Question 3 (8 marks)

Each of the three independent situations below may involve a violation(s) of the rules of professional conduct of CPA Ontario.

Required:

For each of the three situations below, describe the Rules of Professional Conduct violated and explain the nature of the violations.

Situation # 1 (2 marks)

Jessica Khan, CPA, CA, has Relco Corporation as an audit client.Relco asked Jessica to create and install a new computerized payroll system. Because Jessica does not have the appropriate level of expertise, she referred Relco to Systems Running Inc. (SRI), a local software consulting company. Jessica has an arrangement with SRI wherein she is paid ten percent of any fee received by SRI from her referrals.Jessica has disclosed this to her client.

Situation # 2 (2 marks)

Lily Tomlinson is the in-charge auditor on the audit engagement of Xalam Corporation, a public company.The chief financial officer of Xalam has recently called Tomlinson to ask for some advice on the accounting treatment for some complex transactions.According to the chief financial officer it would be best to get it right now rather than later. Tomlinson agrees with this and provides the advice.

Situation # 3 (4 marks)

Avneet Babbar, CPA, CA, has discovered a way to eliminate most of the boring work of processing routine accounts receivable confirmations by contracting with the Better Mail Service (BMS).After the auditor has selected and prepared the confirmations, BMS stuffs them in envelopes, mails them, receives the return replies, opens the replies, keeps track of replies not received and returns them to Avneet