Abstract The audit engagement decision is the result of two sets of decisions: the prospective client's and the proposing audit firm's. The selection of independent auditors by corporations has been extensively researched, but little attention has been given to the auditor's decision processes in accepting new clients. Moreover, existing audit risk models do not incorporate risk assessments made prior to the engagement. The objectives of this study were (1) to examine preengagement decision processes by independent auditors and (2) to begin to reveal the relationship of these processes to auditing firms' overall risk containment programs. Client acceptance/continuance policies and procedures within the Big-Six accounting firms were examined. Evidence gathered from reviews of the firms' written policies and from interviews with audit engagement partners revealed that significant risk assessments occur prior to acceptance of the client. Differences were found among the Big-Six auditing firms in the importance placed on this phase of firms' risk containment programs, and the differences in the preengagement risk assessments made by the firms were not just a reflection of the overall audit technologies employed by the firms. The implications for audit modelling, empirical research, and practice are explored, and several avenues for future research are suggested.
Huss et al. (Sun,) studied this question.