Study On Audit Negotiations Based On CPA’s Persuasion Tactics

An audited financial report is the result of audit negotiations between the CPAs and the audited entities. Audit negotiation is critical to guarantee quality of financial reports, normal operation of effective capital market and order of market economy. Audit negotiation is the process of communication and making decisions upon differences between the auditors and the audited entities in the process of auditing. To improve quality of audit negotiations of auditors and quality of the disclosed information of financial reports, it is quite necessary to study persuasion strategies in the process of audit negotiations and get to know factors which may impact the persuasion strategies. The study history of audit negotiations is short; there are only a few study fruits of persuasion strategies, systematic theoretical study on persuasion strategies in audit negotiations is still unfound, and study on audit negotiations based on persuasion theory is still blank.The thesis takes the game theory, individual decision theory, attribution theory and persuasion theory in social psychology as basis and carries out study on audit negotiations based on CPA’s persuasion tactics. It adopts the study methodology of integrating theoretical analysis and empirical study. By making analysis on relevant persuasion theories, it built persuasion model of CPAs in audit negotiations; and with questionnaires, it investigated the CPAs and financial supervisors in China, verified the influencing factors and effectiveness of persuasion strategies of CPAs in audit negotiations.There are six chapters in the thesis in total,main contents of the chapters are summarized as follows:Chapter One is introduction; Chapter Two is literature review, which reviews the literature of the audit negotiation field and makes comments on main domestic and foreign studies; Chapter Three makes theoretical analysis on CPA’s audit negotiations based on persuasion tactics, mainly basic theories for deciding success of persuasion, including the game theory, prospect theory, attribution theory and persuasion theory in social psychology, etc., and builds the persuasion model of audit negotiations; Chapter Four carries out empirical analysis on factors that may affect selection of persuasion strategies in CPA’s audit negotiations; Chapter Five tested the effectiveness of persuasion strategies adopted in CPA’s audit negotiations; it tested the impact of client concession and client satisfaction on CPA’s audit negotiations by designing CPA’s persuasion tactics; Chapter Six are conclusions and expectations; it summarizes main conclusions and practical implications as well as limitations of the study and future research orientations.Main study conclusions of the thesis include:1. Empirical analysis shows that, main influencing factors on persuasion tactics of CPA’s audit negotiations include:straightforward means of expression, wearing formal business attire instead of leisure clothing while negotiating, CPA’s good mood at negotiations, CPA’s education background, qualification certificate obtained, professional experiences, trainings received on audit negotiations, impact of negotiating results on CPA’s personal interests, client’s accounting specialty, client’s negotiating strategies, client retention, regulation, setting of audit committee, mandatory rotation of the signatory CPAs accounting firms and high litigation risks faced by CPAs, etc..2. Empirical analysis shows that, persuasion tactics and communication style selected by CPAs will surely impact on clientconcession.3. Empirical analysis shows that, persuasion tactics and communication style selected by CPAs will also impact on satisfaction of client s on CPAs and that of the audit negotiations.4. Empirical analysis finds that, when CPA adopts the persuasion tactics of describing similar accounting methods of other companies, client’s satisfaction on the negotiation and the CPA is the highest, and client is most likely to cooperate with CPA in the future; when CPA adopts the persuasion tactics of providing opinions of technical experts, client recognizes competence and reliability of CPA most; when CPA adopts the persuasion tactics of threatening client to issue qualified auditing opinions, client’s satisfaction on the negotiation and possibility of future cooperation with CPA are the lowest; when CPA adopts the persuasion tactics of warning the possibility of being reviewed by quality control authority, client’s satisfaction on CPA is the lowest.5. Empirical analysis finds that, when CPA negotiates with client under the cooperation type of communication, client is likely to give more concessions; when CPA adopts the persuasion strategies of warning the possibility of being reviewed by quality control authority, providing opinions of technical experts or describing similar accounting methods of other companies, the persuasion tactics can achieve more obvious effect than threatening client to issue qualified auditing opinions and warning the existence of stringent regulation.6. Empirical analysis finds that, under competitive communication style, when CPA adopts the persuasion strategies of threatening client to issue qualified auditing opinions or warning the possibility of being reviewed by quality control authority or the existence of stringent regulation, the negative impact on client concession is more obvious.7. Empirical analysis finds that, under competitive and cooperative styles of communication, the persuasion strategies of warning the possibility of being reviewed by quality control authority has opposite correlation with client concession.8. Empirical analysis finds that, client is more likely to negotiate with CPAs of cooperative communication style and make concessions. Under cooperative communication style, client satisfaction on negotiations and CPAs is higher; client will think highly of CPAs and trust them more, and is more likely to cooperate with them in the future.