Learning Goal: I’m working on a accounting question and need the explanation and answer to help me learn.
Tana Thorne works in a public accounting firm and hopes to eventually be a partner. The management of Allnet Company invites Thorne to prepare a bid to audit Allnet’s financial statements. In discussing the audit fee, Allnet’s management suggests a fee range in which the amount depends on the reported profit of Allnet. The higher its profit, the higher will be the audit fee paid to Thorne’s firm.
- Who are the parties potentially affected by this audit and the fee plan proposed?
- What are the ethical factors in this situation? Explain.
- Would you recommend that Thorne accept this audit fee arrangement? Why or why not?
- What are some ethical considerations guiding your recommendation?