Effective screening of prospective clients

A thorough knowledge of a prospective client's type of business is critical when evaluating whether or not to accept the company as a client. When evaluating the capital structure of a potential client, accounting firms typically review the company's leverage. In reviewing related party re...

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Bibliographic Details
Published in:The National public accountant (1957) 1994-06, Vol.39 (6), p.37
Main Authors: Lloyd, B Michl, Cocco, Anthony, Ivancevich, Daniel, Ivancevich, Susan Hermanson
Format: Article
Language:English
Subjects:
Accounting firms
Accounting procedures
Auditing standards
Capital structure
Client relationships
Economic conditions
Environmental impact
FASB statements
Going concerns
Guidelines
Litigation
Modernization
Regulated industries
Related party transactions
Revenue recognition
Selection
Trends
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Summary:A thorough knowledge of a prospective client's type of business is critical when evaluating whether or not to accept the company as a client. When evaluating the capital structure of a potential client, accounting firms typically review the company's leverage. In reviewing related party relationships, the accounting firm should seek to assess whether any related parties have undue influence over the prospective client, as well as whether any questionable transactions have been entered into with related parties. Detailed knowledge of the potential client's regulatory environment is also important in assessing potential risk during a client acceptance evaluation. Before accepting a client, the firm should review the accounting practices used by that client to determine whether or not practices are consistent with practices used by other companies in the industry. As part of client acceptance procedures, accounting firms may decide to perform a time series analysis of several years of data to evaluate changes in account balances and trends in operating activities.
ISSN:0027-9978