Joe Piper was a CPA and a partner with a successful accounting firm Piper & Associations in
Question:
Joe Piper was a CPA and a partner with a successful accounting firm Piper & Associations in Raleigh, NC. His troubles began when his practice started making a great deal of money from several key clients and he gained a reputation for his brash behavior and partying. It drew the attention of the local business community when he picked up a $10,000 tab at a strip club for a celebratory night of expensive liquor with a high-profile client. Later he was detained by police when he got into a shoving match with another patron at a bar in Wilmington during a convention in August 2017. He was not arrested, but the incident was reported in the local newspaper by a reporter covering the event. His real troubles began when he was successfully sued by Kyle Davis the partner of a family-owned business XYZ, Inc. Piper began became interested in acquiring ownership of the company and struck a deal with the company’s shareholder Emily Rivers, who owned 50% of the company to buy to purchase her half of the company. According to the deal, Piper was to pay the Rivers family a $50,000 lump sum, followed by monthly payments of $6,000 until the purchase of the shares was complete. Prior to, during, and after the negotiations, Piper’s accounting firm continued to provide tax preparation services to XYZ, Inc. A number of incidents of alleged wrongdoing were included in the lawsuit. Davis, the other 50% owner of XYZ sued Piper, alleging Piper had opened a line of credit on behalf of XYZ, Inc. with a local bank. A check from the company account in the amount of $50,000 was then written to Rivers without Davis’s knowledge. The check was alleged to be the lump sum payment Piper owed Rivers for the purchase of his shares. Court documents indicate Piper called the $50,000 payment to Rivers “compensation for services to XYZ, Inc.” Furthermore, Davis alleges Piper transferred $90,000 from XYZ, Inc. to himself in monthly installments of $8,500. Davis says these transfers were never discussed with or approved by him. Piper & Associates prepared XYZ’s 2017 tax documents, which indicated that Piper was a co-owner of the business. Because Piper did not acquire Rivers’ stocks and become a co-owner until January of 2018, Davis alleged that Piper falsely named himself as co-owner in order to receive tax benefits from XYZ’s 2017 losses.
Instructions: Using the Rules of Professional Ethics and Conduct established by the North Carolina State Board of CPA Examiner, which can be found here here, please identify which sections of the Rules are violated and explain why.
Auditing and Assurance services an integrated approach
ISBN: 978-0132575959
14th Edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley