QUESTIONT TWO (2)
Accounting ethics are specific rules that and guidelines set by government bodies that
every person associated with accounting should follow to prevent misuse of financial
information or their management position. Example;
There is a company, Y ltd. Who appoints a company as its auditor conducting audit of
the financial statements of the company for the fiscal year 2018-19. At the same time of
deciding the fees for the audit assignment, the company offered the payments of K15,
000 if the auditor gives a clean audit opinion about the company.

In the above case company Y ltd. offers the fee of K15, 000 to the auditor
appointed by it, if the auditor gives the clean audit opinion about the working of
the company.

These fees, which have the condition of fulfillment of specific criteria, is the
contingent fee that is offered by the client to the auditor. The situation is the win
– win for both client as well as for the auditor as the auditor will get the extra fee,
a company will get a clean opinion from the auditor for its working.

This is affecting the independence of the auditor as with extra fee auditor will
help the company in giving the clean audit opinion as required.

However, if the auditor accepts such contingent fees, then it is the misconduct of
the accounting ethics because the firm is motivating the auditor to give a clean
opinion by providing incentive of the same. Hence the auditor should not accept
the terms and conditions of the client.