Skip to content

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

Danbury & Co is tendering for the audit of Kestrel Ltd, a new client. The tender team intends to quote a fee of $40,000, which is well below the expected cost of performing the audit, to win the work and then recover the shortfall through non-audit services. What is the main ethical concern under the IESBA Code?

The key concern is a self-interest threat to professional competence and due care. A fee well below cost may pressure the firm to cut work. The firm may quote a low fee, but must be able to perform the audit to applicable standards and apply safeguards, such as adequate resourcing.

  1. AFee quoting is prohibited for any new audit client
  2. BA low fee may create a self-interest threat to compliance with professional competence and due care, because the firm must still perform the audit to professional standardsCorrect
  3. CThe Code requires fees to be set at a fixed percentage of client revenue
  4. DLow fees are only a concern if the client is a listed entity

Explanation

The Code allows a firm to quote any fee it considers appropriate, but a significantly low fee creates a self-interest threat to professional competence and due care. The firm must ensure it can apply the applicable standards and have the time and resources. Fee quotation is not prohibited, and there is no fixed percentage rule.

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