M/s. CP and Associates are appointed as the Peer Reviewer of M/s. RS and Co., Chartered Accountants. On going through the Profit and Loss account of…

CA Final · Advanced Auditing, Assurance and Professional Ethics · PYQS · September 2025
M/s. CP and Associates are appointed as the Peer Reviewer of M/s. RS and Co., Chartered Accountants. On going through the Profit and Loss account of the firm, it was observed that in following assignments they had charged fees which were contingent upon the findings or results of such work. In which of the below assignments undertaken, M/s. RS and Co. have violated the provisions of Regulation 192?
(A) (A) In case of assignment as a liquidator, fees are charged on a percentage of the realization of the assets.
(B) (B) In case of assignment as auditor of a co-operative society, the fees are charged on the percentage of the paid-up capital.
(C) (C) In case of assignment for appearing before the Income Tax Appellate Tribunal on behalf of an audit client, the fees are charged based on the reduction in the demand note issued by the Income Tax Department.
(D) (D) In case of assignment of cost optimization, the fees are charged on a percentage of the benefit derived.

Suggested Answer and Working Notes:

Correct Answer: Option (C)

(C) In case of assignment for appearing before the Income Tax Appellate Tribunal on behalf of an audit client, the fees are charged based on the reduction in the demand note issued by the Income Tax Department.

Topics: Professional Ethics & Liabilities of Auditors

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