4-24 (Objectives 4-5, 4-7) Each of the following situations involves possible violations of the AICPA Code of Professional Conduct. For each situation, state whether it is a violation of the Code. In those cases in which it is a violation, explain the nature of the violation and the rationale for the existing rule.

Jessica Alma has been serving as the senior auditor on the audit of Carolina BioHealth, Inc. Because of her outstanding work, the head of internal audit at Carolina BioHealth extended her an offer of employment to join the internal audit department as an audit manager. When the discussions with Carolina BioHealth began, Jessica informed her offices managing partner and was removed from the audit engagement.

The audit firm of Miller and Yancy, CPAs, has joined an association of other CPA firms across the country to enhance the types of professional services the firm can provide. Miller and Yancy share resources with other firms in the association, including audit methodologies, audit manuals, and common IT systems for billing and time reporting. One of the partners in Miller and Yancy has a direct financial interest in the audit client of another firm in the association.

Spencer Dunn is the partner in charge of the audit of Brentwood Bank. Dunn is in the process of purchasing a mountain house and has obtained mortgage financing from Brentwood Bank.

Melanie Greers audit client has a material investment in Summit, Inc. Greers nondependent parents also own shares in Summit, and Summit is not an attest client of Greers firm. The amount of her parents ownership in Summit is not significant to Greers net worth.

Joe Pugh is a former partner in Pinnacle and Hughes, CPAs. Recently, he left the firm to become the chief operating officer of Ensworth Clothing, Inc., which is an audit client of Pinnacle and Hughes. In his new role, Pugh has no responsibilities for financial reporting. Pinnacle and Hughes made significant changes to the audit plan for the upcoming audit.

Odonnel Incorporated has struggled financially and has been unable to pay the audit fee to its auditor, Seale and Seale, CPAs, for the 2017 and 2018 audits. Seale and Seale is currently planning the 2019 audit.

Morris and Williams, a regional CPA firm, is providing information systems consulting to one of their publicly traded audit clients. They are assisting in the implementation of a new financial reporting system selected by management.

Chris Lancaster is a financial analyst in the financial reporting department of Cockerham International, a privately held corporation. Chris was asked to prepare several journal entries for Cockerham International related to transactions that have not yet occurred. The entries are reflected in financial statements that the company recently provided to the bank in connection with a loan outstanding due to the bank.

a. Identify and explain any items included in Other Information that need not be part of the auditors report.

b. Explain the deficiencies in Patels report as drafted.*