Explaining of Modeling the Auditor- Client Negotiations Paradigm Concerning Financial Reporting

One of the main steps in formatting financial reports is negotiation process between auditors and their clients in order to remove conflicts. This negotiation substantially affects final reports quality and may have consequences for parties involving this process and their firms and the whole society. This research is aimed to model the process by data-based theory and in-depth interviewing with experts from both parties i. e. audit partners and firms managers. Moreover, this study considers various levels of audit suppliers (audit firm and audit team) in this modeling. This study includes 30 interviews using snowball sampling. Findings show that main reasons for creating the conflicts between auditors and clients are 1. Instrumental reasons (standards and rules) 2. Knowledge reasons 3. Information reasons (information asymmetry) 4. Business reasons. Negotiation requires partie's knowledge quality, negotiation skills and purpose. Based on partie's opinion, implementing a constant paradigm and win-win negotiation requires an independent and logical discussion, assuring, and appropriate corporate governance. In this process, main challenges are insufficient industrial expertise of auditors, client's inappropriate interpretation of auditing and insufficient corporate governance mechanisms. Finally, study model is approved by 2 persons of initial sample and 2 experts.