What does "low-balling" refer to in the context of auditing?

In the context of auditing, "low-balling" refers to the practice of charging less than the market rate for audit services. This strategy is often used by firms to attract new clients or secure contracts in a competitive environment. By offering lower fees than competitors, a firm may create an incentive for potential clients to choose their services over others.

Low-balling can impact the perception of audit quality, as significantly lower prices may raise concerns about the adequacy of resources allocated to the audit process. It could potentially lead to a compromise in the thoroughness or effectiveness of the audit due to diminished financial incentives and resources available to the auditors. This practice is often viewed critically within the industry, as it can undermine the profession's perceived value and integrity.

The other options do not accurately capture the essence of low-balling. Charging more than market value, providing additional services for free, or refusing to negotiate fees do not reflect the concept of low-balling, which is fundamentally about underpricing services to gain competitive advantage.