Advanced Audit and Assurance (International) · Advertising, tendering, and obtaining professional work and fees

Tendering and Obtaining Professional Work for ACCA AAA

Updated 11 October 2026 · Fact-checked

Tendering is how an audit firm competes for work. You must act ethically: assess whether you can accept the client, contact the existing auditor with the client's permission, price fairly, and make only honest, verifiable claims. Exam answers apply the IESBA Code threats, ISQM 1 acceptance rules and ISA 210 terms to the scenario.

Understand Tendering and Obtaining Professional Work

A firm wins work by tendering, by referral or by direct approach. In every case the firm must stay within the fundamental principles: integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Winning work is a commercial aim. It must never override ethics or audit quality.

Before you submit a tender you must decide whether to accept the client at all. This is a risk and ethics decision. You look at the client's integrity and reputation, the business risk, your firm's competence, capacity and time, and any independence or conflict issues. ISQM 1 requires firms to accept or continue relationships only when they can meet ethical requirements and have the resources to do the work properly.

You must also deal properly with the existing auditor. The prospective auditor must ask the client for permission to contact the outgoing auditor. If the client refuses, you should be very cautious and normally decline, because refusal is a warning sign. With permission, you ask the outgoing auditor whether there are professional reasons you should not accept. The outgoing auditor needs the client's consent to disclose anything. The outgoing auditor should reply promptly and, if consent is given, be honest about relevant facts.

Pricing and marketing carry ethical risks. Low-balling means quoting a fee so low that quality may suffer. It is not banned, but it creates a self-interest threat. You must show that the work can still be done to proper standards with enough time and staff. Marketing must be honest and not bring the profession into disrepute. Do not make misleading claims, disparage other firms, or promise outcomes such as a clean opinion. Fee-based or contingent arrangements for audit work are not acceptable.

After winning the work, you issue an engagement letter under ISA 210. It sets out scope, responsibilities, reporting and the fee basis. A strong exam answer follows this chain: threats, safeguards, then a clear decision.

Key rules to remember

Fundamental principles: Integrity, Objectivity, Professional competence and due care, Confidentiality, Professional behaviour; Name the principle at risk in each issue you spot.
Threat categories: Self-interest, Self-review, Advocacy, Familiarity, Intimidation; Low fees and the wish to win work are usually self-interest threats.
Acceptance test: Accept only if ethical requirements can be met and the firm has the competence, time and resources; This follows the ISQM 1 approach to acceptance of client relationships.
Clearance sequence: Client permission → contact outgoing auditor → outgoing auditor replies (with client consent to disclose) → assess → decide; No permission from the client means treat it as a red flag and normally decline.
Low-balling safeguards: Disclose fee basis to the client + assign enough time and competent staff + apply quality review; Show that quality is not reduced by a low fee.
Engagement letter: Agree terms (ISA 210) before starting the audit; Includes objective and scope, responsibilities, framework, expected report form and fee basis.

How to solve Tendering and Obtaining Professional Work questions

Use this method for any question on tendering, acceptance or obtaining work. Tie each point to the scenario facts.

1Read the requirement and the scenario. Note the client, the firm's size and any pressure to win the work.
2List the ethical and acceptance issues you can see: integrity of the client, competence, capacity, independence, conflicts, low fee, misleading claims.
3For each issue, name the fundamental principle and the type of threat.
4Explain why it matters in this scenario. Use figures and facts, such as a fee far below the previous one or a client refusing contact.
5Propose safeguards or actions: clearance with the outgoing auditor, customer due diligence, extra staffing, second partner review, or documenting the fee basis.
6Say what should happen if safeguards are not enough: decline the tender or withdraw.
7State a clear recommendation and what should happen next, in the format asked, for example a memo or briefing.
8Check that you have shown professional scepticism and commercial awareness, since these earn professional skills marks.

Quickest way: Issue, threat, safeguard, decision

When to use it: Use when time is short, for example in a 10-12 mark part of a Section B question.

Write a short list of issues from the scenario, one line each.
Beside each, write the threat or principle.
Add one specific safeguard per issue.
End with a decision: accept, accept with conditions, or decline.
Use short headed paragraphs so the marker can award marks quickly.

Common mistakes in Tendering and Obtaining Professional Work

Saying low-balling is prohibited.
Students remember that it is a threat and assume it is banned.
Fix: Say it is permitted but creates a self-interest threat. Then show safeguards that protect quality.
Contacting the outgoing auditor without saying client permission is needed.
Students focus on professional courtesy and forget confidentiality.
Fix: State that you must first ask the client for permission. Treat a refusal as a warning sign.
Listing generic ethical principles without using the scenario.
Students learn the framework by heart and reproduce it.
Fix: Attach each point to a scenario fact and explain the effect on the firm.
Ignoring client integrity and the firm's own capacity.
Students think only about independence.
Fix: Always consider client reputation, risk, competence, staff availability and timing, as ISQM 1 requires.
Accepting misleading marketing claims, such as promising a lower fee for an unqualified opinion.
Students treat tendering as a purely commercial matter.
Fix: Say the firm may only make honest, verifiable claims and must never promise an audit outcome.
Ending without a decision.
Students run out of time after listing threats.
Fix: Finish every answer with a clear recommendation and conditions.

Worked examples

Example 1

Baxter & Co is invited to tender for the audit of Halden Foods, a listed company. Halden's finance director says the firm should not contact the current auditor because the relationship has ended badly. Baxter plans to quote a fee well below the current fee to win the work. Discuss the ethical and acceptance issues (10 marks).

Show the solution

Clearance: the firm must ask Halden for permission to contact the outgoing auditor. The finance director's reluctance is a warning sign about integrity or a possible dispute. Baxter cannot ignore it.
Action: Baxter should explain that it cannot proceed without permission. If permission is still refused, it should normally decline the tender.
If permission is given, Baxter should ask the outgoing auditor whether there are professional reasons not to accept, such as unpaid fees, disagreements or suspected irregularities.
Low fee: a fee well below the current level creates a self-interest threat, because the firm may cut work to protect margins. This is a threat to professional competence and due care.
Safeguards: confirm that audit hours and staff grades are enough for a listed client. Document the basis of the fee. Make sure the client understands the scope. Apply a second partner review and an engagement quality review, as a listed entity audit requires.
Other acceptance matters: check independence and conflicts, and assess Halden's integrity, risk and the firm's sector experience.
Conclusion: do not accept unless the client allows clearance and the firm shows the fee supports a quality audit.

Answer: Baxter should insist on client permission to contact the outgoing auditor and treat refusal as a reason to decline. It may use a lower fee only if it still resources the audit properly and documents this. Acceptance depends on satisfactory clearance, independence and integrity checks.

Example 2

Your firm wants to include in its tender document the statements: 'We are the leading firm in the region' and 'We guarantee an unmodified audit opinion if you appoint us.' It also wants to say that a rival firm has been criticised by its regulator. Evaluate these proposals (6 marks).

Show the solution

'Leading firm': this is a claim that cannot be verified unless the firm has evidence. Marketing must be honest and not mislead. The firm should use factual statements such as number of clients or sector experience that it can prove.
Guarantee of an unmodified opinion: this is unacceptable. The opinion depends on the evidence obtained and the financial statements, not on the appointment. Offering it threatens integrity and objectivity and would suggest the firm can be influenced.
Comments on the rival: criticising another firm is not acceptable. It is unprofessional behaviour and could bring the profession into disrepute. Even if true, it is not relevant to the client's decision about the tender.
Recommendation: remove all three statements. Replace them with accurate information about experience, approach, team, technology and quality processes. Have a partner review the document before issue.

Answer: Remove all three. The 'leading firm' claim is unverifiable, the guarantee of an opinion compromises integrity and objectivity, and criticising a rival breaches professional behaviour. The tender should contain only honest, evidence-based statements.

Exam tips

Tendering questions usually come with pressure facts, such as a big client, a very low fee or a refusal to allow contact. Find the pressure and build your answer around it.
Always show the client-permission step before contacting the outgoing auditor, and say that refusal is a red flag.
Use the format asked, such as a briefing note or email to the partner. Professional skills marks reward clear structure, judgement and tone.
Do not stop at threats. Give safeguards, then a final decision to accept, accept with conditions or decline.
Link acceptance to ISQM 1 and the terms to ISA 210, but only name a standard when it clearly fits the point.

Practice questions from Advertising, tendering, and obtaining professional work and fees

Tendering and Obtaining Professional Work: frequently asked questions

Can an audit firm quote a very low fee to win an audit?

Yes, but it creates a self-interest threat. The firm must show it can still carry out the audit to the required standard, with enough time and competent staff. It should also document how the fee was set and consider extra review.

Why must the client give permission before you contact the outgoing auditor?

The outgoing auditor owes a duty of confidentiality to the client. Without the client's consent, the outgoing auditor generally cannot disclose information. If the client refuses, you should treat it as a warning sign and normally decline.

What should an audit tender document include?

It should describe the firm, its relevant experience, the proposed team, the audit approach, how quality is managed and the fee basis. All claims must be honest and verifiable. It must not promise outcomes or criticise other firms.

What is the difference between client acceptance and the engagement letter?

Client acceptance is the firm's decision on whether it can and should take on the client, based on ethics, risk and resources. The engagement letter, under ISA 210, comes afterwards and records the agreed terms of the audit.