Engagement Planning, Bid Pricing, and Client Response in the Market for Initial Attest Engagements

22 Pages Posted: 4 Oct 2006

See all articles by Karla M. Zehms

Karla M. Zehms

University of Wisconsin - Madison - Department of Accounting and Information Systems

Jean C. Bedard

Bentley University - Department of Accountancy

Abstract

This study examines how client risk factors and the provision of additional services affect engagement planning and bid pricing for a set of initial engagement proposals that a single firm submitted to its prospective clients in 1997-1998. The paper finds little effect of risk on planned personnel hours, but shows that the firm responds to fraud and error risk factors by applying engagement-planning strategies. The paper finds risk premia for both fraud and error risk factors. It also finds that for clients purchasing additional services, the firm plans more hours and uses industry experts more often.

Keywords: additional service, bid pricing, audit planning, risk evaluation, risk adaptation, SAS No. 82

Suggested Citation

Zehms, Karla M. and Bedard, Jean C., Engagement Planning, Bid Pricing, and Client Response in the Market for Initial Attest Engagements. Accounting Review, Vol. 76, No. 2, pp. 199-220, April 2001. Available at SSRN: https://ssrn.com/abstract=934187

Karla M. Zehms (Contact Author)

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States
608-234-1052 (Phone)
608-265-5031 (Fax)

Jean C. Bedard

Bentley University - Department of Accountancy ( email )

175 Forest Street
Waltham, MA 02452
United States
781-891-2410 (Phone)
781-891-2896 (Fax)

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