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just review BPP revision kits and find a question as below:
If the fees for audit and recurring work exceed 15% of the firm total fees for a listed client, we should review these fees income from this big client regularly and possibly limiting the provision of other services to maintain independence.
How to understand the above in bold. May I have a specific example? Thanks.
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Suppose the total fee is:
Audit: $ X
Tax: $ Y
Internal audit: $ ZAnd X + Y + Z>15% of total income
If you want to accept the assignment, then you have to reduce the total fee from the client to below 15% because the fee affects your independence.
Your options are:
Option 1: audit + tax OR
Option 2: audit + internal auditIf you do not want to accept the assignment, then you can provide:
Option 3: Tax + internal audit
The choice between the three options options will obviously be made based on profitability (and available resources). Although you are supposed to be ethical (which is why you are bringing it down to 15%), you are not running a charity. Its a business 🙂
Always remember, for an auditor, ethics comes first and profit second.
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