Jadiny Help Save & EX EP 03-02 Independence, Integrity, and Objectivity Cases. [LO3), [L05) Knowledge of the rules of conduct, interpretations thereof, and related rulings on independence, integrity, and objectivity will help you respond to the following cases. Required: For each case, state whether or not the action or situation violates the rules of professional conduct, explain why, and cite the relevant rule or interpretation a. Your client, Contrary Corporation, is very upset over the fact that your audit last year failed to detect an $800,000 inventory overstatement caused by employee theft and falsification of the records. The board discussed the matter and authorized its lawyers to explore the possibility of a lawsuit for damages. Toolbar navigation BI V S A2 O This question will be sent to your instructor for grading. 3 of 9 ERE Next > 2 c. In response to the lawsuit by Contrary, you decided to start litigation against certain officers of the company, alleging management fraud and deceit. You are asking for a damages judgment of $500,000 Toolbar navigation This question will be sent to your instructor for grading. 3 d. The Allright Insurance company paid Contrary Corporation $700,000 under fidelity bonds covering the employees involved in the inventory theft. Both you and Contrary Corporation have dropped your lawsuits. However, under subrogation rights, Alright has sued your audit firm for damages on the grounds of negligent performance of the audit 5 points Toolbar navigation BIOS = A Print e. Colt & Associates, PAs, audit Gore Company, Alice Colt (CEO) and Bill Gore (president) discovered a limited real estate partnership deal that looked too good to pass up. Colt purchased limited partnership interests amounting to 23% of all such interests, and Gore personally purchased 31%. Unrelated investors held the remaining 46%. Colt and Gore congratulated themselves on the opportunity and agreed to be passive investors with respect to the partnership. Toolbar navigation BI VS 3 A2 o This question will be sent to your instructor for grading. Prey 3 of 9 Next > 21.59 pm education.com 25 - f. A group of dissident shareholders filed a class-action lawsuit against both you and your client, Amalgamated Inc., for $30 million They allege there was a conspiracy to present misleading financial statements in connection with a recent merger. Toolbar navigation BI VS E E E AL g. PA Anderson, a partner in the firm of Anderson, Olds & Watershed (AOW, a professional accounting corporation), owns 25% of the common shares of Dove Corporation (not a client of AOW). This year Dove purchased a 32% interest in Tale Company and is accounting for the investment using the equity method of accounting. The investment amounts to 11% of Dove's consolidated net assets. Tale Company has been an audit client of AOW for 12 years. O This question will be sent to your instructor for grading, Next > 3 of 9 g O here to search J. During 20X4, the former controller of the North Country Bank, now a partner of D&P was frequently called on for stance regarding loan approvals and the bank's minimum chequing account policy. In addition, he conducted a computer teasibility study for North Country Help 3 Toolbar navigation BI V S 5 points 3 Print k. The Cather Corporation is indebted to a PA for unpaid fees and has offered to give the PA unsecured interest-bearing notes Alternatively, Cather Corporation offered to give two shares of its common stock, after which 10,002 shares would be outstanding Toolbar navigation B I g = = = AL V This question will be sent to your instructor for grading. O g here to search Uue Oct 25 11 59 pm Help 3. Johnny Keems is not yet a PA but is doing quite well in his first employment with a large public accounting form. It has been on the Job two years and has become a "heavy junior le passes the PA exam in September, he will be promoted to senior accountant This month, during the audit of Row Lumber Company, Johnny told the controller about how he is remodeling an old house. The controller likes Johnny and has a load of needed materials delivered to the house, billing Johnny at a 70% discount a savings over the normal cash discount of about $300. Johnny paid the bill and was happy to have the materials, which the otherwise would not have been able to afford on his meagre salary Toolbar navigation B TVs nt m. PA Lily Rowan inherited $1 million from her grandfather, $100,000 of which was the value of shares in the North Country Bank. Lily practises accounting in Hamilton, and several of her audit clients have loans from the bank. Toolbar navigation BI SEE A This question will be sent to your instructor for grading, O search Jadiny Help Save & EX EP 03-02 Independence, Integrity, and Objectivity Cases. [LO3), [L05) Knowledge of the rules of conduct, interpretations thereof, and related rulings on independence, integrity, and objectivity will help you respond to the following cases. Required: For each case, state whether or not the action or situation violates the rules of professional conduct, explain why, and cite the relevant rule or interpretation a. Your client, Contrary Corporation, is very upset over the fact that your audit last year failed to detect an $800,000 inventory overstatement caused by employee theft and falsification of the records. The board discussed the matter and authorized its lawyers to explore the possibility of a lawsuit for damages. Toolbar navigation BI V S A2 O This question will be sent to your instructor for grading. 3 of 9 ERE Next > 2 c. In response to the lawsuit by Contrary, you decided to start litigation against certain officers of the company, alleging management fraud and deceit. You are asking for a damages judgment of $500,000 Toolbar navigation This question will be sent to your instructor for grading. 3 d. The Allright Insurance company paid Contrary Corporation $700,000 under fidelity bonds covering the employees involved in the inventory theft. Both you and Contrary Corporation have dropped your lawsuits. However, under subrogation rights, Alright has sued your audit firm for damages on the grounds of negligent performance of the audit 5 points Toolbar navigation BIOS = A Print e. Colt & Associates, PAs, audit Gore Company, Alice Colt (CEO) and Bill Gore (president) discovered a limited real estate partnership deal that looked too good to pass up. Colt purchased limited partnership interests amounting to 23% of all such interests, and Gore personally purchased 31%. Unrelated investors held the remaining 46%. Colt and Gore congratulated themselves on the opportunity and agreed to be passive investors with respect to the partnership. Toolbar navigation BI VS 3 A2 o This question will be sent to your instructor for grading. Prey 3 of 9 Next > 21.59 pm education.com 25 - f. A group of dissident shareholders filed a class-action lawsuit against both you and your client, Amalgamated Inc., for $30 million They allege there was a conspiracy to present misleading financial statements in connection with a recent merger. Toolbar navigation BI VS E E E AL g. PA Anderson, a partner in the firm of Anderson, Olds & Watershed (AOW, a professional accounting corporation), owns 25% of the common shares of Dove Corporation (not a client of AOW). This year Dove purchased a 32% interest in Tale Company and is accounting for the investment using the equity method of accounting. The investment amounts to 11% of Dove's consolidated net assets. Tale Company has been an audit client of AOW for 12 years. O This question will be sent to your instructor for grading, Next > 3 of 9 g O here to search J. During 20X4, the former controller of the North Country Bank, now a partner of D&P was frequently called on for stance regarding loan approvals and the bank's minimum chequing account policy. In addition, he conducted a computer teasibility study for North Country Help 3 Toolbar navigation BI V S 5 points 3 Print k. The Cather Corporation is indebted to a PA for unpaid fees and has offered to give the PA unsecured interest-bearing notes Alternatively, Cather Corporation offered to give two shares of its common stock, after which 10,002 shares would be outstanding Toolbar navigation B I g = = = AL V This question will be sent to your instructor for grading. O g here to search Uue Oct 25 11 59 pm Help 3. Johnny Keems is not yet a PA but is doing quite well in his first employment with a large public accounting form. It has been on the Job two years and has become a "heavy junior le passes the PA exam in September, he will be promoted to senior accountant This month, during the audit of Row Lumber Company, Johnny told the controller about how he is remodeling an old house. The controller likes Johnny and has a load of needed materials delivered to the house, billing Johnny at a 70% discount a savings over the normal cash discount of about $300. Johnny paid the bill and was happy to have the materials, which the otherwise would not have been able to afford on his meagre salary Toolbar navigation B TVs nt m. PA Lily Rowan inherited $1 million from her grandfather, $100,000 of which was the value of shares in the North Country Bank. Lily practises accounting in Hamilton, and several of her audit clients have loans from the bank. Toolbar navigation BI SEE A This question will be sent to your instructor for grading, O search