What is the rule regarding audit fees for listed clients?

The rule regarding audit fees for listed clients is that if the total audit fees for an audit client exceed 10% of the firm's total fee income, this scenario requires disclosure and may necessitate consideration of safeguards to reduce the threats to independence.

This threshold is in place to ensure independence and objectivity in the audit process. When a firm's income is heavily reliant on a single client, it may create a risk that the firm becomes too financially dependent on that client. The requirement for disclosure aims to inform stakeholders of this potential risk. Safeguards, such as the implementation of additional oversight or engagement quality control reviews, are crucial in maintaining the auditor's objectivity and integrity in the audit process.

The other options may misconstrue the independence rules. While the percentages mentioned are close, the significance of the 10% threshold is clear in terms of practice standards and the responsibilities auditors have in maintaining professional integrity when auditing listed entities. There are no absolute restrictions on audit fees; rather, the focus is on ensuring that the fees do not compromise the auditor's ability to remain independent and objective.