The National Metal Works Limited manufactures and retails door and window frames. The company recently dismissed their external auditors. The directors have approached your firm of accountants to act as their auditors and the directors have proposed a fee of KShs. 1,000, 000 plus a bonus of 1% of profits after tax

Required:

a) Describe the steps you would take before advising the partners of your firm whether to
(8 marks)
accept the appointment as auditors or not

b) State with reason whether professional auditors should accept the method of
remuneration as proposed by the directors of the client company. (6 marks)

Explain the implications of fixing the audit fee by negotiation between the directors and
the external auditors on the independence of the auditor.
(6 marks)