The following are situations that may violate the Code of Professional Conduct. Assume, in each case, that the CPA is a partner, unless stated otherwise. Discuss whether the facts in any of the situations indicate violations of the Code of Professional Conduct. If so, identify the nature of the violation(s):
1. Elbert, CPA, owns a material amount of stock in a mutual fund investment company, which in turn owns stock in Elbert’s largest audit client. Reading the investment company’s most recent financial report, Elbert is surprised to learn that the company’s ownership in his client has increased dramatically.
2. Jasmine, CPA, has set up a small financial services company that specializes in 401Ks and health plans for small businesses. However, Jasmine takes her CPA work with her when she is at the financial services company and has two other CPAs helping her with the financial company.
3. Upon reviewing a new client’s financial statements, Rukan, CPA, approaches the company’s president. He noticed that several of the company’s checks have been canceled and then rewritten at a later date, but there are two cashed checks for the same amount of money. The company’s bookkeeper quit two months prior to the audit.
4. Samir, CPA, is hired to do the audit of Al-Sharif Transportation Co. Samir owns a substantial limited partnership interest in a construction company. Zubair Al-Sharif is a 100% owner in Al-Sharif Transportation Co. Al-Sharif also owns a substantial limited partnership in the same construction company as Samir.
5. After the auditor of a construction company suddenly quit, Basil, CPA, was hired to do the accounting for the company. The audits are due within two weeks, and there are several discrepancies between bank statements and the general ledger. He spoke to his supervisor, who told him to reconcile the two books as quickly as possible.
6. Jamal, CPA, works for Gilgamesh Practices. As part of his job, he is in charge of the audit, tax return, bookkeeping, and management services work for the Uthman Decorating Company. Makin Uthman relies on Jamal’s advice before making any business decisions that could significantly affect the taxes or financial statements of his company. Jamal also attends all meetings of the company’s board of directors. Because he doesn’t know too much about the industry, Jamal attends some professional development courses in interior decorating. Recently, it was announced that Uthman’s vice president will be retiring soon, and Uthman has hinted that he would like Jamal to join his company with a higher pay than he is currently receiving at Gilgamesh.
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