What factors might have caused the auditor to inappropriately accept the assertions by management that the vendor allowances should be reflected in the financial statements?

Auditors may be inclined to accept client representations because of a natural bias to want to trust the client.
Before doing the auditing process, auditor usually receive a small briefing from the management team on the financial system that they use in recording their transactions. If these allowances had been used in the past the auditor may have been inclined to accept them as regular business practices

An industry is a particular form or branch of economic or commercial activity.