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3.2 Lowballing

 Setting a low price initially with the intention of raising it later or by selling
additional services to the client.

 This could lead to a self-interest threat as the auditor may try and keep their
client happy simply in order to win other contracts with them.

 Professional competence and due care may be affected if the low fee leads the
firm to cut corners on the audit to try and minimise losses.

 A reasonable and informed third party may perceive that insufficient time has
been taken to do the audit and quality has been affected because of the low
fee.

 The regulatory system, the desire of audit firms to maintain their reputation, the
cost of litigation and the fear of high profile public scandals should act as a
significant deterrent.

3.3 Contingency fees

 A contingency fee is a fee payable to the accountant upon the completion of a
specified event, or the achievement of a particular outcome.

 Contingency fees could lead to practitioners forcing a specific outcome that
would not normally have been obtained to try and achieve higher fees.

 This could lead to the engagement being conducted without necessary due care
and objectivity.

 The ACCA’s position is that fees should not be charged on a percentage,
contingency or similar basis, except where that course of action is generally
accepted practice e.g. insolvency work.

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