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 1. Identify the parties potentially affected by this audit and the fee plan proposed.

Short answer

The parties affected by this audit are Creditors, investors, banks, and shareholders.

Step-by-step solution

Definition of Accounting firm

An accounting firm is defined as a company that specializes in various accounting services which they provide to their clients.

Parties potentially affected by this audit

The parties which are affected by this audit are as follows:

Creditors: The creditors will not get the exact information about the companies’ credibility.

Investors: The potential investors of the company will not get the exact picture of the company’s financial health.

Bank: These financial organizations provide financial assistance to businesses on the basis of their financial statements

Shareholders: The shareholders will not get the desired amount invested by them in the shares of the company.