Principles and rules of the code of professional conduct
Required
Identify and discuss any professional conduct issues in the following independent scenarios.
(a) Adnan is a certifi ed general accountant working for a national fi rm. He is at his desk when he overhears his colleague Joan having a phone conversation. She is telling the person on the other end of the call that Gupta Co., the firm's largest audit client is about to release the company's audited annual financial statements and the results are spectacular. Joan says she just bought some shares as she expects that the share price will go up.
(b) John Drake, a partner at Drake and Buetz, is meeting with a potential new client. The client recently saw the firm's TV advertisement claiming that the firm was "the premier accounting firm in western Canada." The client requires a review engagement report with its financial statements to obtain a bank loan. John advises that his fee will be 10 percent of any bank loan granted.
(c) Sue Chen, CA, is working on the audit engagement for Jones Construction, a reporting issuer. José, the accountant at Jones Construction, is unsure how to calculate the tax provision. Sue has advised José not to worry. She will prepare the tax provision and ensure that the disclosures are in accordance with generally accepted accounting principles (GAAP) so that she can issue a clean audit opinion.
(d) Sue Chen, CA, is working on the audit engagement for Jones Construction, a private entity. During the course of the audit, she prepares a number of routine journal entries. She makes the required adjustments before she releases the financial statements.
(e) Sue Chen, CA, is working on the compilation engagement for Jones Construction. The bookkeeper, Luc, processes the day-to-day transactions, but he does not prepare any closing adjusting entries. Sue prepares the year-end amortization entry and the adjustment to the shareholder account. She then reviews the financial statements with Wade Jones, the owner, and releases the financial statements.
(f) Jack Bond is a partner in a national firm. He is responsible for the audit for Canada Bank. He recently purchased a car for his daughter and took out a car loan with Canada Bank.
(g) Jack Bond is a partner in a national firm. The firm is the auditor for Canada Bank. Jack's father-in-law is the chief operating officer for Canada Bank.
(h) James Lei, CA is reviewing his firm's accounts receivables. He notices that one of his largest audit clients has not paid its fees for the last two years.
(i) Alison Kotecha, CA, is meeting with a potential new audit client, Klein Advertising. She paid Johan Smit, a former colleague, $1,000 for the referral. Although she hasn't performed any audit engagements for the last four years, she did recently take a GAAP course. During the meeting, she reads over the prior year's financial statements and tells the client she will accept the engagement. She tells the client that she will do a substantive-based audit; therefore, she is certain that the fee will be less than the fee charged by the previous auditor.
(j) Matt Green is married to Jennifer Green, who owns Muffins to Go, a small private entity. Jennifer is a baker and not an accountant. However, she needs a set of financial statements prepared to attach to her tax return. Her husband Matt tells her that he will prepare them.