Auditing and assurance revision question and answer

Auditing and Assurance Revision Questions and Answers

Comment on the following: ( 5 Marks each December 2009)
a) Mr. A, a Chartered Accountant gave 50% of the audit fees received him to the person, who was not a Chartered Accountant, under the classification of office allowance and such an arrangement continued for a number of years.

b) Mr. Baidya, who is a practicing Chartered Accountant, accepted his appointment as an auditor at a lower fee than the audit fee charged the previous auditor. Some of the practicing accountants claimed that Mr. Baidya had obtained the audit undercutting.

a) Answer
Mr. A, Chartered Accountant had shared his profits with a non-CA and, therefore, is guilty of professional misconduct under section 34(3) of ICAN Act. It is not the nomenclature to a transaction that is material but it is the substance of the transaction, which has to be looked into.

b) Answer
As per the Code of Ethics issued ICAN, a professional accountant in public practice should charge fees taking into account:
i) The skill and knowledge required for the type of services involved

ii) The level of training and experience necessary for the person necessarily engaged in performing the services

iii) The time necessarily occupied each person engaged in performing the services

iv) The degree of responsibility that performing those service entails.
Further, a professional accountant in public practice should not make a representation that specific professional services in current or future periods will be performed for either a stated fee, estimated fee or fee range if it is likely at the time of the representation that such fees will be substantially increased and the prospective client is not advised of that likelihood.

It is not improper for a professional accountant in public practice to charge a client a lower fee than has previously been charged to similar services, provided the fee has been calculated in accordance with the requirements of Code of Ethics issued ICAN.
In the given case, it would not amount to the undercutting if the fees are based on the quantum of work, incidental and pocket expenses and other terms of appointment and hence the claim of the other accountants may not be held tenable.



(Visited 6 times, 1 visits today)
Share this on:

Leave a Reply

Your email address will not be published.