Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 4, Problem 23DQP
To determine
State the applicable rule of conduct and whether it is a violation for each of the situations given.
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Each of the following situations involves a possible violation ofthe AICPA Code of Professional Conduct. For each situation, state the applicable section ofthe rules of conduct and whether it is a violation.a. Emrich, CPA, provides tax services, management advisory services, and bookkeepingservices and also conducts audits for the same nonpublic client. Because the firm issmall, the same person often provides all the services.b. Franz Marteens is a CPA, but not a partner, with 3 years of professional experiencewith Roberts and Batchelor, CPAs. He owns 25 shares of stock in an audit client ofthe firm, but he does not take part in the audit of the client, and the amount of stockis not material in relation to his total wealth.c. A nonaudit client requests assistance of M. Wilkenson, CPA, in the installationof a local area network. Wilkenson had no experience in this type of work andno knowledge of the client’s computer system, so he obtained assistance from acomputer consultant. The…
Gloria and Deloria, CPAs, have recently started their public accounting firm and intend to provide attestation and a variety of
consulting services for their clients, which are all nonpublic. Both Ms. Gloria and Mr. Deloria have particular expertise in designing
payroll and other disbursement systems. Ms. Gloria is concerned about whether any of the following services would impair their
audit independence.
a. For each of the services in the accompanying table, provide a judgment as to whether providing the service would impair
attest independence. Assume that management has designated a management-level individual to be responsible for overseeing
the CPA's services and has established appropriate internal control. Also assume that the client is privately held and does not
report to the SEC.
b. Now assume that the services are being contemplated for nonattest clients. Which of the services does the AICPA Code of
Professional Conduct prohibit under this assumption?
Situation
Number
1.
2.…
Which of the following acts by a CPA would be most likely to be a violation of the AICPA Code of Professional Conduct?
Select one:
A “covered member” owns an immaterial amount of stock in an audit client.
Accepting a fee in a tax matter that is contingent upon the result of an administrative proceeding.
Assisting a client in preparing a financial forecast.
Forming a professional corporation to practice as a CPA.
Chapter 4 Solutions
Auditing And Assurance Services
Ch. 4 - Prob. 1RQCh. 4 - Describe an ethical dilemma. How does a person...Ch. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 8RQCh. 4 - Prob. 9RQCh. 4 - Prob. 10RQ
Ch. 4 - Prob. 11RQCh. 4 - Prob. 12RQCh. 4 - Prob. 13RQCh. 4 - Prob. 14RQCh. 4 - Prob. 15RQCh. 4 - Prob. 16RQCh. 4 - Prob. 17RQCh. 4 - Prob. 18.1MCQCh. 4 - Prob. 18.2MCQCh. 4 - Prob. 18.3MCQCh. 4 - Prob. 19.1MCQCh. 4 - Prob. 19.2MCQCh. 4 - Prob. 19.3MCQCh. 4 - Prob. 20.1MCQCh. 4 - Prob. 20.2MCQCh. 4 - Prob. 20.3MCQCh. 4 - Prob. 21DQPCh. 4 - Prob. 22DQPCh. 4 - Prob. 23DQPCh. 4 - Prob. 24DQPCh. 4 - Prob. 25DQPCh. 4 - Prob. 26DQPCh. 4 - Prob. 27DQPCh. 4 - Prob. 28DQPCh. 4 - Prob. 30CCh. 4 - Prob. 31CCh. 4 - Prob. 32C
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- For each of the situations listed, identify which of three principles (integrity, objectivity and independence, or due care) from the AICPA Code of Professional Conduct is violated. Assume allpersons listed in the situations are members of the AICPA. (Note: Refer to the AICPA Code ofProfessional Conduct contained on pages 25–27 in Chapter 1 for descriptions of the principles.)a. Reggie, the managing partner of an audit firm, has the authority to approve all transactions. As a result, he uses firm funds to purchase a new couch for his home.b. Taylor is a first-year auditor for a large public accounting firm. She is assigned to auditBike Global, a regional travel agency specializing in bike tours. Taylor does not discloseto her firm that her mother is a co-owner of Bike Global, since Taylor knows that shewill not allow herself to be influenced by her mom.c. Rick has been working for his company for ten years and is required to attend internal control training annually. Rick does not…arrow_forwardThe following relates to the Menendez–Halliburton situation described in the text.(a) How would you characterize Halliburton’s accounting for revenue from ethical and professional perspectives?(b) Once KPMG learned that Menendez had provided a complaint to Halliburton’s audit committee highlighting questionable accounting and auditing practices, the KPMG audit partner instructed the audit team members to avoid communications with Menendez. How would you characterize those actions ethically and professionally?arrow_forwardThe following scenarios may result in non-compliance with one or more of the principles in the code of ethics, by the auditor or accountants. John, a chartered accountant who is employed by a state-owned enterprise, appeared before a commission of enquiry into financial irregularities that occurred under his direction. John denied his involvement but there was proof made available which indicated he was lying. John acknowledged that he had lied and then went on to state that he was instructed to do so by his superiors. Discuss if the chartered accountants or registered auditors in each of the scenarios above, have failed to comply with any of the fundamental ethical principles in the code of conduct.arrow_forward
- Other Responsibilities and Practices Cases. Read the following cases. For each, statewhether the action or situation shows a violation or potential for violation of the AICPACode of Professional Conduct; if so, explain why, and cite the relevant rule.a. CPA Ron Stout completed a review of the unaudited financial statements of Wolfe Gifts.Arvida Wolfe was very displeased with the report. An argument ensued, and she toldStout never to darken her door again. Two days later, she telephoned Stout and demandedthat he return (1) Wolfe’s cash disbursement journal, (2) Stout’s documentation scheduleof adjusting journal entries, (3) Stout’s inventory analysis documentation, and (4) allother documentation prepared by Stout. Wolfe had not yet paid her bill, so Stout repliedthat state law gave him a lien on all of the records and he would return them as soon asshe paid his fee.b. CPA O’Dell May teaches a CPA review course at the university. He needs problem andquestion material for students’…arrow_forwardFor each of the situations described below, identify the category of threat to the fundamental principles of the SAICA Code of Professional Conduct. Additionally, specify at least one fundamental principle that is compromised in each situation. a) An auditor has shares in a company which is an audit client of theirs. b) An accountant has compiled the financial statements for a client and was requested to also audit the statements. c) The financial director of Baboo Ltd is very aggressive and dismissive of the audit function and audit team. d) A chartered accountant values a client's shares and then leads the negotiations on the sale of the client's company. e) The chartered accountant fails to report a fraud at a client because the perpetrator is a close friend and he is sympathetic to the interest of his friendarrow_forwardEach of the following situations involves possible violations ofthe AICPA Code of Professional Conduct. For each situation, state whether it is a violationof the Code. In those cases in which it is a violation, explain the nature of the violationand the rationale for the existing rule.a. The audit firm of Miller and Yancy, CPAs, has joined an association of other CPAfirms across the country to enhance the types of professional services the firm canprovide. Miller and Yancy share resources with other firms in the association,including audit methodologies, audit manuals, and common IT systems for billingand time reporting. One of the partners in Miller and Yancy has a direct financialinterest in the audit client of another firm in the association.b. Bruce Sullivan, CPA, is the audit partner on the engagement of Xylium Corporation,which is a public company. In structuring the agreement with the audit committeefor the audit of Xylium’s financial statements, Sullivan included a clause that…arrow_forward
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