For each of the following scenarios, evaluate whether the situation involves pos

Question

For each of the following scenarios, evaluate whether the situation involves possible violations of the AICPA’s Code of Professional Conduct. For each situation state: 1) The relevant rule or interpretation that applies to this scenario (Rule number and title); 2) Whether there is a violation of the Code (yes or no); and 3) Your rationale in deciding whether there is a violation.

A. Rankin and Company, CPAs, has a sophisticated network-based computer server that supports the firm’s technological systems and databases. Because of excess capacity available on the server, the CPA firm agreed to maintain on its server accounting records for one of their non-public audit clients.

B. A CPA firm has incorporated and started providing public accounting services. The only shareholders in the corporation are existing employees of the organization, including partners, staff who are CPAs, staff who are not CPAs and administrative personnel.

C. A CPA is a member of a national CPA firm. Her business card includes her name, the firm’s name, address and telephone number and the title “IT Consultant”.

Explanation / Answer

A.

1)         Rule 101-Independence.

2)         Violation.

3)         There is a violation of the section 101 AICPA as the auditor’s liberty is being hindered in the present condition.

B.

1)         Rule 101 – Independence.

2)         Violation

3)         If the members of the CPA team are having financial significance the business of the clients as the self-determination of the auditors is impaired. As CPA is only the shareholders therefore the independence of auditor is vulnerable.

C.

1)         Rule 102 – Integrity and Objectivity

2)         Violation

3)         If the member uses the CPA title in a way to imply that he or she is free of the employer, the member would be intentionally misrepresenting particulars in violation of rule 102.

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