In which one of the following situations would a Chartered Professional Accountant be in violation of the Code of Professional Conduct in determining the audit fee?
(1) A fee is based on whether the CPA’s report on the client’s financial statements results in the approval of a bank loan.
(2) A fee is based on the outcome of a bankruptcy proceeding.
(3) A fee is based on the nature of the service rendered and the Chartered Professional Accountant’s expertise instead of the actual time spent on the engagement.
(4) A fee is based on the fee charged by the prior auditor.