Recent events in the financial world have led to increasing research on issues relating to accounting negotiations. Auditing standards and economic models generally portray the auditor-client management’s reporting, rather than seek to modify it. However, recent negotiation research is of the view that if there is a difference in opinion between the auditor and client management about the client’s reporting, both parties can resolve the difference.
There may be corporate misbehaviour in financial reporting which has prompted legislators and regulators to question the appropriateness of auditors’ judgments over controversial accounting items that are subject to negotiation.
Research has shown that auditors may be waiving the majority of proposed adjustments to the financial statements. Frequent negotiations between auditors and client management raises the question as to whether both groups’ reports of the process may be divergent. If the recalls are the same, then there would be confidence of a reliable characterization of the process.
Research on the GSW model shows congruent recalls that audit partners and CFOs saw negotiation as a process of persuading the other party to adopt the favoured position, or agreeing on some middle ground, rather than as an opportunity to developing new solutions, to the advantage of both.
The two groups saw similar central roles for accounting standards and expertise as well as seeing the audit committee as entirely peripheral and were usually not notified of any negotiations. CFOs had more accounting expertise and understood the business better than the partners did.
The two interpreted similar elements and features differently.
While the partners emphasized the importance of prior negotiation to the current one, the CFOs gave their accounting expertise higher ratings. The audit partners were also aware of a list of potential issues to be negotiated, whereas the CFOs perceived the issues to be a one-off. These different perspectives would of course affect the negotiation strategies as well as outcomes. Factors that would influence current negotiations
• Antecedent conditions: These are derived from the client’s history and past negotiations. Although they both agreed that the history of negotiations was moderately important, audit partners viewed these more importantly that the CFOs did. • Accounting issues: These involve the client’s financial statements and may be affected by changes such as financial standards. Here, differences in expertise may cause both parties to view issues in different lights because a majority of each group chose examples where they first identified the issues.
• The negotiation process: This would start with exchanging of information then assessment of the issue, followed by various interactions and finally identification of the general possible outcome. Both sides saw themselves as important to the issue resolution as they reported considerable involvement of their staff, as well as citing the other group’s staff as examples. They both felt that the length of time it took to resolve an issue was considerably long while the auditors felt that it took longer than the CFOs felt.
• Accounting outcome: This is the end of the formal negotiation. Auditors felt they accepted the CFOs position more than the CFOs accepted the auditors positions. • Consequences This is the financial reporting result which involved both groups having a common ground on clean or unqualified audit, with the same auditor being reappointed and pending issues being agreed upon as to be revisited in future audits, possibly leading to future negotiations.
In conclusion we can say that both parties agree on the contextual features that are important in all negotiations even if they differ in the emphasis on how each constructs an analysis and decision frame. REFERENCES Gibbins, Michael. McCracket Susan. A. & Salterio, Steven, E. Negotiations Over Accounting Issues: The Congruency of Audit Partner and Chief Financial Officer Recalls. 2005
Remember! This is just a sample.
You can get a custom paper by one of our expert writers.
Get your custom essay
Helping students since 2015
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download