Reference no: EM13540641

The following are a number of scenarios that might constitute a violation of the AICPA Code of Professional Conduct.

Required: For each of the sic situations, identify whether it involves a violation of the ethical standards of the profession and indicate which principle or rule would be violated.

a. Tow Hart, CPA, does the bookkeeping, prepares the tax returns, and performs various management services for Sanders, Inc., but does not do the audit. One management service involved the assessment of the computer needs and the identification of equipment to meet those needs, Hart recommended a product sold by Computer Co., which has agreed to pay Hart a 10% commission if Sanders buys its product.

b. Irma Stone, CPA, was scheduled to be extremely busy for the next few months. When a prospective client asked fi Stone would do its next year's audit, she declined but referred them to Joe Rock, CPA. Rock paid Stone $2000 for the referral.

c. Nancy Heck, CPA, has agreed to perform an inventory control study and recommended a new inventory control system for Ettes, Inc., a new client. Currently, Ettes engages another CPA firm to audit its financial statements. The financial arrangement is that Ettes, Inc. will pay Heck 50% of the savings in inventory costs over the two-year period following the implementation of the new system.

d. Brad Gage, CPA, has served Hi-Dee Co. as auditor for several years. In addition, Gage has performed other services for the company. This year, the financial vice president has asked Gage to perform a major computer system evaluation.

e. Due to the death of its controller, an audit client had its external auditor, Gail Klate, CPA, perform the controller's job for a month until a replacement was found.

f. Chris Holt, CPA, conducted an audit and issued a report on the 20X1 financial statements of Tree, Inc. Tree has not yet paid the audit fees for that audit prior to issuing the audit report on 19X2 statements.