The Effects of a Client’s Social Media Disclosure and Audience Engagement on Auditor Judgment

By Owen Brown – Baylor University and co-authors Sanaz Aghazadeh, Laura Latiolais, and Thomas Phillips – Louisiana State University

In today’s digital landscape, companies and executives increasingly use social media platforms such as X (formerly, Twitter) to share company news instantly. While corporate social media disclosure can enhance transparency and stakeholder engagement, it also introduces new dynamics into professional relationships, particularly between auditors and their clients.

In a recent study published in Accounting, Organizations and Society, Owen Brown, PhD, and his co-author team explore how auditors respond to client disclosures that occur via social media as opposed to more traditional, private means of communication (e.g., email). Drawing on Social Penetration Theory (SPT), which explains how relationships deepen or dissolve through communication, the research investigates how a client’s initial disclosure via social media (versus private disclosure) and the level of user engagement with the client’s posts (e.g., number of “likes,” “replies,” and “reposts”) affect auditors’ perception of the auditor-client relationship and their evaluation of the client-disclosed information. This research is among the first to apply SPT to the auditor-client relationship, offering a fresh lens on how digital communication affects audit quality.

Key Findings:

• In an experiment with current practicing auditors as participants, results show that auditors initially learn of information from the CEO via social media that receives high social media engagement, auditors perceive both lower relational closeness with the CEO and lower CEO credibility. This is despite the fact that, in the study, the CEO immediately followed up with the audit team after posting to social media.
• Auditors evaluate the client-provided information more critically when it is initially received via social media rather than directly from the client and are more likely to recommend audit adjustments.
• In contrast, private disclosures (e.g., direct emails) followed by public posts on social media appear to strengthen the auditor-client relationship.
• In a supplemental experiment examining CEO social media follower count, results show that a large social media following can amplify the perceived communication violation felt by auditors when initial disclosure occurs publicly via social media.

Implications for Practice:

• These findings provide audit firms and companies with insight into the benefits and consequences of companies providing voluntary disclosures via social media and of auditors following their clients on social media.
• Given that companies and CEOs are increasingly using social media to disclose information, findings from this study can be used to develop corporate social media communication policies that minimize perceived communication violations between companies and their various stakeholders.
• Audit firms may consider developing social media trainings and policies that not only encourage auditors to review their client's social media postings, but also train auditors on how to respond when they obtain new information through these public communication channels.

Future Research:

Based on the findings from this initial study, Brown and Baylor Accounting Professor Michael Mowchan, PhD, are currently studying how potential investors respond to corporate voluntary disclosure of Environmental, Social and Governance (ESG) information that occurs via social media. Initial findings suggest that the audience engagement of these posts may reveal a company’s lack of consistency between corporate “talk” and “action” and impact investor perceptions of corporate reputation and their likelihood of investing.