Famous Presidents Savings: Client Acceptance and Retention

The decisions to accept and retain clients are critical in the practice of public accounting. Firms must have clients to be profitable. Yet the revenue obtained from some engagements may not fairly compensate the firm for the additional risk assumed. Client acceptance and retention are therefore subjective decisions requiring good judgment on the part of the auditor. Thus, many of the questions posed in this case do not have one clear answer and require professional judgment. By completing the requirements of this case, students will make a judgment regarding client acceptance under conditions of uncertainty, defend their decision to their peers, and document their reasoning in a professional memo. This case has been developed from an actual client engagement and contains factual circumstances and difficulties faced by the auditor. The names have been changed to obscure the identities of the actual individuals and entities involved.