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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Other current issues

Harlow & Partners audits Delmar Group. The IESBA Code on fees for PIE audit clients requires action when fees from the client are large relative to the firm's total fees. Which statement is correct?

Where fees from a public interest entity exceed 15% of the firm's total fees for two consecutive years, the IESBA Code requires disclosure to those charged with governance and an external professional review of the engagement. It does not require immediate resignation, and applies specifically to PIEs.

  1. AIf total fees from a PIE client represent more than 15% of the firm's total fees for two consecutive years, the firm must disclose this to those charged with governance and take action such as a pre-issuance or post-issuance review by an external professionalCorrect
  2. BIf fees exceed 15% in a single year, the firm must resign immediately
  3. CFee dependency is only a concern for non-PIE clients
  4. DFee dependency matters only if fees are overdue by more than a year

Explanation

For PIEs the Code uses a 15% threshold for two consecutive years: the firm discloses to those charged with governance and applies a review by an external professional accountant before or after the opinion, depending on the level. Immediate resignation is not required, and the rule specifically targets PIEs.

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