The Chief Financial Officer's Perspective on Auditor Client Negotiations

Posted: 21 Feb 2007

See all articles by Michael Gibbins

Michael Gibbins

University of Alberta - Department of Accounting, Operations & Information Systems

Susan A. McCracken

McMaster University - Michael G. DeGroote School of Business

Steven Salterio

Queen's University - Smith School of Business

Abstract

Auditor-client negotiation about difficult client accounting issues involves both the auditor and the client. On the client side, the Chief Financial Officer (CFO) plays a central role in the financial reporting process, yet is rarely the focus of academic study. This paper reports how a sample of Canadian CFOs viewed the negotiation process and context, using an experiential questionnaire to build on the negotiation model developed and demonstrated for the auditor side of the negotiation by Gibbins, Salterio, and Webb 2001, and corroborated by a comparison of common questionnaire items across auditor and CFO samples by Gibbins, McCracken, and Salterio 2005.

The CFOs saw negotiation with the auditors as a consequence of change in accounting and disclosure standards or personnel influential to their financial reporting, or business changes, such as, new business deals or acquisitions. Negotiation was thrust upon the CFO, and the CFO then had to manage it. The CFOs informed other management (such as the CEO) and was aware of their interests, but did not generally seek their help. Informing the Board or the audit committee of the issue was much less frequent. The issue being negotiated was seen as complex, requiring research and analysis, and dependent on knowledge and expertise, with the result more likely reflecting form over substance (a result some CFOs suggested was more agreeable to the auditor than to the CFO).

Keywords: Negotiation, Chief Financial Officer, Accounting, Auditor

JEL Classification: M49, M41, M44, M45, G34

Suggested Citation

Gibbins, Michael and McCracken, Susan A. and Salterio, Steven E., The Chief Financial Officer's Perspective on Auditor Client Negotiations. Contemporary Accounting Research, Vol. 24, No. 2, Summer 2007, Available at SSRN: https://ssrn.com/abstract=964032

Michael Gibbins

University of Alberta - Department of Accounting, Operations & Information Systems ( email )

Edmonton, Alberta T6G 2R6
Canada
780-492-2718 (Phone)
780-492-3325 (Fax)

Susan A. McCracken (Contact Author)

McMaster University - Michael G. DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

Steven E. Salterio

Queen's University - Smith School of Business ( email )

Kingston, Ontario K7L 3N6
Canada
613-533-6926 (Phone)

HOME PAGE: http://smith.queensu.ca/faculty_and_research/faculty_list/salterio-steven.php

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