1. A group of dissident shareholders filed a class-action lawsuit against both you and your client, Amalgamated Inc, for $30 million. They allege there was a conspiracy to present misleading financial statements in connection with a recent merger. 2. Groaner Corp is in financial difficulty. You are about to sign the report on the current audit when your firm's office manager informs you the audit fee for last year has not yet been paid. 3. CPA Chapman audited the financial statements of BTV Ltd. These F/S contain capitalized leases that do not meet FASB criteria for capitalization. They resemble more closely the criteria for operating leases. The effect is material, adding $4M to assets and $3.5M to liabilities. However, BTV has a long experience with acquiring such property as its own assets after the "lease" terms end. Chapman and BTV mgmt. believe the F/S should reflect the operating policy of the management instead of the technical requirements of the FASB. Consequently, the auditors' report explains the accounting and gives an unmodified opinion. 4. CPA Sal Colt has discovered a way to eliminate most of the boring work of processing routine accounts receivable confirmations by contracting with the Cohen Mail Service. After the auditors has prepared the confirmations, Cohen stuffs them in envelopes, mails them, receives the return replies, opens the replies, and returns them to Colt. 5. CPA, who has reached retirement age, arranged to sell their practice to another certified public accountant. Their agreement called for the review of all audit documentation and business correspondence by the accountant purchasing the purchase. CPA gave the purchaser full access. 6. CPA O'Dell May teaches a CPA review course at the university. He needs problem and question material for students' practice; thus he decides to pay students who take the exam $5 for each question they can "remember" after taking the exam. 7. Is independence impaired for the individual or the firm in the following scenarios? a. CPA Sandra is a partner at Bain,CPA's (Austin, TX office)and works on the Casa Construction Company (CCC) audit . She owns 100 shares of CCC. b. CPA Sandra sells her shares to CPA Yun, another partner in the Austin office, but is not involved in the CCC audit. c. CPA Yun transferred ownership of the shares to their 12-year old daughter. d. CPA Yun's daughter transferred the shares to her grandfather, who was happy to combine the shares with shares he already owned because now he owns 25% of CCC and can control many of the decisions made by the company. e. CPA Yun's father does not own any stock in CCC. He was hired by CCC during the year, though, as Director of Financial Reporting. He will have the option to purchase stocks in 2 years