AAA – L3 – SA – Q4.4 – Practice management

What is the definition of low-balling in the context of auditing?

Question

What is low-balling?

A Giving an unqualified audit opinion to preserve retention as the auditor

B Ignoring requests from the secondary auditor

C Ignoring reporting by exception

D Attempting to win the audit by submitting an unrealistically low fee

Answer

Explanation: Low-balling refers to the practice of submitting an unrealistically low fee to win an audit engagement, with the expectation of increasing fees in future years or compensating through profitable non-audit services. Option A is incorrect as it describes compromising audit quality, not low-balling. Option B relates to poor communication with other auditors, not fee-setting. Option C pertains to failing to report exceptions, which is unrelated to low-balling.

Tags: Audit Appointment, Audit fees, Client acquisition, Low-balling, Professional Ethics
Level: Level 3

Topic: Practice management

Uploader: Salamat Hamid