Audit Client Satisfaction and Engagement Profitability

This study examines client satisfaction and engagement profitability for a Big 4 audit firm. I obtain proprietary client data from the firm’s national office, including satisfaction survey responses and profitability (realization) rates. I examine the roles of service quality dimensions that are distinguished by the audit firm and its clients. In my models of satisfaction ratings and realization rates, I control for abnormal discretionary accruals, as well as client and engagement characteristics, such as client size, financial performance, industry, and billed hours. I find that audit clients’ satisfaction is determined primarily by their perceptions of the audit firm’s service customization and responsiveness. Engagement profitability is positively associated clients’ with perceptions of communications effectiveness. The assignment of expert audit personnel contributes to engagement profitability, but not to client satisfaction.