Robert Lewandowski, the owner of iEat Inc., a private company that designs and installs interactive computer display terminals in coffee shops and restaurants, recently switched auditors and hired his friend Chris Persson to perform the company’s annual financial statement audit. i Eat needs the audit as part of its financing arrangement with a private lender. Chris recently received his Chartered Professional Accountant (CPA) designation and was eager to make some money to pay off his student loans. So he offered Robert a discount and promised to perform the audit for 15 percent less than any other accounting firm. To appease the private lender, Robert told Chris that iEat must have a clean audit opinion. Chris told Robert that it should not be a problem as he recently wrote the Certified Fraud Examiner exam, and because of that his work would be superior to that of other “older” auditors who may not be as up-to-date on the most recent auditing and accounting standards. Chris also felt obligated to help his friend, as two years ago Robert co-signed on a mortgage for Chris’s condo. Because Chris trusted Robert, he did not bother to communicate with the previous auditor of iEat. By discounting his audit fee and promising to perform audits better and faster than other accounting firms, over a short period of time, Chris was able to add a few other clients. When the iEat audit was scheduled to start in March 2021, Chris was so busy with other audits and the preparation of corporate tax returns for his audit clients that he had no time to conduct the iEat audit. Instead, he hired Adam and Ewa, two recent university accounting graduates to do the work. Chris told Adam and Ewa to quickly review their university audit textbook and begin the iEat audit immediately. He instructed them to first draft a clean audit opinion and email it to him and in three weeks return back with an audit file that would support the drafted clean opinion. Burdened with their student loans and facing a tough job market, Adam and Ewa accepted this new challenge. They also felt that it would help them in their preparations for the CPA PEP Assurance module. To get Adam and Ewa started on the iEat audit, Chris provided them the audit plan for another audit client he was working on. This audit program did not always match up with what had to be done at iEat, so Chris instructed Adam and Ewa to delete whatever was not relevant, but not to add anything, as that would only make things more complicated and could delay the completion of the audit. Chris was also glad when he found out that Adam was related to the controller of iEat. He thought that this relationship would make the audit go more smoothly and quickly. Alexandra, the controller, was Adam’s aunt, and he lived with her when he attended his last year of university. Alexandra had also promised to hire Adam once he received his CPA designation. Chris came to iEat only once over the course of the three week audit to discuss iEat’s corporate tax return with Chris and Alexandra. He did, however, like to Snapchat with Ewa and at least once a day sent her a goofy Live Story. From his audit class, Adam remembered that it was important for auditors to attend and observe the year-end inventory count, so he became concerned when he found out that Ewa failed to show up and observe the year-end count at two warehouses that were assigned to her. Instead, Ewa went out clubbing to celebrate her friend’s birthday. The iEat audit program stated that inventory should be observed at three warehouse locations, but Adam had only observed the inventory at one warehouse. When Adam told Chris about what happened, he told him to get inventory listing sheets from Alexandra for the two warehouses assigned to Ewa and make sure that the inventory balance in iEats’s general ledger agreed with the total for all their inventory sheets. At the end of the audit, Adam and Ewa brought their working papers to Chris, who had little time to review them, as he was still busy with completing iEat’s tax return. Chris recorded his conclusion that “the financial statements are fairly stated” and asked Adam to print the audit opinion they drafted for him at the
start of the audit.

REQUIRED
Identify and discuss the Rules of Professional Conduct violated and the nature of the violations. In addition, identifyand discuss any actions taken during the audit that have resulted in the failure to comply with generally accepted auditing standards.