Unformatted text preview: cts are informed that the ﬁxed payment is independent of the decisions they make during this phase. At the end of the ﬁfth round, each
auditor observes the corresponding manager’s fraud choices made during this phase. Thus,
managers can form reputations for cooperation by selecting the cooperate option (hence
the ‘‘puffery-action’’ designation). In addition, during Phase 1, managers can use pufferytalk (discussed below). The purpose of the puffery-action phase is to enhance trust between
managers and auditors. Managers’ instructions encouraged them to form reputations for
honesty during the puffery-action phase by informing them of the strategic possibilities
associated with having the auditors view their willingness to cooperate during this phase.
To further facilitate this trust, the puffery-action phase is referred to as the ‘‘Get Acquainted’’ session for the subjects. This treatment surrogates for interactions between clients
and auditors that do not necessarily reﬂect the client’s true trustworthiness. Importantly,
auditors understand that managers’ puffery is not binding; that is, a manager may promise
to cooperate but actually s...
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