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Lowballing

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Lowballing

  • This topic has 1 reply, 2 voices, and was last updated 10 years ago by MikeLittle.
Viewing 2 posts - 1 through 2 (of 2 total)
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  • August 19, 2015 at 7:08 pm #267799
    yellow
    Participant
    • Topics: 52
    • Replies: 68
    • ☆☆

    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

    August 19, 2015 at 11:18 pm #267817
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23335
    • ☆☆☆☆☆

    Low 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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