You have recently been promoted to audit manager. One of your responsibilities is to generate new business.You have been approached by a potential client who appears to be an excellent fit for the organization. However, the client insists on an overly aggressive time allotment for the audit. The client explains that they absolutely need to get the audit done for a pending public offering.
To entice you to accept the audit the client insists that a contingency be put in place in the payment structure. If the audit is done early or on time, your firm receives a bonus. If the audit takes longer than the agreed upon time frame your firm will be penalized.
You also know that the firm has just lost a major client and that if you do not accept the engagement, several of your auditors will have to be terminated. Outline the guidance required by auditors on contingencies. Explain what you would do and why. Are there any alternative strategies?