Under the AICPA Code of Professional Conduct, which of the following fee arrangements is prohibited for an audit client?

Answer options:

A fee based on the complexity of the service and the level of expertise required.

A fee established by a court in a bankruptcy proceeding.

A fee based on the amount of a loan obtained by the client using the audited financial statements.

A fee that is lower than the predecessor auditor's fee.

How to approach this question

Identify the definition of a contingent fee and the exceptions. Contingent fees are generally banned for attest clients.

Full Answer

C.A fee based on the amount of a loan obtained by the client using the audited financial statements.✓ Correct

A fee based on the amount of a loan obtained by the client using the audited financial statements.

A contingent fee is a fee established for the performance of any service pursuant to an arrangement in which no fee will be charged unless a specified finding or result is attained, or in which the amount of the fee is otherwise dependent upon the finding or result of such service. This impairs independence.

Common mistakes

Confusing court-fixed fees (permitted) with contingent fees.

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