Reference no: EM132724781

Question - For each of the following independent situations, state whether the CPA has violated generally accepted auditing standards and/or the CPA-Canada Code of Ethical Principles and Rules of Conduct or Independence Standard AND explain your reasoning.

1. Susan, a CPA, is engaged to review the financial statements of a client company. A major shareholder of the company is a mutual fund of which Susan owns shares. Her investment in the mutual fund is not material relative to her total investment portfolio. On completion of the engagement, Susan issues a standard review report, modified only to indicate her lack of independence from the client.

2. Yang, CGA, was approached by a potential small business client who asked him if he could compile the company's financial statements from the initial transaction records, making whatever adjustments he considered necessary to produce financial statements that could be filed with the company's tax returns. Yang accepted the engagement and prepared a balance sheet and income statement, without notes, to which he appended an unmodified "Notice to Reader."

3. Jacob, CGA, has recently taken out an advertisement in the local newspaper in which he offers to conduct reviews of GST and provincial sales taxes for companies for which he will be compensated only by a percentage of the recoveries of overpaid taxes. He also offers to review personal and corporate income tax returns and assessments on the same basis (that is, his compensation will be contingent on the recoveries of taxes paid or assessed).

4. Mathew, a CGA, primarily prepares audits of private companies. He regularly attends meetings with his assurance clients and creditors to discuss the audited financial statements, ratios, and other covenant calculations. Mathew attends these meetings as a passive participant and his discussion with the creditors is limited to factual information only.