KPMG: How Many Firms Case Study Solution
Advantages and Disadvantages:
The audit firms provides services related to audit and non-audit services such as tax and consultancy services to their client. The firm who provides both services of audit and other than audit services to same client then this will result in some advantage and disadvantages for the audit firm as well as for the client. Following are the advantages and disadvantages for providing both services to same client (Chron, 2017).
Conflict of Interest:
If the firm of audit provides the services of audit and services of consultancy to the same client then the conflict of interest might occur. As at the one side audit firm conducts the audit and it have to give true and fair view regarding the client’s financial Statement and at other side the audit firm being the tax consultancy recommend the ways in which client can maximize their profit by avoiding the tax charges.
Biased Attitude:
Audit may be conducted by biased attitude if the client threaten the audit firm regarding that taking their audit services to another firm and also consultancy services if the client will not get the favorable audit and consultancy services. Therefore for their business benefits the audit might be conducted with biased attitude and give them favorable services. In addition to that, despite of any pressure from the company side the audit himself can conduct an audit with biased attitude as they might have been build the relationship with a company due to providing non-services
Objectivity:
The objectivity of an audit firm can be compromised as the accountancy and audit firm provide both audit and other than audit services to same client. By this the firms of audit and accountancy will become too close with their client and due to this the objectivity of an auditor could be compromised and it is also possible that the shareholders and investors will less rely on the audit report due to same auditor providing both the services
High Understanding:
In addition to disadvantages as discussed above, there is also benefit for providing the audit services and other than audit services to the client. As by providing the both services, the audit firm will have high understanding of their accounts, as the auditor will already have gone through account of the company and the auditor have knowledge what are the policies of the company how the company is being operated and many other thing related to this and this will help the auditor in conducting their audit.
Time Saving:
Another advantages if the same audit firm give the both services to a company, is that it will save the time of the company and also save time for itself as the audit firm has gone through their accounts and environment of the company therefore they will not waste more time on finding or gathering the information.
Impact of Small Number of Firms:
Due to the smaller number of international accounting firm across the world, the accounting firms have high bargaining power of supplier and it can easily take the benefit by charging the higher fees from the public companies and the public companies has to pay higher amount to the audit firms for conducting the audit as they have no any other option and bargaining power........
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