RELATIONAL CHARACTERISTICS AND RESOLUTION MODES AS DETERMINANTS OF CONSTRUCTIVE AND DESTRUCTIVE CONFLICT PERCEPTIONS BETWEEN AUDIT FIRMS AND THEIR CLIENTS

This study examines audit firm-client dyads at the organizational level to determine if certain characteristics of the relationships lead to differing perceptions of conflict. The existence of conflict is seen as a potential change for these organizations and thus effects the nature of professional relationships. Concepts of conflict used were based primarily on previous work by Coser, Assael, Deutsch, and Robbins. Their work deals with constructive and destructive aspects of conflict; constructive conflict is seen as having benefit to organizations whereas destructive conflict has negative consequences.; Nine hypotheses were tested. Independent variables include (H1)-proportion of routine issues, (H2)-times management advisory services provided, (H3)-size of the client, (H4)-amount of audit team experience, (H5)-amount of time audit services provided, (H6)-degree of environmental uncertainty faced by the client, (H7)-financial position of the client, (H8)-use of the collaborating mode of conflict resolution, and (H9)-use of the competing mode of conflict resolution. Thirteen separate dimensions of the dependent conflict perception variable were identified and used in the tests of the hypotheses.; Five hundred twenty-four randomly selected companies were requested to participate in the survey. Data was collected using self-administered questionnaires. The chief financial officer provided data for the client organization and the partner-in-charge provided data for the audit firm. The analysis of the data was confined to ninety-two companies for which both parties responded. Data was also collected from a subsidiary sample of audit partners to test for possible response bias.; Analysis of the data indicated that, although CFOs and partners were subjected to comparable measures, their perceptions of the underlying dimensions comprising the conflict experience varied remarkably. CFOs tended to stress the importance of communications, achieving a consensus on administrative affairs, and being able to perform effectively, whereas partners tended to stress general performance and achieving a consensus on technical matters.; Data indicated that there was some support for four hypotheses. The test of H1 showed that, particularly for CFOs, as the difficulty of interpreting GAAP and GAAS increased, the perceptions of conflict were likely to increase also. These interpretation difficulties were one measure of routineness of issues. The test of H5 revealed that as the amount of audit team experience increased, the more likely perceptions of conflict were to decrease. The test of H6 indicated that, as environmental uncertainty increased, there was also likely to be an increase in perceptions of conflict. The test of H8 indicated that for partner's responses the more the collaborating mode of conflict resolution is used, the less the perceptions of conflict are likely to be.; The major conclusion of the study, subject to future research, is that codification of accounting standards in such a way that interpretation is not difficult is likely to reduce perceptions of conflict. GAAP and GAAS which emphasize standardized procedures instead of the auditor's use of discretionary judgement would be more likely to improve communications as well as the ability to achieve professional relationships. This study therefore recommends that work be undertaken in the area of defining the factors which create interpretation difficulty when using GAAP and GAAS, and further exploring how these factors affect the nature of professional relationships.