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Madison Thorne works in a public accounting firm and hopes to eventually be a partner. The management of Allnet Company invites Thorne to pepare a bid to audit Allnet's financial statements. In discussing the audit fee, allnet's management suggestsua 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.1. Identify the parties potentially affected by this audit and the fee plan proposed.2. What are the ethical factors in this situation? Explain.3. Would you recommend that thorne  accept this audit fee arrangement? Why or why not?4. Describe some ethical considerations guiding your recommendation.

Question

Madison Thorne works in a public accounting firm and hopes to eventually be a partner. The management of Allnet Company invites Thorne to pepare a bid to audit Allnet's financial statements. In discussing the audit fee, allnet's management suggestsua 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.

1. Identify the parties potentially affected by this audit and the fee plan proposed.

2. What are the ethical factors in this situation? Explain.

3. Would you recommend that thorne  accept this audit fee arrangement? Why or why not?

4. Describe some ethical considerations guiding your recommendation.

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Step 1

Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and specify the other subparts (up to 3) you’d like answered

Step 2

1.  The management of the Allnet company has proposed audit which will be based on the company's reported profits i.e. auditors get increased fees with increased reported profits

The parties who would be potentially affected by the audit and proposed fees are

a)the stockholders and various other stakeholders who use the audited reports

b) the audit firm as this fees structure which jeopardise the independence of the auditors

Step 3

2.  The ethical factors involved is accepting audit fees which is based on the reported net profits of the client will benefit the audit firm financially but it is against profession...

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