If a firm offers an assurance engagement at a significantly lower fee, what must they demonstrate to ensure there’s no self-interest threat?

In an assurance engagement, particularly when a firm offers its services at a significantly lower fee, it is crucial to address potential self-interest threats that may arise from this pricing strategy. To mitigate these threats and maintain the integrity of the engagement, the firm must not only assign qualified staff but also ensure that all relevant assurance standards are fully adhered to.

Qualified staff implies that the team has the necessary skills, knowledge, and experience to perform the engagement competently. However, simply having qualified individuals is not enough to ensure the quality and credibility of the assurance service. Assurance standards cover the ethical and professional conduct of the auditors, the quality control procedures, and the methodology to be used in the engagement. Adhering to these standards reinforces the reliability of the audit findings and demonstrates the firm's commitment to maintaining quality in its services.

Therefore, for a firm to convincingly show that a lower fee does not compromise the integrity of the engagement or lead to a self-interest threat, it must adequately staff the engagement with qualified personnel while simultaneously adhering to all applicable assurance standards. This dual assurance of staffing competence and compliance with established standards promotes confidence in the service provided, alleviating concerns over potential conflicts of interest that may arise due to reduced fees.