Ethical Considerations in Setting Audit Fees (Case Study Sample)

Ethical Considerations in Setting Audit Fees Student's Name Course Code: Course Name Name of your Institution Instructor's Name Date of Submission Ethical Considerations in Setting Audit Fees Tana Thorne, the public accounting firm for which she is employed, along with Allnet as a corporation and its shareholders and stakeholders, including but not limited to owners and consumers of financial statements, can potentially be affected by both this audit and the proposed fee structure. This remuneration plan, hinged upon Allnet's reported profits, could significantly impact the concerns of these key individuals and entities as it complicatedly links the financial success of Allnet to the impartiality and integrity of the auditing procedure. This situation raises ethical concerns regarding potential threats to auditor independence and objectivity due to an inherent conflict of interest between Allnet's reported profit and its tied audit fee. The Code of Ethics for Professional Accountants, underscored by the International Ethics Standards Board for Accountants (IESBA), spotlights auditors' ethical obligations when determining audit compensation amidst declining fee pressure (The International Federation of Accountants, 2016). Further, the NASBA Ethics and Strategic Professional Issues Committee identifies risks to independence, integrity, and objectivity when there is excessive fluctuation in fees and profitability levels (Hansen, 2010). Thorne should reject this audit fee arrangement to safeguard the audit process's integrity and objectivity. This recommendation is founded upon ethical considerations such as upholding auditor independence, ensuring ethical conduct, and prioritizing audit excellence to uphold investors' confidence. Tana Thorne should decline the proposed audit fee arrangement due to ethical concerns regarding the potential compromise of auditor independence and impartiality. The tie between the audit fee and Allnet's reported profits poses a conflict of interest for the auditor. According to IESBA, auditors must adhere to ethical standards outlined in the Code of Ethics for Professional Accountants when determining fees, especially in cases where there may be pressure to lower them. Maintaining investor confidence requires prioritizing auditor independence, ethical conduct, and a commitment to audit excellence. Thus, to uphold professional integrity and the sanctity of the audit procedure, Thorne must decline this fee arrangement. Essential ethical factors guide my recommendation against accepting the audit fee arrangement. * The compromise of auditor autonomy may occur due to the correlation between the audit fee and Allnet's declared earnings, potentially impacting th...