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So, we’ve worked up the following scenario-driven exercise to see if you can deduce what does and does not constitute an AICPA ethical violation and to explain “why?”.
Step 1: Review the AICPA code of professional conduct Links to an external site..
You don’t need to read the code from cover to cover but do make a pass through the document to see what it entails.
You’ll also want to reference our earlier video on AICPA ethicsLinks to an external site..
Step 2: Review each of the ethical scenarios below:
Toggle the accordion to reveal the scenario details.
Jessica Alma
Jessica Alma has been serving as the senior auditor on the audit of Carolina BioHealth, Inc. Because of her outstanding work, the head of internal audit at Carolina BioHealth extended her an offer of employment to join the internal audit department as an audit manager. When the discussions with Carolina BioHealth began, Jessica informed her office’s managing partner and was removed from the audit engagement.
Miller and Yancy CPAs
The audit firm of Miller and Yancy, CPAs, has joined an association of other CPA firms across the country to enhance the types of professional services the firm can provide. Miller and Yancy share resources with other firms in the association, including audit methodologies, audit manuals, and common IT systems for billing and time reporting. One of the partners in Miller and Yancy has a direct financial interest in the audit client of another firm in the association.
Spencer Dunn
Spencer Dunn is the partner in charge of the audit of Brentwood Bank. Dunn is in the process of purchasing a mountain house and has obtained mortgage financing from Brentwood Bank.
Melanie Greer
Melanie Greer’s audit client has a material investment in Summit, Inc. Greer’s nondependent parents also own shares in Summit, and Summit is not an attest client of Greer’s firm. The amount of her parent’s ownership in Summit is insignificant to Greer’s net worth.
Joe Pugh
Joe Pugh is a former partner in Pinnacle and Hughes, CPAs. Recently, he left the firm to become the chief operating officer of Ensworth Clothing, Inc., an audit client of Pinnacle and Hughes. In his new role, Pugh has no responsibilities for financial reporting. Pinnacle and Hughes made significant changes to the audit plan for the upcoming audit.
Odonnel Inc.
Odonnel Incorporated has struggled financially and has been unable to pay the audit fee to its auditor, Seale and Seale, CPAs, for the 2022 and 2021 audits. Seale and Seale are currently planning the 2023 audit.
Morris and Williams
Morris and Williams, a regional CPA firm, is providing information systems consulting to one of their publicly traded audit clients. They are assisting in implementing a new financial reporting system selected by management.
Chris Lancaster
Chris Lancaster is a financial analyst in the financial reporting department of Cockerham International, a privately held corporation. Chris was asked to prepare several journal entries for Cockerham International related to transactions that have yet to occur. The entries are reflected in financial statements that the company recently provided to the bank in connection with an outstanding loan.
Step 3: Select FOUR scenarios and address the following questions:
Does this scenario represent a violation of the AICPA code of professional conduct?
If “no,” explain clearly why not.
If “yes,” explain the following:
The nature of the violation
The specific rule (part of the code) which is being violated
The rationale for the relevant rule
Step 4: Post your ethical analysis for your four scenarios in a discussion post.
Copy and paste the scenario description and the answers to the step 3 questions.
Make a single post that includes all your scenarios (rather than four separate posts).
