Chapter 5 - Advertising

Question 0

Lowballing is

Answer 0

Setting a low price at the start of engagement to secure business with intent of raising it at later date or recovering losses with provision of more lucrative services

Could lead to self interest threat as try to keep client happy to win business.

Or could lead to corner cutting to try and minimise losses which would impair competence and due care.

Question 1

Adverts are to

Answer 1

Inform rather than impress

Should not reflect adversely on member, profession or ACCA

Question 2

Contingency fee is

Answer 2

Arrangement made at outset of engagement under which a predetermined amount or percentage is payable on completion.

May cause practitioners to force specific outcomes to try and achieve higher fees for example rapid completion of an audit, which would mean the engagement being completed without the necessary due care and objectivity.

Question 3

Fee quotations

Answer 3

When negotiating may quote fees too low to secure the work that then becomes difficult to complete the engagement in accordance with standards and so ethical threats to competence and due care arise.

Safeguards for this include making it clear to the client which services are covered by fees and basis of charges,

Performing budgeting process to smite costs recovered

Assigning sufficient time and appropriate staff to assignment so it’s performed effectively.