Client acceptance and continuation decisions;

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Client Acceptance and Continuation Decisions*
Stephen Asare Karl Hackenbrack W. Robert Knechel
University of Florida
Abstract
This paper presents the results of a study designed to understand how auditors make client acceptance and continuation decisions. Descriptive evidence was gleaned from the professional literature, audit firm materials, and interviews with seven audit partners. Based on the evidence we present a framework that delineates the key activi­ties
in this area. Avenues for additional research are presented.
Introduction
Why do auditors accept some companies as audit clients but not others? What types of information do auditors use when making client acceptance decisions? Once a professional relationship has been established, under what circumstances will an auditor terminate the relationship? These and related client acceptance and continua­tion
issues have received limited attention in both the academic and professional literature. The decision to accept an audit client or continue a professional relationship with an existing client is important because an incorrect decision may directly affect the financial viability of an accounting practice.
We interviewed seven practicing audit partners who are responsible for making client acceptance and continuation decisions and reviewed audit firm manuals and professional standards. This paper presents preliminary findings on the task structure, the decision process and its participants, their incentives, and the types and sources of available information that shape such decisions. Our effort is exploratory—to sketch some of the more important issues that are of interest and concern to practitioners and academics alike. Sometimes it will appear that we have raised more questions than we have answered. This is deliberate and follows from our goal of identifying key issues and stimulating further research.
The next section delineates the motivation and presents background information. It is followed by a section that describes the interview method. Then the descriptive information on how auditors make client acceptance and continuation decisions is presented in a framework that emerged as we analyzed the interview results. The final section enumerates some research opportunities.
Motivation and Background Information
Our primary motivation is to understand the client acceptance decision process—in its naturalistic setting—from the perspective of practitioners. The paucity of research
* The authors were supported by a summer research grant from the Fisher School of Accounting.
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