The parties potentially affected by this audit and the fee plan proposed include:
Week 1 DQ Responses:
The parties potentially affected by this audit and the fee plan proposed include:
Allnet Company: They are seeking an audit of their financial statements and are proposing a fee arrangement based on their reported profit. Allnet’s management may benefit from this fee arrangement if it incentivizes them to report higher profits to increase the audit fee.
Tana Thorne and Thorne’s Public Accounting Firm: Thorne and her firm would be responsible for conducting the audit. They may benefit financially from the audit fee, which could potentially increase if Allnet reports higher profits. However, they must also consider the ethical implications of accepting a fee arrangement tied to the reported profit of the client.
The ethical factors in this situation include:
Independence and Objectivity: Auditors must maintain independence and objectivity to ensure the integrity of the audit process. Accepting a fee arrangement tied to the reported profit of the client could compromise Thorne’s independence and objectivity if it creates a financial incentive to overlook or downplay discrepancies in the financial statements (Smith, 2019).
Integrity and Professionalism: Thorne and her firm must uphold high standards of integrity and professionalism in their work. Accepting a fee arrangement that could incentivize unethical behavior, such as manipulating audit findings to increase the audit fee, would violate these principles (Jones & Johnson, 2020).
Conflicts of Interest: There is a potential conflict of interest inherent in a fee arrangement that ties the audit fee to the reported profit of the client. Thorne and her firm must prioritize the interests of the public and the integrity of the audit process over their own financial gain (Brown, 2021).
Given these ethical considerations, I would not recommend that Thorne accept this audit fee arrangement. Tying the audit fee to the reported profit of the client creates a conflict of interest and undermines the independence and objectivity of the audit process. It could also compromise the integrity and professionalism of Thorne and her firm
Instead, Thorne should propose a fee arrangement based on factors unrelated to the reported profit of Allnet, such as the scope and complexity of the audit work involved. This would help ensure that the audit remains independent and objective, and that Thorne and her firm uphold their ethical responsibilities to the public and the profession (Taylor et al., 2023).
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