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

Harlow & Co, an audit firm, is tendering for the audit of Brindle Ltd, a new client. To win the work, the partner proposes a fee well below the level needed to perform an audit in line with ISAs, while stating that the shortfall will be recovered through other services. Under the IESBA Code, which threat is most directly created by the low fee?

A significantly low fee creates a self-interest threat to professional competence and due care, since the firm may cut work or resources to stay profitable. Advocacy, familiarity and intimidation threats arise from other circumstances, not from the pricing level itself.

  1. ASelf-interest threat to compliance with professional competence and due careCorrect
  2. BAdvocacy threat to objectivity
  3. CFamiliarity threat to independence
  4. DIntimidation threat to confidentiality

Explanation

The IESBA Code recognises that a significantly low fee may create a self-interest threat to professional competence and due care, because adequate resources and time may not be applied. Advocacy relates to promoting a client's position, familiarity to long association, and intimidation to pressure from the client; none arises directly from a low quote.

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