For each of the following independent situations, state whether the CPA has violated generally accepted auditing standards and/or the CPA Ontario Professional Code of Ethics. Explain your reasoning. (That is, violated/not violated and then explain why?)

a. Emily, CPA, completed an audit of the financial statements of Major Breakthrough Inc. (MBI), a public company. During the audit, she became privy to information that MBI’s most recent major breakthrough was falsified and the information was going to made public in the near future. Emily advised her friend who held MBI’s stock to sell before the announcement, which was sure to cause a decline in the stock value. (2 marks)

b. Martha, CPA, a partner in a growing CPA firm, is eager to develop her public practice. She is approached by the president of XYX Corporation, a large public company, who asks her to submit a bid to perform next year’s audit. The president assures her that if the client accepts her bid and likes her work, she will be asked to perform a significant amount of tax services in the future. After some preliminary investigation to gain an understanding of the client and the work that will be needed, she offers to perform the audit for $40,000, which is considerably less than the costs that she expects to incur on the initial engagement. (2 marks)

c. In an effort to expand his business, Mathew, CPA, places an advertisement in the business section of the local newspaper listing specific services he performs and his Page 2 of 2 rate for performing each type of service, some of which are available for a fixed fee and others for an hourly fee, which was also stated in the advertisement. (2 marks)

d. Howard, CPA, discovered, during the audit of his client Ignoble Enterprises Inc., that the company had failed to include a significant amount of income on last year’s corporate income tax return. Howard suggested to the controller that he submit an amended return. When the controller refused, Howard resigned from the engagement. Howard later received a letter from the successor auditor asking if Howard was aware of any circumstances that they should be aware of prior to accepting Ignoble as a client. Howard replied by letter and informed the successor auditor that Ignoble’s management failed to adjust income tax returns containing significant material errors. (2 marks)