Madison Thorne works in a public accounting firm and hopes to eventually be a partner. The management of Allnet Company invites Thorne to prepare a bid to audit Allnet's financial statements. In discussing the audit fee, Allnet's management suggests a fee range in which the amount depends on the reported profit of Allnet. The higher its profit, the higher will be the audit fee paid to Thorne's firm.
Required:
1. Identify the parties potentially affected by this audit and the fee plan proposed.
2. What are the ethical factors in this situation? Explain.
3. Would you recommend that Thorne accept this audit fee arrangement? Why or why not?
4. Describe some ethical considerations guiding your recommendation.