The following are situations that may violate the general rules of conduct of professional accountants. Assume in each case that the PA is a partner. a. Simone Able, a PA, owns a substantial limited partnership interest in an apartment building. Juan Rodriquez is
a 100 percent owner in Rodriquez Marine Ltd. Juan also owns a substantial interest in the same limited partnership as Simone. Simone does the audit of Rodriquez Marine Ltd.
b. Horst Baker, a PA, approaches a new audit client and tells the president that he has an idea that could result in a substantial tax refund in the prior year's tax return by application of a technical provision in a tax law that the client had overlooked. Horst adds that the fee will be 50 percent of the tax refund after it has been resolved by Canada Revenue Agency. The client agrees to the proposal.
c. Chantal Contel, a PA, advertises in the local paper that her firm does the audit of 14 of the 36 largest drugstores in the city. The advertisement also states that the average audit fee, as a percentage of total assets for the drugstore she audits, is lower than that of any other public accounting firm in the city.
d. Olaf Gustafson, a PA, sets up a small loan company specializing in loans to business executives and small companies. Olaf does not spend much time in the business because he works full time in his public accounting practice. No employees of Olaf's public accounting firm are involved in the small loan company.
e. Louise Elbert, a PA, owns a material amount of stock in a mutual fund investment company, which, in turn, owns stock in Louise's largest audit client. Reading the investment company's most recent financial report, Louise is surprised to learn that the company's ownership in her client has increased dramatically.
REQUIRED
Discuss whether the facts in any of the situations indicate violations of the rules of conduct for professional accountants. If so, identify the nature of the violation(s).