Craig Thome works in a public accounting firm and hopes to eventually be a partner. The man¬ agement of Allnet Company invites Thome to prepare a bid to audit Allnet’s financial statements. In dis¬ cussing 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 Thome’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 Thome accept this audit fee arrangement? Why or why not?

4 . Describe some ethical considerations guiding your recommendation.