Hello Mr. Mike
How are you? Hope you are fine :)
My question is about ''lowballing''. As far as I understood lowballing means when the audit firm offers a very low price for their audit works in order to win the tender.
Now my questions are :
1 – Is lowballing allowed ?! By now I though lowballing is not allowed but the ACCA answer says it is permitted! (ACCA answer : December 2014-Question 4-part a(ii) – Paragraph 5 – line 2). Maybe I have misunderstood the ACCA answer.
2 – If it is not allowed, then the question is WHY?! Maybe you will say because lowballing will decrease the quality of audit, but what if the audit firm ensures that the quality of audit work won't be decreased!!!
Thank you in advance
Kind Regards
Ask the Tutor ACCA AAA
Lowballing
11y ago#1Low balling IS allowed. It's not smiled upon, but it is nevertheless allowed.
"If it isn't allowed, why not?". Yes, audit firms consistently claim that they take appropriate measures to ensure that quality is not compromised.
But audit firms are businesses and need to show profits and, if they can't generate revenue to cover costs, they're in trouble. So reduce costs! And there's the rub - quality is compromised in an effort to reduce costs in order to maintain profits
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