The SEC$$s auditor independence rules $[$Rule $2-01($b$)]$ require that external auditors are independent, in both fact and appearance, from their audit clients. Furthermore, the AICPA$$s Rule $510$ prohibits auditors from accepting contingent fees from their audit clients. A contingent fee is one for which the fee will not be collected unless a specified finding or result is attained, or in which the amount of the fee depends on the finding or results of such services. Rule $102($e$)$ of the Federal securities laws provides that $$the $[$SEC$]$ may $...$ deny, temporarily or permanently, the privilege of appearing or practicing before it $...$ to any person who is found $...$ to have engaged in unethical or improper professional conduct.$$

Ernst & Young LLP $($EY$)$ is the auditor for Cintas Corporation. The audit team, led by Adam Bering, employed a billing arrangement in which they provided nonaudit tax consulting services on a contingent basis for Cintas during the period $20092018.$ Bering is an attorney and an EY tax partner. He failed to inquire in response to information indicating that his staff on the Cintas engagement was billing in this prohibited manner. Cintas paid EY $1015\%$ of the benefit it received for federal, state, and local tax credits.

According to Accounting and Auditing Enforcement Release $($AAER$)$ No$.4271,$ a manager on the Cintas engagement informed Bering via email in January $2017$ that Cintas was paying EY on a contingent$-$fee basis. Bering ignored the email and in a follow$-$up phone call told the manager to resolve the issue with the person responsible for invoicing Cintas. Bering did not inquire further and did not attempt to halt the contingent$-$billing arrangement. As a result of the violations, Bering was barred for a year from practicing before the SEC and received a penalty of $$10,000.$

Alan Greenwell is an EY audit partner who was the tax account leader for the Cintas engagement. According to AAER No$.4272,$ he obtained preapproval from Cintas$$ audit committee to perform tax consulting services. The engagement letter specified that the fee would be paid on a time and material basis, but in practice the bills that EY submitted to Cintas were calculated on a contingent$-$fee basis. Greenwell also completed audit work papers stating that EY was independent of Cintas, despite the existence of various red flags that should have alerted Greenwell about the contingent fees. EY fired Greenwell in March $2019.$ As an example of one such red flag, in February $2016$ Greenwell received an email from Cintas stating that the bills for tax consulting during $2014$ and $2015$ would be paid once the precise amount of federal tax credits were known, which clearly indicates a contingency that he failed to investigate further. Greenwell was barred for two years from practicing before the SEC and received a penalty of $$15,000.$

Philip Hurak was a senior manager on the Cintas engagement before resigning from EY in February $2019.$ Hurak was the individual who approved the invoices that were sent to Cintas, which he knew were calculated on a contingent$-$fee basis. He was barred for two years from practicing before the SEC and received a penalty of $$20,000.$

Scott Clark was a CPA who was Cintas$$ Vice President of Corporate Taxation. He approved the payment of EY$$s contingent$-$fee invoices and therefore aided and abetted Cintas$$ violations of federal securities laws. He resigned from Cintas in $2020$ and was barred for a year from practicing before the SEC and received a penalty of $$30,000.$

Given these facts and the significant downside risk they reveal to the auditors and the VP of Corporate Taxation, the question is this: Why did they engage in this behavior? After all, the Cintas consulting fees would still have been substantial even if they had not been calculated on a contingent$-$fee basis.

For each of the four individuals in this case, consider the elements of the fraud triangle: incentive, opportunity, and rationalization. Conjecture about each of these elements for $(1)$ Adam Bering, $(2)$ Alan Greenwell, $(3)$ Philip Hurak, and $(4)$ Scott Clark.