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

Dunmore LLP audits Corvin Co. The firm quoted a low initial fee but can show it reflects a genuine efficiency gain from a new data analytics tool, and the engagement team will have full hours and staff of appropriate competence. Which action best satisfies the IESBA Code on the low fee?

The firm should ensure and document that the fee is justified and that the audit will meet professional standards, with the client understanding the scope and basis of the fee. A low fee is not prohibited per se, and fees are not disclosed in the audit report.

  1. ADocument that the fee is appropriate and that the work will meet applicable technical and professional standards, with the client informed of the basisCorrect
  2. BIncrease the fee only after the audit starts, once hours are known
  3. CRefuse the engagement because any fee below the market average is prohibited
  4. DDisclose the fee to the client's shareholders in the audit report

Explanation

The Code permits a lower fee if the firm ensures that the work is performed in accordance with applicable technical and professional standards, and that the client understands the terms and basis of the fee. Low fees are not prohibited outright, and the audit report does not disclose fees.

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