Client Acceptance and Continuance
Evaluating New and Existing Clients
Audit firms establish policies to evaluate both new clients and continuing engagements. Existing clients are reassessed annually because circumstances such as management changes, financial distress, or litigation may increase audit risk.
- Assess management's integrity.
- Review the client's financial stability.
- Evaluate prior audit findings.
- Consider legal disputes and regulatory issues.
- Determine whether independence remains intact.
Note
Client continuance decisions are just as important as initial client acceptance decisions.
Summary
Client acceptance and continuance procedures help ensure the auditor works only with clients that present acceptable levels of professional risk.