Contingent fee
A contingent fee is calculated on a predetermined basis related to the outcome or result of an engagement. It can create self-interest threats and may be prohibited for particular assurance services under applicable independence requirements.
Worked example
A fee based on the amount of financing obtained for an audit client could create an incentive to support management’s preferred figures.
Common mistake
Do not presume that an engagement letter and disclosure make a prohibited contingent fee acceptable.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AAA (INT) | Direct | September 2026–June 2027 |