Morgan and Jones, CPAs, is a mid-tier accounting firm operating in the Kentucky-Ohio region.  Morgan and Jones (M&J) has about 300 business clients and overall annual revenue of $10 million.  M&J's largest audit client is Snix &Snax, Incorporated, a food products manufacturer.  Snix and Snax (S&S) is a large private company.  Tom Morgan has been the lead partner on the audit for fifteen years.  He is very comfortable with the M&J's relationship with S&S over the years and even more so now because the new CFO of S&S (Hao Huang) is a former Manager at M&J who left the firm last year to take on his new role.  Hao and Tom know each other well and were teammates on their high school golf team.  Still today they catch a round of golf together whenever they can.  

S&S pays M&J about $1,100,000 per year for their audit.  Recently, S&S reached out to the consulting arm of M&J to discuss an engagement in which the consulting team would reconfigure the production process at S&S.  The reconfiguration will include installation of high-tech automated material handling equipment and the related interfaces of the equipment with inventory record keeping and financial reporting systems software.  While the total fee for the consulting engagement is uncertain due to contingencies, it is expected to run between $2 million and $3 million dollars in 2022.  Some of that fee will relate to the training of current S&S employees on the new process.  Another component of the fee will support M&J's ongoing oversight of the new production process for the first six months.  In 2023, the consulting fees are expected to drop to a "maintenance level" of $300,000 per year.

Required.  

1. Identify all potential Morgan and Jones violations of AICPA guidelines found in either the Code of Professional Conduct and Plain English Guide to Independence.  Cite the guidelines at issue.
   
     
2. If any potential violations are found, for each violation identify possible safeguards that would allow Morgan and Jones to continue both the audit and consulting work for S&S.

Answer rating: 100% (QA)

There are several potential violations of AICPA guidelines that Morgan and Jones MJ may have committed as follows Threat to Independence According to ... View the full answer