The following situations involve a possible violation of the AICPA's
Code of Professional Conduct. For each situation, (1) determine the applicable rule from the
Code, (2) decide whether or
not the
Code has been violated, and (3) briefly explain how the situation violates (or does
not violate) the
Code.
a. In 2014, Freeman and Johnson, both CPAs, decided to form a CPA practice. In 2016, Freeman and Johnson approached Bill Delaney, a physician and medical expert, and asked him to assist them with their growing medical consulting practice. Delaney agreed, but only after he was given an ownership interest in the firm. Delaney does not intend to quit his private medical practice.
Explanation:
b. Brian DePalie has a successful dentistry practice in Charleston. Brian has recommended one of his patients to Katie Walton, CPA. To show gratitude for the referral, Katie has agreed to pay Brian a token gift of $50. Katie discloses the payment arrangement to her new clients.
Explanation:
c. The accounting firm of Bayer & Peng, CPAs, is negotiating a fee with a new audit client. They agree the client will pay $50,000 if Bayer & Peng issues a clean, unmodified opinion, $40,000 if a qualified opinion is issued, and only $20,000 if an adverse opinion is issued.
Explanation:
d. Don Smith, CPA, is a member of the engagement team that performs the audit of Shaw Corporation. Don's five-year-old daughter, Precious, received ten shares of Shaw Corporation's common stock for her fifth birthday. The stock was a gift from Precious's grandmother.
Explanation:
e. Jennifer Harris, CPA, is a partner in the CPA firm that audits Alltech, Inc., a closely held corporation. Jennifer's sister-in-law is the chief financial officer at Alltech, Inc.
Explanation:
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