Potential differences between engagement and risk review partners and their effect on client acceptance judgments

Mixed messages regarding the need for firms to grow their audit client base, yet avoid overly risky opportunities, may result in a variety of different interpretations by partners involved in the client acceptance process. This field survey contributes to the scant literature regarding client acceptance judgments by examining differences between two partner groups in (1) the relative level of conservatism in their client acceptance judgments, (2) certain factors which are suspected to influence client acceptance judgments, and (3) the extent to which these same factors influence client acceptance judgments. Thus, we hope to provide preliminary answers to two questions: do risk review partners make more conservative client acceptance judgments than engagement partners, and if so, why do they make more conservative judgments? Results from 216 Big 6 audit partners suggest that risk review partners do indeed make more conservative client acceptance judgments than engagement partners. In explaining this judgmental difference, we note that risk review partners made more conservative assessments of client financial condition and had a higher level of general public accounting experience than their engagement partner peers. Both of these variables had strong effects on client acceptance judgments for both partner groups in a direction that suggests added conservatism for risk review partners. In addition, risk review partners' perceptions regarding the consequences of accepting overly risky clients were more severe than those of the engagement partner group, and this variable had a stronger effect on client acceptance judgments for the risk review partner group than for the engagement partner group. Assessments of management integrity were also found to significantly affect client acceptance judgments, but neither the assessments themselves nor the impact of the assessments on client acceptance judgments varied across the two partner groups.