Client Engagement Risks and the Auditor Search Period

ABSTRACT

This paper investigates whether client engagement risks lengthen the client acceptance phase for audit firms and result in a longer auditor search period for their clients. Using a sample of auditor resignations over the period 2003–2008, we document that the auditor search period is longer for firms associated with client business risk (financial distress) and audit risk (internal control weaknesses or management integrity issues), while it is shorter for firms representing reduced auditor business risk (auditor industry specialization). These findings highlight the importance of client risk assessment and explain audit firms' response to perceived client risks.

Keywords:  client acceptance, auditor search period, audit risk

Samer Khalil is an Assistant Professor at the American University of Beirut, and Jeffrey R. Cohen is a Professor and Kenneth B. Schwartz is an Associate Professor, both at Boston College

Source : Samer K. Khalil, Jeffrey R. Cohen, Kenneth B. Schwartz (2011) Client Engagement Risks and the Auditor Search Period. Accounting Horizons: December 2011, Vol. 25, No. 4, pp. 685-702.