Negotiation Strategies and Uncertainty in Auditor-Client Negotiations

Download or read book Negotiation Strategies and Uncertainty in Auditor-Client Negotiations written by Marcus Brocard and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper complements the existing literature on auditor-client negotiations by providing insights on the auditors' and clients' preferences for distributive negotiation strategies in an economic setting where negotiations may fail even if a common negotiation range exists. The analysis reveals that managers prefer a contending negotiation strategy even under uncertainty and are thus less threatened by the possibility of a temporary negotiation failure than auditors. In contrast, auditors seek to avoid uncertainty of the negotiation process and favor a shift from a contending to a concessionary strategy depending on the effort level invested in the audit procedure. We show that a concessionary negotiation strategy by auditors results in a reduced optimal effort if the effort level has no direct influence on the uncertainty of the negotiation process. However, as long as auditors can directly influence the certainty of the negotiation process, the threat of a temporary negotiation failure results in an increase of the optimal effort level.