Answer the following:

1. Illustrate the per diem or hourly rate basis and maximum fee computations of audit fee.
2. Illustrate the flat of fixed fee and retainers fee computations of audit fee.

6. Cooperation to be extended by the client's staff It is usual that the client and auditor would agree on the client's staff assisting the auditor. This could be by way of the client's staff preparing analyses and schedules instead of the auditors doing it. On a set-up similar to this, the fees are accordingly reduced. METHODS OF SETTING UP THE AUDIT FEE Auditing firms and the audit circumstances may result in varying ways on how the audit fees are established. However, the usual methods in practice are: 1. Per diem or hourly rate basis The charges are determined on the basis of actual time spent. This would include all the members participating in the audit from partner level down to the staff assistants. The charges vary from level to level and are usually made known to the client in advance. At times, the basis may not be hourly, but daily. 2. Flat fee basis Under this method, the client and the auditor agree on a lump-sum audit fee, The charges for travelling and other out-of-pocket expenses are to be charged separately to the client.27 3. Maximum fee basis This method is similar to the per diem or hourly rate basis, but a maximum limit or ceiling is imposed by agreement between the client and the auditing firm. The final bill will be, whichever is lower between the per diem total or the pre- agreed maximum. 4. Retainer basis The usual retainer basis is for the client to pay a uniform monthly retainer fee and an additional amount as an annual charge upon submission of the audit report. This is usually used for long-term audit contracts. A/B Other methods are also acceptable if ethical Example: a 10% professional fee based on a client's tax adjustment is ethical. Why? The tax adjustment will be verified by the courts or by the BIR, so as the basis of the 10% fee is fair. However