Edgy & Co. is an established firm of accountants based in a rural area. They have two main types of clients. One type is the local businesses mainly farmers, farm suppliers, retailers, and estate agents. The second type is the wealthy individuals who have retired and who need help with their tax returns and investment advice. The clients are all small or medium-sized. You have just been made a partner of Edgy & Co. bringing the number of partners to six. As the youngest partner, it was thought that you would be most aware of the latest rules and regulations.

You have been instructed to review the state of the firm's technical and ethical values and its compliance with professional regulations. You note the following:

• Thaws, a client which sells tractors and other equipment, has recently been taken over by a larger, national concern, Mega plc. You discover that your senior partner has been approached to quote for the audit of Mega plc. He is keen to make a pitch at a low initial fee since he thinks that this will bring in some big fees for other services in the longer term.

• By chance, you discover that another of your partners, Bill Oddly, works in his spare time for an audit client, Lovely Lands, a real estate agency. You are relieved to find that Oddly has never been the audit partner on the audit of Lovely Lands.

• In conversation with one of the tax managers, you learn that a tax client has good connections in the City of London and has offered to give some lucrative share tips based on information that has not yet been released to the public. If these tips proved successful, the client would expect a reduced tax bill and a lower fee.

• Edgy & Co has just gained a new audit client, a country estate that rents holiday cottages. One of your partners has made a business loan to help the estate to develop.

• At a partners' meeting recently, the decision was made that Edgy & Co. should become more commercial and go after more clients by means of a local advertising campaign. The majority of the partners liked the slogan 'For the best advice, get Edgy'.

 

a) Identify in each of the above situations, the technical or ethical concerns you might have.

 

b) What are the key elements of good professional ethics and why is it important for the accounting profession to have high ethical values?

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