved spørsmål ex auditorio fra salen henvender spørsmålsstiller seg til disputasleder senest i pausen mellom opponentene.