Reference no: EM133175869

Questions -

Q1. You are audit manager in charge of the audit of Denhead plc with a year end of 31 December 2018 and are explaining to the chief accountant how your firm's fees are calculated. The chief accountant tells you that it is important that the audit report be issued by 16 February 2019 and says he is willing to increase the audit fee by 10 per cent if you meet that deadline. What would you say to him?

Q2. Both the IFAC Code and FRC Ethical Standard have rules to help firms decide if the amount of the regular fees charged to a client are significant in relation to the total income of the firm. Thus the IFAC Code suggests that 15 per cent of total income of the practice would be appropriate in the case of a listed client, whereas FRC Ethical Standard suggests that 15 per cent would be appropriate in the case of a non-listed client and 10 per cent in the case of a listed client. Explain what kinds of threats would arise if fees to an individual client regularly exceeded these percentages? Would there be any safeguards that might reduce the threats to an acceptable level? If the percentages were 14.9 per cent or 9.9 per cent respectively, would this mean that there was no threat?

Q3. A partner in a small two partner firm, established two years ago, tells you that in the first two years the fees charged to two audit clients both exceed 15 per cent of total income. This is expected to continue for the next two years until the fee income from other clients becomes significant. What advice would you give to the partner?

Q4. You are running a training course for your firm and you have been asked by a participant whether staff on an audit could expect to have their salary augmented if they were able to sell non-audit services to the client. The participant tells you about useful suggestions they made that will lead to efficiency savings for an audit client. What would be your response? What principles do you think would be relevant?