ABSTRACT Prior research examining value‐added auditing in auditor–client relationships is primarily based on the auditor's perspective. We extend this line of research by examining how governance patterns and clients' perceived risk of material misstatement and cognitive conflict are associated with the provision of value‐added audit services. Using the partial least squares (PLS) technique to analyse survey data collected from 249 senior managers in listed firms in Australia, we found that clients' perceived risk of material misstatement is positively related to the service provision, both directly and indirectly, through cognitive conflict. Of the two governance patterns, only contractual use is directly related to the service provision. Moreover, cognitive conflict between clients and auditors is found to mediate the relationship between relational governance and service provision. Overall, our study highlights the distinct roles of relational and contractual governance, perceived risk of material misstatement and cognitive conflict in interdependent relationships between auditors and clients, contributing to the provision of value‐added audit services.
Appuhami et al. (Thu,) studied this question.