Ethical Standard: Section 4 (Fees, Remuneration, Evaluation Policies, Gifts & Hospitality, Ligation) Flashcards
What are the guidelines regarding fees and contingent fee arrangements under Section 4?
Audits must adhere to ISAs, regardless of the fee structure.
Contingent Fees:
In NI, contingent fee arrangements are prohibited for both audit and non-audit services to any audit client.
In the ROI, contingent fees are banned for audits but are allowed for non-audit services if the fee is immaterial to the audit firm and not based on the outcome of material financial statement matters.
Overdue Fees: Consider resignation if overdue fees are not trivial.
Agreement on Fees: The amount and payment method for previous audit fees must be agreed upon before formally accepting an appointment.
EU Audit Regulation: Imposes a cap of 70% of the audit fee for non-audit services provided to the client.
How does Section 4 regulate fee levels for auditors?
For Unlisted Clients: An audit firm cannot act as an auditor if total fees from a client regularly exceed 15% of the audit firm’s fee income. Disclosure to Those Charged With Governance (TCWG) and an external quality review are required if fees exceed 10% but not 15%.
For Listed Clients: An audit firm cannot act as an auditor if total fees from a client regularly exceed 10% of the audit firm’s fee income. Disclosure to TCWG is necessary if fees exceed 5% but not 10%, and safeguards must be considered.
What are the policies on remuneration, gifts, hospitality, and litigation under Section 4?
Remuneration and Evaluation Policies: Should not incentivize the sale of non-audit services.
Gifts and Hospitality: Only trivial or inconsequential gifts or hospitality can be accepted from the audit client or any related entity.
Litigation: An auditor should consider resigning if involved in litigation with the audit client or its affiliates, unless it’s routine or insignificant.
