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Becker & Smith, CPAs, and its client, Troper Lighting, are discussing a possible advisory engagement in which the firm would review Troper's account receivable (A/R) system and recommend changes that would streamline the company's collection process. Troper will pay Becker & Smith a fee based on improved performance in A/R collections. Would this contingent fee arrangement raise any ethical concerns under the profession's rules?

Yes, but only if Becker & Smith was performing other services for Troper.

Yes, if Becker & Smith also performed a review engagement for Troper.

No, but only if Troper is a publicly traded company subject to SEC and PCAOB rules.

No, provided Becker & Smith documents the arrangement in the engagement letter.

Respuesta :

MaxSan
Becker & Smith, CPAs is providing an accounting service to Troper Lighting, and they are discussing the terms, If both the client and provider are ok with    the terms, there wouldn´t have to be any ethical concerns. So.No, provided Becker & Smith documents the arrangement in the engagement letter.
MsTeel

Answer:

Yes, if Becker & Smith also performed a review engagement for Troper.

Explanation:

Review engagement is like a an audit except it only looks to make sure there are no obvious issues with how things are reported or managed (an audit does this but also looks for actual mistakes). If Becker & Smith performed a review and also was in charge of managing Troper's accounts it could raise ethical concerns.

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