Nasty behavior by individuals at client companies toward auditors is widespread and can negatively affect audit quality and auditor judgment, according to a recent academic study.
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"We found that auditors don't experience incivility from time-to-time — they experience it a lot,"
Over three-fourths (77%) of the auditors surveyed said clients had rudely told them how to do their jobs or questioned their procedures, while more than 60% had their skills or abilities questioned and over 50% had been ignored or faced hostility when approaching a client. One-third of the auditors reported being bullied at some point in their career.
Client rudeness can cause auditors to back off and allow clients to get away with aggressive accounting choices. The experiment involved a client recording a seemingly low inventory write-down amount supported by weak assumptions. The researchers measured the auditors' willingness to challenge the aggressive reporting by asking what write-down amount they would propose. A higher amount would indicate a greater challenge to aggressive reporting. They found that auditors' write-down amounts were lower when they experienced client incivility, as opposed to when they didn't.
They also looked at the coping mechanisms used by auditors who experienced rude behavior from clients and found that active coping mechanisms such as looping in a senior colleague to intervene in the situation helped reduce the auditor's emotional distress and helped them push back against an aggressive accounting choice by the client.
Accounting Today asked Mokhtar whether there could be the opposite effect from client incivility, with auditors getting tougher on client companies whose employees act rudely toward them.
"The opposite effect you're referring to is actually part of what motivated our research," she replied. "We wanted to understand whether auditors become more skeptical when they encounter client incivility or whether incivility undermines their judgment. Our findings suggest that, on average, auditors are less likely to challenge clients' aggressive accounting when they face incivility, rather than getting tougher on them. That said, the effect may depend on other circumstances. In our generic setting, auditors became less tough, but it's possible that certain environmental factors could lead to the opposite response. Our survey also showed that auditors sometimes report becoming tougher in those situations. We just haven't tested those contextual factors yet."
For audit firms that wish to maintain high audit quality, the researchers suggest it's critical to assess the risks associated with serving uncivil clients. "Client incivility pervades the audit profession, and there is no reason to believe that it will diminish," said the study. "Our research suggests firms could encourage auditors to use active coping, as it helps them challenge aggressive reporting."
Active coping can include talking to the perpetrator or to a superior who can intervene. Training can be helpful in this regard. "Audit firms may want to consider a broader set of remedies, such as training or more open dialogue on client incivility and coping, to ensure auditors are aware of different coping responses, how to engage in them, and which ones could benefit their judgments and mental well-being the most," said the study.
