This study contributes to the debate on the motives for auditor changes by examining the relationship between client retention and one of the many factors that potentially influence client retention, engagement‐level pricing. We find for a sample of public and private audit engagements that the difference between realized realization rates (the ratio of the audit fee billed to the standard audit fee) and expected realization rates is positively associated with client retention over a five‐year window. Our findings suggest pricing pressure is more than an isolated occurrence and the incumbent auditor's inability to recover unexpectedly high labor usage is associated with the severing of the auditor‐auditee relationship.
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Research Article| May 01 2005
Client Retention and Engagement‐Level Pricing
Karl E. Hackenbrack, Associate Professor;
Online ISSN: 1558-7991
Print ISSN: 0278-0380
American Accounting Association
AUDITING: A Journal of Practice & Theory (2005) 24 (1): 7–20.
Karl E. Hackenbrack, Chris E. Hogan; Client Retention and Engagement‐Level Pricing. AUDITING: A Journal of Practice & Theory 1 May 2005; 24 (1): 7–20. https://doi.org/10.2308/aud.2005.24.1.7
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