Mina Ličen


auditing, personal relationship, financial incentives, unconscious needs, game theory


The aim of our study is to shed light on auditors’ cognitive drivers of bias inherent in long-term personal relationships with clients. We examine whether a long-term personal relationship invokes a conscious misjudgement because of a mutual long-term financial interest, or an unconscious bias invoked by affective motives and unconscious needs. The paper combines two theories, the first being the incentive based motivated reasoning (Kunda, 1990) and the second the need based motivation theory (McClelland, 1987). We analyse the problem with a two-player perfect-information sequential game within the framework of game theory, involving an accounting choice task. We find that the positive effect of a personal relationship on biased decision-making is mediated by a long-term financial interest rather than by an affective motive such as friendship. Unconscious needs are also found to influence subjects’ decisions. In other words, the need for achievement and the need for power reinforce auditor independent opinion and help them resist the pressure from clients, whereas the need for affiliation is accentuated in a personal relationship and positively affects auditor bias. The study provides an original empirical investigation of the drivers of behaviour in the auditing setting, while its results indicate that both conscious financial incentives and unconscious needs influence subjects’ decisions simultaneously.