ACC305: Assurance and Attestation

Banyan Tree Holdings (Banyan Tree) is a leading international operator and developer of premium resorts, hotels, spas and residences. Banyan Tree also manages and/or has ownership interests in niche resorts and hotels. Banyan Tree's independent auditor is Ernst & Young LLP. You are an audit manager in JBG LLP. JBG is an established professional accounting firm that provides audit, tax, and advisory services. For purposes of this assignment, assume that Banyan Tree would like to change its auditor, and JBG has been invited to tender for the financial statement audit of Banyan Tree.

Question 1

Assume, for purposes of this assignment, that the audit partner gathered information suggesting that price is an important consideration to Banyan Tree when choosing the audit firm to award the tender to. Illustrate three (3) reasons why companies perceive the cost of external audits as a necessary evil to be driven down as low as possible. (6 Marks)

Your answer should comprise of a discussion of companies in general, AND a discussion in relation to the context of Banyan Tree.