Dilemma 1:
A CPA's client, Galaxy, performs payroll service for approximately forty companies including twelve of the CPA's clients. The payroll services performed by Galaxy include all of the standard payroll operations along with payment, i.e. for each payroll period. Galaxy receives funds from each company to deposit in a special imprest bank account to cover the payroll checks issued to their employees. During the current audit of Galaxy, the CPA discovers that Galaxy's liabilities exceed its assets by approximately $50,000. After discussing the problem with Galaxy, the CPA is considering notifying its clients who use Galaxy's services to stop sending funds to Galaxy lest the cash disappear or become frozen due to legal or financial complications.
Dilemma 2:
Freon Company has decided to deviate from a generally accepted accounting principle (GAAP) in publishing their financial statements because Freon believes that the statements would be misleading, if they followed GAAP. The CPA concurs in this departure from GAAP. In his report, the CPA is considering disclosing the following information in a middle paragraph: the deviation and the approximate effects thereof. Based upon these disclosures, the CPA thinks that an unqualified opinion would be appropriate.
For each dilemma, address the following in one 600 word discussion post in APA format using 4 scholarly sources:
Indicate how you would resolve the dilemma. Be specific and respond with logic and reason. Support your conclusion by referencing specific principles and rules from the AICPA Code of Professional Conduct.