Each of the following situations involves possible violations of the rules of conduct and/or independence threats that apply to CPAs. For each situation, state whether it is a violation.  Where there is a violation, explain the nature of the violation (what type) and the rationale for the corresponding rule (i.e. why is this inappropriate). 

1) Carla is the CFO of Xenon Company. Carla was very happy after her husband Dwayne, a partner at a large PA firm, was assigned as Xenon Company's new auditor. Carla is confident that this will be helpful to Xenon since Dwayne already knows so much about the business.

2) Ken Burns is a partner at Burns and Fields LLP, a PA firm. Ken was approached by a friend who asked him to invest in Safran Group Inc., a growing high tech company. The proposal would be for Ken to invest $650 000 to obtain 3% of the company. Ken decided to go ahead with the investment because Safran is a client from their Seattle office and he has never provided any services to Safran Inc. Ken indicates that he will ensure that he does not work on the audit of Safran. 

3) Xiao, PA, is the auditor of Minkle Credit Union, a medium-sized credit union. Xiao has prepared a management letter with several serious control weaknesses. Management agrees with the facts, but does not want to present the letter with the weaknesses to the audit committee or the board of directors. Management has implied that they will request a change of auditors if your firm presents the management letter to the board.