. Each of these are real-life situations involving possible AICPA Code violations. For each one, state three things: 1. what rule is applied to the situation; 2. whether it is a violation of the Code or not and if so 3. explain the nature of the violation.

1. Jenkins and Rosenberg, CPAs is performing consulting services to help management of Mount Olive Global Services streamline its production operations. Jenkins and Rosenberg structured the fee for this engagement to be a fixed percentage of costs savings that result once the new processes are implemented. Jenkins and Rosenberg perform no other services for Mount Olive Global Services.

2. Betty Smith is a financial analyst in the financial reporting department of Raleigh Technologies International, Inc., a privately held corporation. Betty was asked to prepare several journal entries for Raleigh, Inc. 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.

3. Matthews and Morris, 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.

4. Joy Foster has been serving as the senior auditor on the audit of Carolina BioHealth, Inc. Because of her outstanding work, the head of the 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, Joy informed her offices managing partner and was removed from the audit.

5. Odyssey Inc. has struggled financially and has been unable to pay the audit fee to its auditor, Singletary and Singletary, CPAs, for the 2014 and 2015 audits. Singletary and Singletary are currently planning the 2016 audit.

6. Joe Staples is a former partner in Baker and Simpson, CPAs. Recently, he left the firm to become chief operating officer of the Food Lion, Inc., which is an audit client of Baker and Simpson. In his new role, Joe Staples has no responsibilities for financial reporting. Bake and Simpson made significant changes to the audit plan for the upcoming audit.

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

8. Omar Bishop is the partner in charge of the audit of Southern Bank. Bishop is in the process of purchasing a beach condo and has obtained mortgage financing from Southern Bank.

9. The audit firm of Ford and Freeman, CPAs, has joined an association of other CPA firms across the country to enhance the types of professional services the firm can provide. Ford and Freeman 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 Ford and Freeman has a direct financial interest in the audit client of another firm in the association.

10. Rachel Anderson, CPA, stayed longer that she should have at an annual holiday party of Anderson and Associates, CPAs. On her way home she drove through a red light and was stopped by a police officer, who observed that she was intoxicated. In a jury trial, Anderson was found guilty of driving under the influence of alcohol. Because this was not her first offense, she was sentenced to 30 days in jail and her drivers license was revoked for one year.

11. Rick Henderson, CPA, serves as controller of a U.S. based company that has a significant portion of its operations in several South American countries. Certain government provisions in selected countries require the company to file financial statements based on international standards. Rick oversees the issuance of the companys financial statements and asserts that the statements are based on international financial accounting standards; however, the standards he uses are not those issued by the IASB.

12. In preparing the personal tax returns for a client, Steve Motive, CPA, observed that the deductions for contributions and interest were unusually large. When he asked the client for backup information to support the deductions, he was told, Ask me no questions, and I will tell you no lies. Motive completed the return on the basis of the information acquired from the client.

13. A nonaudit client requests assistance from Steve Watson, CPA, in the installation of a local area network. Watson has no experience in this type of work and no knowledge of the clients computer system, so he obtains assistance from a computer consultant. The consultant is not in the practice of public accounting, but Watson is confident of his professional skills. Because of the highly technical nature of the work, Watson is not able to review the consultants work.

14. Frank DiSalvo is a CPA, but not a partner, with three years of professional experience with Thomas Jenkins and Company, CPAs. He owns 25 shares of stock in an audit client of the firm, but he does not take part in the audit of the client, and the amount of stock is not material in relation to his total wealth.

15. Seven small Maryland CPA firms have become involved in an information project by taking part in an interfirm working paper review program. Under the program, each firm designates two partners to review the audit files, including the tax returns and the financial statements of another CPA firm taking part in the program. At the end of each review, the auditors who prepared the working papers and the reviewers have a conference to discuss the strengths and weaknesses of the audit. They do not obtain authorization from the audit client before the review takes place.

16. Sarah Adams, CPA, set up a casualty and fire insurance agency to complement his auditing and tax services. She does not use her own name on anything pertaining to the insurance agency and has a highly competent manager, Jack Franks, who runs it. Adams often requests Franks to review the adequacy of a clients insurance with management if it seems underinsured. She believes that she provides a valuable service to client by informing them when they are underinsured.

17. Evans, CPA, provides tax services, management advisory services, and bookkeeping services and also conducts audits for the same nonpublic client. Because the firm is small, the same person often provides all the services.

18. Justin Reynolds, CPA, wants to go into business with another person who is not a CPA. The other person is good at tax preparation and Justin is good at auditing. The new business with be a partnership called Justin Reynolds and Associates, CPA.

19. Sheila Banks, CPA has been unable to finish a clients tax return because of a death in her family. So she files an extension for the client. The client is not happy and requests his records to be returned to him Sheila states that she has put in time on this job and the fees must be paid before the records will be returned.

20. Jack Montana, CPA is a sole proprietor operating a business out of Mount Olive N.C. He has been so busy with audits that are due that he filed an extension and paid an estimated payment. He then forgot to file his tax return by October extension deadline.