ICAEW ARF · Chapter 10 · Question 10 of 12
Which of the following fee arrangements for a statutory audit would be unacceptable?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) A fee calculated as a percentage of the client's reported profit before tax
Explanation
A contingent fee, where the fee depends on the outcome of the work or a result such as reported profit, creates a self-interest threat so significant that it is not permitted for an audit. Time-based fees, fixed fees and fees reflecting the work required are all acceptable, provided the fee is sufficient to allow a proper audit.
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