Question

Question: Tana Thorne works in a public accounting firm and hopes to eventually be a partner. The management of Allnet Company invites Thorne to prepare a bid to audit Allnet’s financial statements. In discussing the audit fee, Allnet’s management suggests a fee range in which the amount depends on the reported profit of Allnet. The higher its profit, the higher will be the audit fee paid to Thorne’s firm.

Required 3. Would you recommend that Thorne accept this audit fee arrangement? Why or why not?

Short answer

Answer

This engagement should not be accepted.

Step-by-step solution

Recommendation

The auditor should not accept the audit engagement in this case.

Explanation for not choosing the audit engagement

While making the decision regarding the engagement acceptance and the continuance, the fees or the expected profits may impose a threat towards the compliance of ethical behaviour.