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

Larch & Partners tenders for the audit of Orion plc and offers a fee well below that of the previous auditor, to win the work. The partner says the audit will be completed with fewer hours than the prior year. Which statement is most accurate under the IESBA Code?

A low fee is allowed, but it creates a self-interest threat to professional competence and due care. The firm must be satisfied that it can still perform the audit in accordance with applicable technical and professional standards with appropriate resources. The Code sets no minimum fee.

  1. AA low fee is never permitted, because the Code sets minimum audit fee levels
  2. BA low fee is acceptable provided the firm can still perform the audit in accordance with technical and professional standards, and the quoted fee is not the only considerationCorrect
  3. CA low fee is acceptable as long as it is disclosed to the outgoing auditor
  4. DA low fee is acceptable because fee levels are purely a commercial matter and have no ethical implications

Explanation

The Code does not prohibit a low fee, but it creates a self-interest threat to professional competence and due care if the fee is so low that quality may suffer. The firm must ensure it can apply appropriate resources and meet applicable standards. There are no mandated minimum fees, and it is not a matter of disclosure to the outgoing auditor.

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