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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional appointments

Brightwell & Co is tendering for the audit of Kora Foods plc. The tender partner proposes to quote a fee of 40% of the previous auditor's fee to win the work, noting that the firm expects to sell consulting services to Kora later. Which statement best reflects the IESBA Code?

A low fee is not prohibited in itself, but it creates a self-interest threat to professional competence and due care. The firm must be satisfied it can still perform the audit to professional standards, with adequate time and skilled staff, and apply safeguards where needed.

  1. ALow fees are never permitted because the Code sets a minimum audit fee
  2. BA low fee is acceptable provided the firm discloses it in the audit report
  3. CQuoting a low fee is not prohibited in itself, but the firm must ensure it can perform the audit in accordance with professional standards and that the fee does not create a self-interest threat to qualityCorrect
  4. DA low fee is acceptable because cross-selling revenue removes any threat to objectivity

Explanation

The Code does not set minimum fees and permits the firm to quote what it likes, but a significantly low fee creates a self-interest threat to compliance with professional standards. The firm must be able to allocate adequate time and skilled staff and apply safeguards. Cross-selling expectations increase, not remove, the threat.

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