Client Continuance Evaluation Tool

This tool can assist with client relationship continuance decisions based on several criteria. It is critically important that you answer honestly for each criteria. This
tool can be tailored to the firm's specifications.

Step 1: Evaluate your client based on risk and profitability. Keep in mind that sometimes unprofitable engagements can be a
higher risk because people are not spending enough time to ensure a thorough audit due to budget constraints.
Job
Risk/Comple Referral Source/Client Additional Potential Timeliness of
Client Name xity Profitability Tie in Life Cycle Services Payment Satisfaction Score Comments

0
5=Excellent referrer/Tied to 5=Great to work with and A Client=30-
5=No Risk 5=100% or more 5=Emerging Growth 5=Could be doing a lot more 5=30 days or fewer
an "A" client our team enjoys them 35
4=Below 4=Occasional referrer/Tied to B Client=25-
4=90-99% 4=Mature Profitability 4=A few additional opportunities 4=31-60 days 4=Good environment
Average Risk another client 30
C Client=20-
3=Average Risk 3=80-90% 3=Possible referrer, if asked 3=Transitional Uncertainty 3=Full now but future potential 3=61-90 days 3=OK job, we get through it
25
2=Above D Client=19
2=75-80% 2=Tied to another client 2=Startup/ Entrepreneurial 2=Reached full potential 2=90-120 days 2=Can be stressful at times
Average Risk or less
1=Client hates us and treats
1=High Risk 1=75% or less 1=No referral/No tie 1=State of Decline 1=Doesn't value what we do now 1=over 120 days
our people poorly

Step 2: Determine if this client a good fit for the firm. Rate each characteristic. Also think about additional factors that are
relevant to the evaluation and add each characteristic accordingly.
Client If rating is 3 or less, provide your recommended solution to
Characteristic Rating Rating move the characteristic up to a rating of 4 or 5.

The client cares about our integrity 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4

The client insists the work be done correctly (vs.

asking that shortcuts be taken) 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4

The client is available and willing to answer

questions 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4

The client has identified a main point of contact 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4

The client provides clear answers in a timely

fashion and provides any documentation
requested 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4

We have a good relationship with the client and

employees. 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4
There are no concerns as it relates to
management's integrity (reputation of owners,
mgmt, governance, etc.) 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4

After re-visiting our understanding of the client's

annual operations and reviewing relevant reports
(tax returns, regulator reports, etc), there are no
significant changes or additional evidence that
would regard the engagement as high-risk or
warrant us to not want to associate with the client 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4

There isn't anything that causes us to be

uncomfortable about the engagement 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4

In working with this client, there isn't anything that

would prevent us from complying with legal and
ethical requirements 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4
Step 2: Determine if this client a good fit for the firm. Rate each characteristic. Also think about additional factors that are
relevant to the evaluation and add each characteristic accordingly.
Client If rating is 3 or less, provide your recommended solution to
Characteristic Rating Rating move the characteristic up to a rating of 4 or 5.

Firm personnel have experience and have

performed at least # similar engagements in this
relevant industry or subject matter area 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4

Firm personnel have adequate and recent CPE

(within last 12 months) in the same relevant
industry or subject matter area 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4
Firm personnel have the competence and
knowledge to service the client and comply with
specialized industry guidelines, regulations, etc.
5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4

The firm is independent as required by the AICPA,

state CPA societies, state boards of accountancy,
DOL/ERISA, and other regulatory bodies, as
applicable 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4

We currently have sufficient personnel, including

the use of specialists, that is needed for the
engagement in order to complete the engagement
within the reporting deadline 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4

The firm has go-to A&A resources to call upon for

answers, should the engagement pose a situation
of which we lack expertise (e.g. network of industry
mentors/specialists; AICPA Center for Plain
English Accounting or AICPA Audit Quality Center) 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4

The proposed fee is adequate for the

time/resources that is required to do a thorough
audit which will result in a quality profitable
engagement. 5=Strongly Agree 4=Agree 3=Somewhat Agree 2=Disagree 1=Strongly Disagree 4

Total 68

Step 3: Based on the above evaluations in Step 1 and Step 2, document your continuance decision. Firm policy is to only continue working with clients with an A or B
rating in Part 1 and at least a score of 68 in Part 2.

Step 4: If your analysis in Step 3 above is to discontinue working with the client on their audit engagement, document your consideration of working with the client in a
different capacity. For example, if you are not comfortable performing the audit, offer your consulting services as their liaison to the new auditor in assisting the client in
preparing for and during the audit.
Continuance of Client Relationship Evaluation Tool
Definitions:
Job Risk/Complexity — This criteria deals with client risk and the potential liability some clients may bring to the firm. Whether it is an audit client in a high risk industry, management attitude or lack of controls, or a tax
client that constantly pushes the limit on deductions and income reporting, we know there are some clients that pose a higher risk to the firm than others.

Profitability — Is the firm making money on this client? Grade accordingly and adjust as necessary.

Referral Source/Client Tie In — This criteria becomes important to the overall profitability to the firm. Grade your clients according to their proven past, potential future and referral habits. The majority of your clients
were likely referred by another client and it is important to quantify that criteria in this process. Remember that just because you do work for a client that was referred by an “A” client, does not mean they are a good fit
client for your practice.

Life Cycle — It’s important to analyze a client’s life cycle to understand their maturity and longevity in your firm. Is the client beginning a new start-up business? Are they growing, increasing sales and competing in
their industry? Are they in a mature stage with sales at a steady state? Or is the client in a state of decline? Instead of declining, clients could be in a state of transitional uncertainty but the option of improving their
products and brand and hopefully renewing their business.

Management Integrity & Commitment to Quality

Timeliness of Payment — This is fairly self-explanatory and very quantifiable.

Be honest when grading this criteria.

Satisfaction — This criteria is not how satisfied the client is with us, rather, this deals with our satisfaction and enjoyment in working with the client. More importantly, if you and other team members derive enjoyment
and satisfaction
in working with the client and from the work itself.