The scenarios below all involve a possible violation of the AICPA's Code of Professional Conduct.
1.Using the list below,indicate which of the Code of Conduct Rules applies to the scenario.
a.Independence
b.Integrity and Objectivity
c.Contingent Fees
d.Acts Discreditable
e.Commissions and Referral Fees
f.Form of Organization and Name
2. State if the scenario is a violation of the Code.
Scenario:
1.Margaret Henry is a partner in the Tupelo office of Jenkins & Thorn,CPAs.Margaret's father is the controller at Markrich Sporting Supplies,Inc.,a publicly held company in Tupelo.Markrich is one of Jenkins & Thorn's audit clients.Margaret is not involved in the audit of Markrich.
2.Jason Alexander is an audit manager with Reese & Co.,CPAs.Jason owns 100 share of common stock in one of the firm's audit clients,but he does not provide any audit or non-audit services to the company.
3.The accounting firm of Fine & Herman,CPAs,provides bookkeeping and tax services for Henderson Corporation,a privately held company.Mr.Herman also performs the annual audit of Henderson Corporation.
4.Elaine Cooper,CPA,is the auditor of Paula's Pizza.Toward the end of the audit,Paula gave Elaine her estimate of receivable collectability and Elaine accepted it without any testing.
5.Charley Ray,CPA,is a member of the engagement team that performs the audit of Desiree Corporation.Charley's five-year-old daughter,Becky,received ten shares of Desiree common stock for her fifth birthday in a trust fund established by Becky's grandmother.
6.Freeman and Johnson formed a successful CPA practice ten years ago.In the current year,they approached Adam Sawtooth,a surgeon and medical expert,and asked him to assist them with their growing medical consulting practice.Sawtooth agreed,but only after he was given an ownership interest in the firm.Sawtooth does intend to reduce his private practice hours and spend 40% of his working hours devoted to the Freeman & Johnson practice.
7.Sally Preen has a successful computer network consulting business.Sally has recommended one of her clients to Sam Walton,CPA.To show gratitude for the referral,Sam has agreed to pay Sally a token gift of $50.Sam has not disclosed the payment arrangement to his ne clients.
8.The accounting firm of Smith & Black,CPAs,is negotiating a fee with a new audit client where the client will pay $50,000 if the client obtains the line of credit needed for working capital purposes.Otherwise,the fee will be $40,000.
9.Brad Barns,CPA,was traveling from Las Vegas to the Grand Canyon when he was pulled over by a police officer for suspicion of driving under the influence.He was convicted in court of driving under the influence of alcohol and received six months' probation.
10.Manuel Lopez,CPA,is a senior in a small,local,CPA firm that audits Childress,Inc.,a closely held corporation.Manuel's sister was recently appointed as the controller for Childress,Inc.

Which of the Following Circumstances Impairs an Auditor's Independence

Multiple Choice

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