Read the following cases. For each cases state whether the action or situation shows a violation, or potential violation, of the AICPA Code of Professional Conduct. Explain why and cite the relevant rule or interpretation. As a class, lets be sure to answer all the different cases.

Without consulting Jora Cramer, its CPA, Cadentoe Corporation has changed its accounting so that it is not in conformity with the Generally Accepted Accounting Principles (GAAP). During the regular audit engagement, Cramer discovers that the statements based on the accounts are so grossly misleading that they might be considered fraudulent. Cramer resigns the engagement after a heated argument. Cramer knows that the statements will be given to Sandy Panzer, a friend at the Last National Bank, and that Panzer is not a very astute reader of the complicated financial statements. Two day later, Panzer calls Cramer and asks some general questions about Cadentoes statements and remarks favorably on the very thing that is misrepresented. Cramer corrects the erroneous analysis and Panzer is very much surprised.

A CPA who had reached retirement age arranged to sell the practice to another certified public accountant. Their agreement called for the review of all audit documentation and business correspondence by the accountant purchasing the practice.

Martha Jacoby, CPA, withdrew from the audit of Harvard Company after discovering irregularities in Harvards income tax returns. One week later, Jacoby received a phone call from Jake Henry, CPA, who explained that he had just been retained by Harvard Company to replace her. Henry asked Jacoby why she withdrew from the Harvard engagement, and she told him.

Burgess Company engaged Kim Philby, CPA, to audit Maclean Corporation in connection with a possible initial public offering (IPO) of stock registered with the Security and Exchange Commission (SEC). Burgess Company established a holding company named Cairncross Inc. and asked Philby to issue an engagement letter addressed to Cairncross stating that Cairncross would receive the auditors report. Caricross has no assets and Philby agreed to charge a fee for the audit of Maclean only if the IPO is successful.