ACC614DiscussionsWeek 1 - Discussion 2- AICPA Code of Professional Conduct

Week 1 - Discussion 2

• Certified public account (CPA), Sal Colt, has discovered a way to eliminate the tedious work of processing routine accounts receivable confirmations by contracting with the Cohen Mail Service. After the auditor has prepared the assurances, Cohen stuffs them in envelopes, mails them, receives the return replies, opens them, and returns them to Colt.

Sal Colt has broken all four provisions of Rule 201 (a, b, c, and d). Sal breaks (a) since he uses a mail service that isn’t accredited in any way to handle his A/R confirmations, which is against the law. The lack of personal guarantees is unprofessional behavior on their part. (b) if Sal doesn’t take precautions and oversee the verifications themselves. However, the mailing service is not prepared to recognize or answer auditing inquiries. As a result of (c), Sal failed to meet the criterion of clearly defining and performing the auditing that was to be done because he failed to supervise the mail service staff. When you send the paperwork back to Sal, there’s no way to know that he has all the information necessary to provide an unbiased assessment of the receivables. Given this evidence, it is reasonable to conclude that Sal Colt broke Rule 201 of the AICPA Code of Professional Conduct.

• Chen Wallace, CPA, has two audit clients: Willingham Corporation, owned by Jayden Willingham, and Ward Corporation, owned by Bailey Ward. Willingham Corp. sells a large proportion of its products to Ward Corp., which amounts to 60 percent of Ward Corp.’s purchases in most years. Willingham and Ward are also Wallace’s tax clients as individuals. While preparing Ward’s tax return this year, Wallace discovered information suggesting Ward Corporation was failing financially. Considering that the companies and individuals are mutual clients, Wallace discussed Ward Corporation’s financial difficulties with Willingham.

In this case, Chen Wallace has infringed Rule 301 of the AICPA Code of Professional Conduct, indicating a conflict of interest. Evidence that Mr. Wallace has been supplying the Willingham Corporation and the Ward Corporation led to this conclusion. Willingham Corporation and Ward Corporation cooperate in that Willingham sells many of its products to Ward. Wallace has broken rule 301, which can be summed up as the requirement to safeguard client confidentiality by offering professional services to both entities, such as tax returns. Wallace must also use caution and not disclose the customer’s proprietary information to anyone outside the organization without obtaining permission from the client. Finally, Wallace has broken Rule 102, which requires a certified public accountant to act with complete objectivity, integrity, and independence while serving more than one client. As a professional, Wallace would have to choose which customer would best benefit from their services.

References

Louwers, T. J., Bagley, P. L., Blay, A. D., Strawser, J. R., & Thibodeau, J. C. (2021). Auditing & assurance services (8th ed.). McGraw Hill.