Skip to content

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

Alder & Finch is invited to tender for the audit of Brightwater Ltd. The tender response says the fee will be $90,000 if the audit opinion is unmodified, but only $60,000 if the opinion is modified. How should this be assessed?

This is unacceptable because the fee depends on the audit opinion, making it a contingent fee. The IESBA Code does not permit contingent fees for audit engagements, as the self-interest threat to objectivity is so significant that no safeguards can reduce it, regardless of the client's status.

  1. AAcceptable, because it rewards efficient audits
  2. BAcceptable if the difference is disclosed to the audit committee
  3. CUnacceptable, because a fee dependent on the outcome of the audit is a contingent fee that creates a self-interest threat too significant for any safeguardCorrect
  4. DUnacceptable only if the audit is for a listed entity

Explanation

Under the Code, a fee for an audit engagement that is contingent on the result of the work, such as the opinion issued, is not permitted. The threat is so significant that no safeguards can reduce it. Disclosure to the audit committee or non-listed status does not change this.

Did you get it right without looking?

One question tells you little. A timed set on Advertising, tendering, and obtaining professional work and fees shows your real accuracy, how long you take and where you lose marks.

Practise Advertising, tendering, and obtaining professional work and feesFree diagnostic mock

More Advertising, tendering, and obtaining professional work and fees questions