Audit Fee

Topics: Audit, Financial audit, Auditing Pages: 2 (335 words) Published: March 18, 2014
Madison 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 Allet. The higher its profit, the higher will be the audit fee paid to Thorne’s firms.

Would you recommend that Thorne accept this audit fee arrangement? Why or why not?

Describe some ethical considerations guiding your recommendations”

Now i’m not asking for the answer, since it’s an online class its hard to ask to teacher but here are my questions

1. What does “prepare a bid to audit” mean?
2. What does “free audit” mean”
3. What does “free range” mean

Best answer:

Answer by JKRB
An audit bid tells the company being audited what actions will be performed and how much it will cost. The “audit fee” is how much will be charged. A “fee range” would mean the fees would change depending upon what actions are taken or what the results are.

You didn’t ask for the answer, but the source below shows the major auditing standard that would be broken if the auditing fee is based on the profit of the company. It has to do with the independence of the auditor. Basing the auditing fee on profit could affect the impartiality of the auditor or at least give the appearance of bias. 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 Allet. The higher its profit, the higher will be the audit fee paid to Thorne’s firms.

Would you recommend that Thorne accept this audit fee arrangement? Why or why not?
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