Is lowballing allowed?

hi,

lowballing is a kind of controversial area in the hierarchy of threats to independence. U should understand the concept of independence firstly and then u have an answer on ur question:

1. Independence is a STATE OF MIND – u, as an auditor allways prefer fair busniness relationship with ur client.
2. Independence in APPERANCE – u shoudl no be only independent, u should also appear independent? what does it mean in case of lowballing?

let me explain why is lawballing controversial area in first place: if audit firm charges fees far low then its competitor firms, then we have threat to independence, mostly of unacceptable level, in this case engagement should be terminated. But if audit firm will charge fees which are nearly the same as by competitors, it will possible loose valuable clients. So code of ethics says: if audit firm can justify (independence in APPERANCE) lower fees with suficient documentation and is reasonable taking in account current level of labour rate etc. then it is permitted to charge lower fees provided appropriate safeguards are in place. in this case it will not be deemed as lowballing by the profession.

That’s why u have two different statements in bpp text and revision kits.

hope now is clear.

rgrds

u’ve got it exactly rt my friend, good job