What's Happening?
A recent study published in Contemporary Accounting Research highlights the negative impact of client incivility on audit quality and auditor judgment. The research involved an experiment with 114 senior auditors and a survey of 70 auditors across the U.S.
and Canada. It found that client rudeness, defined as negative behavior with ambiguous intent to harm, is prevalent in the audit profession. Ninety percent of auditors reported encountering negative client behavior during their careers, with over three-fourths experiencing clients rudely instructing them or questioning their procedures. The study revealed that auditors tend to propose lower write-down amounts when exposed to client incivility, indicating a reduced challenge to aggressive reporting. Active coping mechanisms, such as involving a senior colleague, were found to mitigate emotional distress and encourage auditors to push back against aggressive accounting choices.
Why It's Important?
The findings of this study are significant for audit firms aiming to maintain high audit quality. Client incivility can lead auditors to back off from challenging aggressive accounting practices, potentially compromising the integrity of financial reporting. This has broader implications for the audit profession, as it underscores the need for firms to assess the risks associated with uncivil clients and implement strategies to support auditors in coping with such behavior. Encouraging active coping mechanisms can help auditors maintain their professional judgment and ensure accurate financial reporting, which is crucial for investor confidence and the stability of financial markets.
What's Next?
Audit firms may consider implementing training programs and fostering open dialogue about client incivility and coping strategies. By equipping auditors with the tools to handle rude client behavior effectively, firms can enhance audit quality and protect auditors' mental well-being. The study suggests that firms should explore a broader set of remedies to address client incivility, ensuring auditors are aware of different coping responses and how to engage in them. This proactive approach could lead to improved auditor judgment and a more resilient audit profession.
Beyond the Headlines
The study raises ethical considerations regarding the treatment of auditors by clients and the potential impact on audit quality. It highlights the importance of fostering a respectful and professional environment in client-auditor interactions. Additionally, the findings suggest that the audit profession may need to address cultural shifts in client behavior and develop strategies to mitigate the adverse effects of incivility on auditor performance.
