Concerned about her current customer base, manager Andersen started to think of factors that might affect the attractiveness of an auditing firm. Of course, the provided service quality and the fees charged by the auditor seem two important factors. Next, she decides that reputation of the auditing firm also needs to be included in the framework as an independent variable. As illustrated by the dramatic effects of recent auditing scandals, reputation seems especially important for large auditors (i.e., auditing firms that are large in size). Finally, manager Andersen thinks that also the proximity of the auditing firm to the customer is another variable to be included as an independent variable. Proximity very likely affects the possibility for the client to personally meet with the auditors on a regular basis and she knows from her own contact with customers that they perceive personal interactions as quite important.

a. Identify the problem

b. Develop a diagram representing the conceptual model

c. Develop the hypotheses.