Raula Kato discovered a material reporting error in accounting records of Sampoon, Inc. (SI), during the annual audit. The error was so significant that it will certainly have an adverse effect on the price of the client’s stock which is actively traded on the western stock exchange. After talking to his close friend, and president of SI, Kato agreed to withhold the information until the president had time to sell his SI stock. Kato leaked the information to his parents so that they could sell their shares of stock as well. The reporting matter was a relatively complex issue that involved recently issued reporting standards. Kato told himself that if he were caught he would simply plead ignorance. He would simply say that he did not have time to keep up with the rapidly changing standards and he would be off the hook.

a. Write a memo that identifies specific articles of the AICPA Code of Professional Conduct that were violated by Kato.
b. Would pleading ignorance relieve Kato from his audit responsibilities?

  • CreatedOctober 12, 2013
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