This paper develops a theory of the negotiating positions, or preferences over auditing standards, of the interest groups that may set or negotiate such standards. We represent auditing standards by two properties: toughness and vagueness (or lack of precision). Our model predicts that auditors and investors would consider both toughness and vagueness in influencing or setting auditing standards (e.g., preference over vagueness depends on the level of toughness.) Since the market is composed of auditors with different wealth levels and investors with various investment projects, the optimal standards vary across these parties. We show that as a result, auditing standards with a degree of vagueness are preferred. By analyzing economic incentives in the process of setting auditing standards, we help explain how the standards have developed into their current form.