How does audit firm emphasis on client relationship quality influence auditors' inferences about and responses to potential persuasion in client communications?

Many audit firms use client relationship management tools (e.g., client satisfaction surveys); however, overemphasizing relationship quality potentially makes auditors susceptible to client influence. Audit seniors, the main point of contact with clients, could be most vulnerable. In an experiment, we manipulate the presence of a potential client persuasion attempt in response to auditor inquiry (expressions of high confidence) and an audit firm's emphasis on relationship quality (desire to achieve high client satisfaction ratings for the current year's audit). We examine how these variables jointly influence the extent to which audit seniors infer persuasion from client explanations and, importantly, whether that inference is reflected in their actions. We find that auditors infer to an incrementally greater extent that client persuasion is present when they encounter high confidence when relationship quality is emphasized; however, they do not respond by collecting more relevant audit evidence under these conditions. Our findings suggest that auditors do not pursue audit evidence that could reduce their reliance on client-provided information and, thereby, limit client influence, even when they infer client persuasion to a greater extent. (C) 2020 Elsevier Ltd. All rights reserved.