Client Engagement Risks and the Auditor Search Period
American University of Beirut - New York Office
Jeffrey R. Cohen
Boston College - Department of Accounting
Kenneth B. Schwartz
May 31, 2011
Accounting Horizons, Forthcoming
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.
Number of Pages in PDF File: 27
Keywords: Client acceptance, auditor search period, audit risk
JEL Classification: M41
Date posted: May 31, 2011 ; Last revised: July 25, 2011
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