A Study Regarding Fee Level and Risks on the Financial Auditor Independence. Solutions and Perspectives

Author:Univ.Prof. Eugeniu ŢURLEA, Ph. D.; Mihaela MOCANU, Ph. D. Student; Emil LUNGEANU, Ph. D. Student

JEL:L14, L84, M42

DOI:

Keywords:financial audit, fees, independence, financial dependence

Abstract:
When total fees (irrespective of the type of services offered) that are or will be received from an audit client represent a significant percentage from the turnover of that financial auditor, there is a risk of financial dependence of the auditor on the client-company. A solution to avoid this (even apparent) financial dependence of the audit company on a certain audited entity would be to limit the fee percentage from the total audit fees an audit company can receive from a single client. Another solution would be that no restriction on the fee level exists and instead this level is freely set between auditors and audit committee. Moreover, independence of the financial auditor could be protected by other measures, too, such as the external rotation (the rotation of the audit company).\r\n\r\nThe present article critically analyses these solutions that are also to be found in the financial audit regulations in force at the European Union level, at international level and in the United States of America. Therefore, the present study analyses and compares the European, international and North-American regulations from the perspective of the manner in which they regulate the maximum level of fees cashed from the audit clients, so that the independence of the financial audit remains intact. The research continues with a critical analysis of the answers received on this issue following the debate launched by the Green Paper of the European Commission in 2010 – „Audit policy. Lessons from the crisis”. Last but not least, the authors’ opinions on the investigated issues are supported by arguments.\r\n\r\n

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