Following are five independent situations involving possible violations of the CPA-Canada Code of Ethical Principles and Rules of Conduct.

 

Required:

For each situation, indicate whether the CPA-Canada Code of Ethical Principles and Rules of Conduct has been violated or not violated. Explain your reasoning.

 

Sol, CPA — a sole public practitioner — has been losing considerable business to one of his competitors — Jess, CPA — another practitioner operating in the same town. Sol has heard comments from some of his clients that Jess has been aggressive in offering to perform services for very low fees. Jess has also placed   advertisements on bulletin boards of local stores and in other public places for his CPA practice, which is named "Assurance Services Ltd." Sol believes that Jess is engaging in unfair and unprofessional competition, and therefore files a formal complaint against Jess with his provincial CPA Association.

 

A CPA is the sole owner of a luxury automobile dealership, Excalibur Cars Ltd., which specializes in the    retail sale of luxurious automobiles. She is also a partner in a CPA firm that, among other things, compiles the financial statements for the dealership and prepares the company's tax returns. Because the automobile business is based on reputation and trust, she has a prominent sign in the auto dealership and on the dealership's business correspondence (that is, letterhead) explaining that she is also a CPA and a partner in a CPA firm.

 

Crown, CPA, is the controller of a furniture company operating in Manitoba, Canada. As part of his duties, Crown prepares the company's tax returns. While preparing these returns for the current year, Crown is told by the company's president to reduce the amount of inventories by $1,000,000, so as to reduce taxable income and conserve the company's cash. Crown complies with the president's request since he believes that the amount involved is not material, as taxable income after the reduction in inventories will still be about $12,000,000.

 

Soldera, CPA, is performing management advisory services for a client whose shares are publicly traded. Soldera learns that the client's financial statements issued in the previous fiscal year, on which another CPA firm gave an unmodified opinion, were materially misstated due to a failure to record certain liabilities. These audited statements were issued 6 months ago. Soldera therefore informs the client and the provincial securities commission (at the same time) about the misleading financial statements.

 

For many years, Garfield, CPA, has compiled the financial statements of his sister's shoe store, Those Shoes Inc., and has issued an appropriate notice to reader. He also provides his sister with free tax advice, but does not prepare the store's tax returns. This year, his sister wants to obtain a bank loan, and she asks her brother to   review the store's financial statements and submit his review engagement report to the bank. Garfield, howe ver, does not want to get involved in assurance services for the store, and instead recommends a CPA friend who   does not know his sister.