Total Marks: 20
Starting Date: Friday, May 10, 2013
Closing Date: Tuesday, May 14, 2013
Status: Open
210.9 A chartered accountant in practice who is asked to replace another chartered accountant in practice, or who is considering tendering for an engagement currently held by another chartered accountant in practice, shall determine whether there are any reasons, professional or otherwise, for not accepting the engagement, such as circumstances that create threats to compliance with the fundamental principles that cannot be eliminated or reduced to an acceptable level by the application of safeguards. For example, there may be a threat to professional competence and due care if a chartered accountant in practice accepts the engagement before knowing all the pertinent facts.
Section 240
240.1 When entering into negotiations regarding professional services, a chartered accountant in practice may quote whatever fee is deemed to be appropriate commensurate with the nature and service to be rendered. However, in such cases, chartered accountants in practice should be careful not to quote fee lower than that charged by the chartered accountants in practice previously carrying out the audit unless scope and quantum of work materially differs from the scope and quantum of work carried out by the previous auditor, as it could then be regarded as undercutting.
240.2 Chartered accountants in practice shall comply with ATR-14, Minimum Hourly Charge out Rates and Minimum Fee for Audit Engagements.
Hint: For solving this GDB, read ATR-14 mentioned in Members’ Handbook from page 11 to page 14 available on the following link:
Starting Date: Friday, May 10, 2013
Closing Date: Tuesday, May 14, 2013
Status: Open
Learning Objective:
The students are expected to learn about ATR 14 observed by the professional auditors in Pakistan.
Background:
Consider the following sections of revised Code of Ethics for Chartered Accountants issued by Institute of Chartered Accountants of Pakistan as background before attempting this GDB:
Section 210
210.1 Before accepting a new client relationship, a chartered accountant in practice shall determine whether acceptance would create any threats to compliance with the fundamental principles. Potential threats to integrity or professional behavior may be created from, for example, questionable issues associated with the client (its owners, management or activities).210.9 A chartered accountant in practice who is asked to replace another chartered accountant in practice, or who is considering tendering for an engagement currently held by another chartered accountant in practice, shall determine whether there are any reasons, professional or otherwise, for not accepting the engagement, such as circumstances that create threats to compliance with the fundamental principles that cannot be eliminated or reduced to an acceptable level by the application of safeguards. For example, there may be a threat to professional competence and due care if a chartered accountant in practice accepts the engagement before knowing all the pertinent facts.
Section 240
240.1 When entering into negotiations regarding professional services, a chartered accountant in practice may quote whatever fee is deemed to be appropriate commensurate with the nature and service to be rendered. However, in such cases, chartered accountants in practice should be careful not to quote fee lower than that charged by the chartered accountants in practice previously carrying out the audit unless scope and quantum of work materially differs from the scope and quantum of work carried out by the previous auditor, as it could then be regarded as undercutting.
240.2 Chartered accountants in practice shall comply with ATR-14, Minimum Hourly Charge out Rates and Minimum Fee for Audit Engagements.
The Case:
M/S Atta Ch. Chartered Accountants (ACCA) is currently rated among top five chartered accountancy firms of the country. Mr. Bakshi Khan, the company secretary of Multi Cement Company (MCC) – a company which is a market leader of cement sector, has requested ACCA to act as their auditors for the next financial year in place of their current chartered accountancy firm M/S Haji & Sons Chartered Accounts (HSBA). Overall, ACCA is happy to get the appointment but the HSBA has not yet resigned. Mr. Bakshi has assured that MCC will not reappoint them in future provided ACCA wave off 25 percent of the first year audit fee.Required:
Whether the above arrangement is acceptable under both legal and ethical guidelines? Explain your answer in the light of ATR-14.Hint: For solving this GDB, read ATR-14 mentioned in Members’ Handbook from page 11 to page 14 available on the following link:
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