Contracting between tax entities and tax professionals occurs millions of times every year, yet little is known about the nature of these economic interactions. This study examines the effect of commonly occurring contextual factors on tax professionals’ billing decisions for tax research. These contextual factors are unrelated to the tax research itself and the time it takes to conduct the tax research, but we find that billing decisions are strongly influenced by the three non‐time‐related contextual factors that we manipulate. Initial client volume impacts amounts billed for tax research, with lower initial client volume resulting in higher per client fees. Further, we find that initial billing decisions serve as value billing benchmarks for unanticipated subsequent clients who benefit from research conducted for initial clients. As a result, subsequent clients are billed higher fees when they follow a smaller number of initial clients. We also find that client referrals are billed higher fees than nonclient referrals because professionals attempt to avoid making initial clients feel as though they have been treated unfairly relative to subsequent clients who would otherwise be billed lower fees. The results of this study are relevant beyond the traditional confines of accounting research—they are relevant to the millions of tax entities that contract with tax professionals each year.

Despite the importance placed on professional skepticism by the accounting profession and regulators, the failure of auditors to exercise an appropriate level of skepticism continues to be a global issue. We experimentally test a potential barrier to skepticism. We find that outcome knowledge biases supervisors' evaluations of skeptical behavior. Holding a staff member's skeptical judgments and acts constant, superiors on the engagement team evaluate the staff's skeptical behavior based on whether the staff's investigation of an issue ultimately identifies a misstatement. Our evidence suggests that evaluators penalize auditors who employ an appropriate level of skepticism, but do not identify a misstatement. Although consultation with their superiors while exercising skepticism improved staff auditors' performance evaluations, consultation did not effectively mitigate the outcome effect on their evaluations. Last, we observe that auditors in the field anticipate that their superiors will be influenced by outcome knowledge when they evaluate their skeptical behavior. Collectively, our results depict an evaluation system that may inadvertently discourage skepticism among auditors in the field. Data Availability: Contact the authors.