Knowledge of the rules of conduct and interpretations thereof regarding various other responsibilities and practices will help you respond to the following cases.
For each case, state whether or not the action or situation shows violation or potential for violation of the ICAO rules of professional conduct, explain why, and cite the relevant rule or interpretation.
a. R. Stout, PA, completed a review of the unaudited financial statements of Wolfe Gifts. Ms. Wolfe was very displeased with the report. An argument ensued, and she told Stout never to darken her door again. Two days later, she telephoned Stout and demanded he return (1) Wolfe’s cash disbursement journal, (2) Stout’s working paper schedule of adjusting journal entries, (3) Stout’s inventory analysis working papers, and (4) all other working papers prepared by Stout. Since Wolfe had not yet paid her bill, Stout replied that provincial law gave him a lien on all the records and that he would return them as soon as she had paid his fee.
b. The PA firm of Durkin & Panzer had received promissory notes in payment of the Henshaw Hacksaw company tax return preparation fee. Six months after the notes were due, PA Durkin notified Dave Henshaw that the notes had been turned over to the North Country Bank for collection.
c. PA Panzer has been invited to conduct a course in effective tax planning for the City Chamber of Commerce. The C. of C. president said a brochure would be mailed to members giving the name of Panzer’s firm, his educational background and degrees held, professional society affiliations, and testimonials from participants in the course held last year comparing his excellent performance with that of other PAs who have offered competing courses in the city.
d. PA Philby is a member of the provincial bar. Her practice is a combination of law and accounting, and she is heavily involved in estate planning engagements. Her letterhead gives the affiliations: Member, Provincial Bar of —, and Member, CICA.
e. The PA firm of Burgess & Maclean has made a deal with Cairncross & Company, a firm of management consulting specialists, for mutual business advantage. B&M agreed to recommend Cairncross to clients who need management consulting services. Cairncross agreed to recommend B&M to clients who need improvements in their accounting systems. During the year, both firms would keep records of fees obtained by these mutual referrals. At the end of the year, Cairncross and B&M would settle the net differences based on a referral rate of 5% of fees.
f. Sturm & Drang, PAs, conduct an aggressive, growing practice in Middle City. The firm pays 20% of first-year fees to any staff member (below partner) who brings in a new client.
g. Jack Robinson and Archie Robertson (both PAs) are not partners, but they have the same office, the same employees, and a joint bank account, and they work together on audits. A letterhead they use shows both their names and the description “Members, ICAO.”
h. PA Dewey retired from the two-person firm of Dewey & Cheatham. One year later, D&C merged practices with Howe & Company, to form a regional firm under the name of Dewey, Cheatham & Howe Company.
i. Fritz Brenner, PA, died and widow Brenner inherited the interest he had in the PA firm of Brenner & Horstmann, P.C. Can widow Brenner share in the partnership as a passive investment? She is not a PA.