Mary, a CPA who practices forensic accounting as a sole proprietor, was engaged to perform investigative services for an attorney pursuant to impending litigation. Mary was very busy with other engagements, so she hired a private investigator (PI) who recently became licensed and was relatively inexperienced to perform the financial investigation required for the engagement. When the PI completed his report, the PI apprised Mary that he had made several judgments as to what to include in the report. Mary scanned it quickly and reproduced it, unchanged, on her letterhead.

1. What section(s) of the code did Mary most likely violate?

Kevin is preparing to perform a valuation engagement for ABS Inc., a commercial business that provides a service to the state of Virginia. The valuation engagement involves valuing a plot of land near ABS for the purpose of determining a value to use in negotiations to purchase the land from its present owner. Because Kevin knows the management of ABS well (he performs monthly compilation services for ABS), he decides not to issue an engagement letter. As part of its contractual arrangement with Virginia, ABS is required to use a valuation approach specified by the state. This valuation approach is not addressed in VS section 100, Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset, in AICPA Professional Standards). Kevin dutifully follows the guidance contained in VS section 100 (except for using the valuation approach specified by Virginia) applicable to a valuation engagement and issues a calculation report.

Required

1. Has Kevin complied with the provisions of the code? Explain.

Stanley Moore, a U.S. citizen, forensic accountant, and certified fraud examiner, owned a foreign bank account that he controlled in Switzerland. The highest balance of the account was $900,000 and, at one time, Stanley wired $500,000 from his foreign bank account to a U.S. bank account that he also controlled. He did not report that he had a financial interest in (and signatory authority over) this foreign bank account on Schedule B of Form 1040 for any of the years that he owned the account. Penalties for individuals for failure to report on Schedule B are a maximum of $100,000, imprisonment of not more than 3 years, or both, together with the costs of prosecution. In addition, Stanley did not file a “Report of Foreign Bank and Financial Accounts” (commonly referred to as an FBAR) for any of the years that he owned the account. The FBAR is to be filed annually with the U.S. Department of Treasury when a U.S. citizen or resident alien or non-resident alien has a financial interest in, or signatory authority over, a financial account in a foreign country with an aggregate value of more than $10,000 at any time during a calendar year. For not complying with the law, Stanley faces a civil penalty of $10,000 for each non-willful violation; however, if the violation is found to be willful, the penalty for each violation is the greater of $100,000 or 50 percent of the amount in the account.

The case was investigated by the IRS and resulted in Stanley pleading guilty to willful violation of failure to file an FBAR. He was sentenced to pay $200,000 in penalties and to serve two years imprisonment.

Required

1. Does any part of the CFE Code of Professional Standards Interpretation and Guidance of the Association of Certified Fraud Examiners apply in this situation? (The link to the CFE Code of Professional Standards can be found at www.acfe.com/standards/.)
2. What type(s) of punishment could the ACFE Board of Regents impose in this situation? (Access the ACFE Bylaws at www.acfe.com/acfe-bylaws.aspx.)

Gary is a forensic accountant and CPA who has practiced for nine years and has established an excellent reputation for the quality of his work and for his honesty. Two years ago he and another CPA, Sandy, merged their practices. Although Gary handles all forensic accounting engagements, Sandy performs attestation work.

Recently, Gary was approached by an attorney who would like to engage him to help prepare a case for litigation. The case involves a matter that requires the skill of a forensic accountant. Gary's initial meeting went well and provided him with enough information to determine that he was qualified to perform the work needed by the attorney. Telling the attorney that he would think about whether to accept the engagement, he returned to his office.

After thinking about the potential engagement and checking his work calendar to determine whether he would be able to perform the engagement within the time period expected by the attorney, he decided that he would accept the engagement. Once he called the attorney to let her know that he would be happy to work on the case, she divulged the name of the party involved in the litigation. Gary recognized the name immediately. It was his wife's brother-in-law (the husband of Gary's wife's sister).

Required

1. Are there any threats that might operate to affect Gary's compliance with the code and what code rule (or rules) should Gary consult before performing work on the engagement?
2. Under what circumstances, if any, may Gary accept the engagement?
3. Are there any safeguards that Gary can implement to reduce any threats that exist?