Question

Provided is a list of actions or situations that show a violation of the AICPA Code of Professional Conduct. For each case, select the relevant rule that is being violated. Relevant Rule or Interpretation a. Your client. Contrary Corporation, is very upset over the fact that your audit last year failed to detect an $800,000 inventory overstatement caused by employee theft and falsification of the records. The board discussed the matter and authorized its attorneys to explore the possibility of a lawsuit for damages Independence Rule b. Contrary Corporation filed a lawsuit alleging negligent audit work, seeking $1 million in damages. Compliance with Standards Rule Form of Organization and Name Rule General Standards Rule Independence Rule Integrity and objectivity Rule d. In response to the lawsuit by Contrary, you decided to bring litigation against certain officers of the company alleging management fraud and deceit. You are asking for a damage judgment of $500,000 The Alright Insurance Company paid Contrary Corporation $700,000 under a fidelity bond covering an inventory theft by employees. Alright is suing your public accounting firm for damages on the grounds of negligent performance of the audit, claiming that a proper audit would have uncovered the theft sooner and the amount of loss would have been considerably less. Your audit olent, Science Techinc, installed a cost accounting system devised by the consulting services department of your firm. The system failed to account property for certain product costs (according to management), and the system had to be discontinued. Science Tech management was very dissatisfied and filed a lawsuit demanding return of the $10,000 consulting fee. The audit fee is normally about $50,000 and $10,000 is not an especially large amount for your firm. However, you believe that Science Tech management operated the system improperly. You are willing to do further consulting work at a reduced rate to make the system operate, but you are unwilling to return the entire $10,000 fee. Independence Rule A group of dissident shareholders filed a class-action lawsuit against both you and your client, f. Amalgamated Inc., for $30 million. They allege there was a conspiracy to present misleading financial statements in connection with a recent merger CPA Ellis Lisa, a shareholder in the firm of Eden, Benjamin, and Block, P.C. (a professional accounting corporation) owns 25 percent of the common stock of Dove Corporation (not a client of Eden, Benjamin, and Block). This year, Dove purchased a 32 percent interest in Tale Company and is accounting for the investment using the equity method of accounting. The investment amounts to 11 percent of Dove's consolidated net assets. Tale Company has been an audit client of Eden, Benjamin, and Block for 12 years. CPAs Mark and Ben Saliba are the father-and-son partners of Queens, LLP. They have a 12 percent joint private investment in ownership of the voting common stock of Hydra Corporation, which is not h. an audit client of Queens, LLP. However, the firm's audit client, Howard Company, owns 48 percent of Hydra, and this investment accounts for 20 percent of Howard's assets (using the equity method of accounting) i. Drew Francie and Madison Brian, CPAs, regularly perform the audit of the First National Bank, and the fimm is preparing for the audit of the financial statements for the year ended December 31, 2017 (1) Two directors of the First National Bank became partners in Francie and Brian, CPAs, on July 1, 2017, resigning their directorship on that date. They will not participate in the audit. 1 Drie 2017 the free entrallar of first time DSL Astarin Consid

Answer 1

A. INDEPENDENCE RULE

B. INDEPENDENCE RULE

C. INDEPENDENCE RULE

D. INDEPENDENCE RULE

E. INTERGRITY AND OBJECTIVE

F. ADVERTISING AND OTHER FORMS OF SOLICATION

G. FORM OR ORGANISATION AND NAME RULE

H. COMPLIANCE WITH STANDARD RULE

I. COMPLIANCE WITH STANDARD RULE

J. COMPLIANCE WITH STANDARD RULE

K. COMPLIANCE WITH STANDARD RULE

L. GENERAL STANDARD RULE

M. COMPLIANCE WITH STANDARD RULE

N. INTEGRITY AND OBJECTIVITY RULE