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L5 Notes_Part_2 - © W.R Knechel Audit Fee Determination...

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Audit Fee Determination Inform Expected future losses Benefits of associating with client Audit Market Conditions Audit Production costs Cost/benefit of associating with client Audit Fee How Many Cues? Auditor’s Judgment Reality Audit production costs = f(cost of staff by time and grade, out of pocket, slack for unforeseen problems, risk) E(future losses) = f(regulatory sanctions, litigation, reputation damage, inability to pay fees) E(Benefits) = growth, industry leadership, good for staff, access to management with integrity, favorable year end, willingness to accept fee increases, other services
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Unformatted text preview: © W.R. Knechel Audit Fee Determination Cost of staff by time and grade: size, complexity, and risk 80% Internal control strength 1st year learning Internal auditors assistance anticipated Need for a spet Can they pay the fee? Not an AICPA concern Retainer (smooth cash flow) 1990s: Non audit services -> audit as loss leader Did the predecessor get paid? Aesop: Fox and Lion Footprint going into Lion’s den but not coming out, bones. Story A/P aging, need to have clients to make partner...
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