Audit Fees – NBC Institute

AAA – Nov 2014 – L3 – SC – Q6 – Environmental and Sustainability Audits

Evaluates the risks and considerations of tendering for the audit of Lagos Leisure Ltd, including fee estimation and tender document components.

Question

You are the senior audit manager for a medium-sized firm of accountants. Your firm has just lost two clients which have gone into receivership and has now been invited to tender for the audit of Lagos Leisure Ltd. The audit fees have been initially estimated at ₦200,000.

Lagos Leisure Ltd is a medium-sized manufacturing organisation which has existed for 35 years and has generally made consistent profits. However, in the last two years, profits have fallen by approximately 10% in each year, although the market sector in which Lagos Leisure Ltd operates is expanding. The company has also stated that they would like some consultancy support regarding business strategy in order to try and reverse the current profit downturn and have set aside ₦1m for this.

You have ascertained the following from a brief discussion with the Managing Director:

There has been no investment in non-current assets in the last 10 years. The company was intending to start a program of investment two years ago but this was cancelled due to reduced profits, and maintenance and repair costs have increased significantly over the last year.
Staff remuneration has been frozen, and there has been some discussion with unions as staff morale is very low and several staff have already left. So far, industrial action has been avoided.
The Financial Director was dismissed three months ago and hasn’t been replaced; he is currently suing Lagos Leisure Ltd for unfair dismissal.
The Managing Director is due to retire next year; a replacement has not yet been considered.
There is an outstanding litigation as an employee is suing Lagos Leisure Ltd due to an accident in the workplace, and the authorities have written a detailed report about the case.

Your firm’s total fee income last year was ₦7m, including ₦500,000 from the lost clients.

Required:

(a) Discuss the advantages and disadvantages of tendering for the audit of Lagos Leisure Ltd, highlighting any key risks to your firm. (7 Marks)

(b) Although the initial estimate of the audit fee was ₦200,000, further work needs to be done before a figure could be included in the tender document. List the factors which should be taken into account when calculating this fee. (4 Marks)

(c) Outline the matters which should be included in the tender document if the firm decides to tender. (4 Marks)

Answer

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Tags: Audit Fees, Audit strategy, Client Acceptance, Consultancy, Litigation, Risk Assessment, Staff Issues, Tender Document
Level: Level 3

Topic: Environmental and Sustainability Audits
Series: NOV 2014

AAA – Nov 2012 – L3 – AII – Q5 – Ethical Issues in Auditing

Identifies two general approaches to negotiation for auditors when discussing fees.

Question

Auditors need negotiation skills to be able to agree fees with prospective clients or agree to increase fees with existing clients. TWO recommended general approaches to negotiation are …………… and …………… bargaining.

Answer

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Tags: Audit Fees, Client Relations, Ethical Standards, Negotiation, Professional Skills
Level: Level 3

Topic: Ethical Issues in Auditing
Series: NOV 2012

AA – Nov 2016 – L2 – Q2d – Ethical Issues in Auditing

This question explains the technique of "low-balling" used by audit firms when tendering for audit engagements and its potential ethical implications.

Question

Explain briefly the technique used by an audit firm known as “low-balling” when it tenders for audit work.

Answer

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Tags: Audit Fees, Competition in Auditing, Ethical Issues, Low-balling, Tendering
Level: Level 2

Topic: Ethical Issues in Auditing
Series: NOV 2016

AAA – May 2021 – L3 – Q1b – The audit approach | Internal audit and outsourcing

Draft a report on the factors influencing the external auditor’s reliance on the work of internal auditors according to ISA 610.

Question

Your audit client, Asuoyeboa Ltd, has recently hired an Internal Auditor to deal with increased regulatory requirements. Afrakoma, the CEO of Asuoyeboa Ltd, has indicated that she believes the presence of the Internal Auditor will dramatically reduce the work that your audit firm will have to perform. She anticipates that this will have an impact on the audit fee.

Required:

Draft a report indicating factors that will influence the extent to which the external auditors will rely on the Internal Auditors’ work as per the requirements imposed by ISA 610: Using the Work of Internal Auditors. (10 marks)

Answer

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Tags: Audit Fees, Audit Reliance, External audit, Internal Audit, ISA 610
Level: Level 3

Topic: Internal audit and outsourcing, The audit approach
Series: MAY 2021

AAA – May 2017 – L3 – Q2b – Professional responsibility and liability | Reporting

Discuss the auditor's responsibility for fraud detection and the validity of a client withholding audit fees due to undetected fraud.

Question

Stevens and Associates have completed the audit of the accounts of Eno Serwah & Co. Ltd for the year ended 31 December 2015. The auditor’s opinion on the financial statement has been favorable to Eno Serwah & Co Ltd. Internal check procedures after the audit revealed a shortage of cash of Two Million Ghana cedis (GH¢2m). The Directors of Eno Serwah & Co Ltd. put a freeze on the payment of the audit fees on the grounds that the audit could not detect the shortage.

Required:

Discuss the stand taken by the Directors of the company.

Answer

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Tags: Audit Fees, Auditor Responsibility, Fraud Detection, Legal Dispute
Level: Level 3

Topic: Professional responsibility and liability, Reporting
Series: MAY 2017

AAA – Nov 2014 – L3 – SC – Q6 – Environmental and Sustainability Audits

Evaluates the risks and considerations of tendering for the audit of Lagos Leisure Ltd, including fee estimation and tender document components.

Question

You have ascertained the following from a brief discussion with the Managing Director:

There has been no investment in non-current assets in the last 10 years. The company was intending to start a program of investment two years ago but this was cancelled due to reduced profits, and maintenance and repair costs have increased significantly over the last year.
Staff remuneration has been frozen, and there has been some discussion with unions as staff morale is very low and several staff have already left. So far, industrial action has been avoided.
The Financial Director was dismissed three months ago and hasn’t been replaced; he is currently suing Lagos Leisure Ltd for unfair dismissal.
The Managing Director is due to retire next year; a replacement has not yet been considered.
There is an outstanding litigation as an employee is suing Lagos Leisure Ltd due to an accident in the workplace, and the authorities have written a detailed report about the case.

Your firm’s total fee income last year was ₦7m, including ₦500,000 from the lost clients.

Required:

(a) Discuss the advantages and disadvantages of tendering for the audit of Lagos Leisure Ltd, highlighting any key risks to your firm. (7 Marks)

(c) Outline the matters which should be included in the tender document if the firm decides to tender. (4 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Fees, Audit strategy, Client Acceptance, Consultancy, Litigation, Risk Assessment, Staff Issues, Tender Document
Level: Level 3

Topic: Environmental and Sustainability Audits
Series: NOV 2014

AAA – Nov 2012 – L3 – AII – Q5 – Ethical Issues in Auditing

Identifies two general approaches to negotiation for auditors when discussing fees.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Fees, Client Relations, Ethical Standards, Negotiation, Professional Skills
Level: Level 3

Topic: Ethical Issues in Auditing
Series: NOV 2012

AA – Nov 2016 – L2 – Q2d – Ethical Issues in Auditing

This question explains the technique of "low-balling" used by audit firms when tendering for audit engagements and its potential ethical implications.

Question

Explain briefly the technique used by an audit firm known as “low-balling” when it tenders for audit work.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Fees, Competition in Auditing, Ethical Issues, Low-balling, Tendering
Level: Level 2

Topic: Ethical Issues in Auditing
Series: NOV 2016

AAA – May 2021 – L3 – Q1b – The audit approach | Internal audit and outsourcing

Draft a report on the factors influencing the external auditor’s reliance on the work of internal auditors according to ISA 610.

Question

Required:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Fees, Audit Reliance, External audit, Internal Audit, ISA 610
Level: Level 3

Topic: Internal audit and outsourcing, The audit approach
Series: MAY 2021

AAA – May 2017 – L3 – Q2b – Professional responsibility and liability | Reporting

Discuss the auditor's responsibility for fraud detection and the validity of a client withholding audit fees due to undetected fraud.

Question

Required:

Discuss the stand taken by the Directors of the company.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Fees, Auditor Responsibility, Fraud Detection, Legal Dispute
Level: Level 3

Topic: Professional responsibility and liability, Reporting
Series: MAY 2017

Question Tag: Audit Fees

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AAA – Nov 2014 – L3 – SC – Q6 – Environmental and Sustainability Audits

Evaluates the risks and considerations of tendering for the audit of Lagos Leisure Ltd, including fee estimation and tender document components.

AAA – Nov 2012 – L3 – AII – Q5 – Ethical Issues in Auditing

Identifies two general approaches to negotiation for auditors when discussing fees.

AA – Nov 2016 – L2 – Q2d – Ethical Issues in Auditing

This question explains the technique of "low-balling" used by audit firms when tendering for audit engagements and its potential ethical implications.

AAA – May 2021 – L3 – Q1b – The audit approach | Internal audit and outsourcing

Draft a report on the factors influencing the external auditor’s reliance on the work of internal auditors according to ISA 610.

AAA – May 2017 – L3 – Q2b – Professional responsibility and liability | Reporting

Discuss the auditor's responsibility for fraud detection and the validity of a client withholding audit fees due to undetected fraud.

AAA – Nov 2014 – L3 – SC – Q6 – Environmental and Sustainability Audits

Evaluates the risks and considerations of tendering for the audit of Lagos Leisure Ltd, including fee estimation and tender document components.

AAA – Nov 2012 – L3 – AII – Q5 – Ethical Issues in Auditing

Identifies two general approaches to negotiation for auditors when discussing fees.

AA – Nov 2016 – L2 – Q2d – Ethical Issues in Auditing

This question explains the technique of "low-balling" used by audit firms when tendering for audit engagements and its potential ethical implications.

AAA – May 2021 – L3 – Q1b – The audit approach | Internal audit and outsourcing

Draft a report on the factors influencing the external auditor’s reliance on the work of internal auditors according to ISA 610.

AAA – May 2017 – L3 – Q2b – Professional responsibility and liability | Reporting

Discuss the auditor's responsibility for fraud detection and the validity of a client withholding audit fees due to undetected fraud.

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AAA – Nov 2014 – L3 – SC – Q6 – Environmental and Sustainability Audits

Evaluates the risks and considerations of tendering for the audit of Lagos Leisure Ltd, including fee estimation and tender document components.

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AAA – Nov 2012 – L3 – AII – Q5 – Ethical Issues in Auditing

Identifies two general approaches to negotiation for auditors when discussing fees.

You're reporting an error for "AAA – Nov 2012 – L3 – AII – Q5 – Ethical Issues in Auditing"

AA – Nov 2016 – L2 – Q2d – Ethical Issues in Auditing

This question explains the technique of "low-balling" used by audit firms when tendering for audit engagements and its potential ethical implications.

You're reporting an error for "AA – Nov 2016 – L2 – Q2d – Ethical Issues in Auditing"

AAA – May 2021 – L3 – Q1b – The audit approach | Internal audit and outsourcing

Draft a report on the factors influencing the external auditor’s reliance on the work of internal auditors according to ISA 610.

You're reporting an error for "AAA – May 2021 – L3 – Q1b – The audit approach | Internal audit and outsourcing"

AAA – May 2017 – L3 – Q2b – Professional responsibility and liability | Reporting

Discuss the auditor's responsibility for fraud detection and the validity of a client withholding audit fees due to undetected fraud.

You're reporting an error for "AAA – May 2017 – L3 – Q2b – Professional responsibility and liability | Reporting"

AAA – Nov 2014 – L3 – SC – Q6 – Environmental and Sustainability Audits

Evaluates the risks and considerations of tendering for the audit of Lagos Leisure Ltd, including fee estimation and tender document components.

You're reporting an error for "AAA – Nov 2014 – L3 – SC – Q6 – Environmental and Sustainability Audits"

AAA – Nov 2012 – L3 – AII – Q5 – Ethical Issues in Auditing

Identifies two general approaches to negotiation for auditors when discussing fees.

You're reporting an error for "AAA – Nov 2012 – L3 – AII – Q5 – Ethical Issues in Auditing"

AA – Nov 2016 – L2 – Q2d – Ethical Issues in Auditing

This question explains the technique of "low-balling" used by audit firms when tendering for audit engagements and its potential ethical implications.

You're reporting an error for "AA – Nov 2016 – L2 – Q2d – Ethical Issues in Auditing"

AAA – May 2021 – L3 – Q1b – The audit approach | Internal audit and outsourcing

Draft a report on the factors influencing the external auditor’s reliance on the work of internal auditors according to ISA 610.

You're reporting an error for "AAA – May 2021 – L3 – Q1b – The audit approach | Internal audit and outsourcing"

AAA – May 2017 – L3 – Q2b – Professional responsibility and liability | Reporting

Discuss the auditor's responsibility for fraud detection and the validity of a client withholding audit fees due to undetected fraud.

You're reporting an error for "AAA – May 2017 – L3 – Q2b – Professional responsibility and liability | Reporting"

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