non-audit services
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Potter and Partners are a chartered accounting firm with offices in capital cities in most states. The head of the business development department is seeking to grow the firm’s revenue from non-audit services.
Required:
What non-audit services could a chartered accounting firm provide to its listed company clients? Explain why a company would buy these services from its audit firm instead of another consulting firm.
Step by step
Solved in 3 steps
- Explain the ‘audit expectation gap’. What causes the gap? b: Potter and Partners are a chartered accounting firm with offices in capital cities in most states. The head of the business development department is seeking to grow the firm’s revenue from non-audit services. Required: What non-audit services could a chartered accounting firm provide to its listed company clients? Explain why a company would buy these services from its audit firm instead of another consulting firm.You are a Senior Manager in Federer & Co, a firm of Chartered Certified Accountants offeringaudit and assurance services mainly to large, privately owned companies. The firm has suffered from increased competition, due to two new firms of accountants setting up in the same town. Several audit clients have moved to the new firms, leading to loss of revenue, and an over staffed audit department. Ann Agassi, one of the partners of Federer & Co, has asked you to consider how the firm could react to this situation. Several possibilities have been raised for your consideration: 1. Several audit clients are experiencing staff shortages, and it has been suggested that temporary staff assignments could be offered. It is envisaged that a number of audit managers could be seconded to clients for periods not exceeding six months, after which time they would returnto Federer & Co. Required: Identify and explain the fundamental ethical principle and ethical threat involved for Federer…You are a Senior Manager in Federer & Co, a firm of Chartered Certified Accountants offering audit and assurance services mainly to large, privately owned companies. The firm has suffered from increased competition, due to two new firms of accountants setting up in the same town. Several audit clients have moved to the new firms, leading to loss of revenue, and an over staffed audit department. Ann Agassi, one of the partners of Federer & Co, has asked you to consider how the firm could react to this situation. Several possibilities have been raised for your consideration: 1. Nadal Co, a manufacturer of electronic equipment, is one of Federer & Co.’s audit clients. You are aware that the company has recently designed a new product, which market research indicates is likely to be very successful. The development of the product has been a huge drain on cash resources. The Managing Director of Nadal Co has written to the audit engagement partner to see if Federer & Co…
- You are a Senior Manager in Federer & Co, a firm of Chartered Certified Accountants offering audit and assurance services mainly to large, privately-owned companies. The firm has suffered from increased competition, due to two new firms of accountants setting up in the same town. Several audit clients have moved to the new firms, leading to loss of revenue, and an over staffed audit department. Ann Agassi, one of the partners of Federer & Co, has asked you to consider how the firm could react to this situation. Several possibilities have been raised for your consideration:1. Nadal Co, a manufacturer of electronic equipment, is one of Federer & Co.’s audit clients. You are aware that the company has recently designed a new product, which market research indicates is likely to be very successful. The development of the product has been a huge drainon cash resources. The Managing Director of Nadal Co has written to the audit engagement partner to see if Federer & Co would…Tana Thorne is an accountant who aspires to become a partner in a public accounting company. Thorne is invited by Allnet Company's management to submit a proposal to audit Allnet's financial accounts. When considering the audit charge, Allnet's management offers a price range based on Allnet's reported earnings. The more the profit, the greater the audit fee payable to Thorne's business. What ethical considerations apply to this situation? Explain.Assume that you have finished your MBA program and have applied for a position in the FinancialAccounting Department of a large multinational company. The company is struggling with itsaccounting reporting matters and several accounting reports are under regulatory scrutiny. In theinterview board, the recruitment committee members have asked you the following questions. How can you contribute the Financial Accounting Department of this company if youare recruited?
- You are a Senior Manager in Federer & Co, a firm of Chartered Certified Accountants offering audit and assurance services mainly to large, privately-owned companies. The firm has suffered from increased competition, due to two new firms of accountants setting up in the same town. Several audit clients have moved to the new firms, leading to loss of revenue, and an overstaffed audit department. Ann Agassi, one of the partners of Federer & Co, has asked you to consider howthe firm could react to this situation. Several possibilities have been raised for your consideration: 1. Federer & Co is considering expanding the provision of non-audit services. Maria Williams, a Senior Manager in Federer & Co, has suggested that the firm could offer a recruitment advisory service to clients, specializing in the recruitment of finance professionals. Federer & Co would charge a fee for this service based on the salary of the employee recruited. Maria Williams worked as a…Assume that you have finished your MBA program and have applied for a position in the FinancialAccounting Department of a large multinational company. The company is struggling with itsaccounting reporting matters and several accounting reports are under regulatory scrutiny. In theinterview board, the recruitment committee members have asked you the following questions. i. How can you contribute the Financial Accounting Department of this company if youare recruited? (PLEASE DO NOT GIVE OTHER OR EXISTING ANSWER OF BARTLEBY)Tana Thorne works in a public accounting firm and hopes to eventually be a partner. The managementof Allnet Company invites Thorne to prepare a bid to audit Allnet’s financial statements. In discussingthe audit fee, Allnet’s management suggests a fee range in which the amount depends on thereported profit of Allnet. The higher its profit, the higher will be the audit fee paid to Thorne’s firm. What are the ethical factors in this situation? Explain.
- 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?Assume that you have finished your MBA program and have applied for a position in the Financial Accounting Department of a large multinational company. The company is struggling with its accounting reporting matters and several accounting reports are under regulatory scrutiny. In theinterview board, the recruitment committee members have asked you the following questions. i. How can you contribute the Financial Accounting Department of this company if you are recruited?You are a senior manager in the audit department of Raven & Co. You are reviewing three situations which have arisen in respect of audit clients, which were recently discussed at the monthly audit managers' meeting:Grouse Co is a significant audit client which develops software packages. Its managing director, Max Partridge, has contacted one of your firm's partners regarding a potential business opportunity. The proposal is that Grouse Co and Raven & Co could jointly develop accounting and tax calculation software, and that revenue from sales of the software would be equally split between the two firms. Max thinks that Raven & Co's audit clients would be a good customer base for the product. Plover Co is a private hospital which provides elective medical services, such as laser eye surgery to improve eyesight. The audit of its financial statements for the year ended 31 March 2012 is currently taking place. The audit senior overheard one of the surgeons who performs laser…