The Client Acceptance and Retention Process: How Policies and Procedures Are Developed and Implemented Within Audit Firms

When developing client acceptance and retention policies and procedures, an audit firm's policy-makers are required to adhere to quality control and auditing standards established by the Public Company Accounting Oversight Board (PCAOB) and American Institute of Certified Public Accountants (AICPA) that are not well defined. As a result, the policies and procedures across firms may differ significantly. These differences arise from the development as well as the implementation of client acceptance and retention policies when evaluating prospective and continuing clients. My research study examines these differences in client acceptance and retention policies and procedures and also investigates the potential differences in policies and procedures across firms of different sizes (international, national, and regional). Using a qualitative setting, I interview risk management and local office partners across multiple firms to gather firm-specific and partner-specific information about client acceptance and retention policies and procedures. My results contribute to the existing literature on the processes and procedures developed by audit firms to assess and evaluate risks that may arise from prospective and/or continuing clients.