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contingent fee

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › contingent fee

  • This topic has 1 reply, 2 voices, and was last updated 10 months ago by Kim Smith.
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  • August 28, 2021 at 5:26 am #633185
    jaemx
    • Topics: 2
    • Replies: 1
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    How does contingent fee result in an advocacy threat?

    August 28, 2021 at 7:48 am #633195
    Kim Smith
    Keymaster
    • Topics: 87
    • Replies: 6089
    • ☆☆☆☆☆

    It DEPENDS on what the contingent fee relates to – e.g. see in our notes (which are downloadable and searchable):

    3.3 Advocacy threats
    Advocacy is where the assurance or audit firm promotes a point of view or opinion to the extent the subsequent objectivity is compromised. An example would be where the audit firm promotes the shares in a listed company or supports the company in some sort of dispute (eg with the tax authorities).

    It is in the nature of contingent fees that the auditor’s interest will become aligned with management’s – wanting (and therefore promoting) the same outcome.

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