Scenario Below:

Client: Dewey, Cheatem & Howe, LLP

Business: Law firm

Structure: Partnership

Services: Audit and tax

Client contact(s): Mr. Dewey (designated as the Financial matters partner within the law firm)

Mrs. Cheatem (designated as the Tax matters partner with the law firm)

Background Facts

A CPA firm is conducting the annual audit of Dewey, Cheatem & Howe and in the course of performing certain procedures, an auditor discovers an error in the partnerships accounting records. The error is communicated to Mr. Dewey (the clients Financial matters partner) and a proposed adjust is prepared to correct the error.

The law firm has unpaid audit fees as well as unpaid tax fees.

Scenario 1

Mr. Dewey acknowledges the error, the work papers, and financial statements are adjusted to reflect the correction, and the audited financial statements are issued.

Mr. Dewey requests a copy of the correcting journal entry.

Scenario 2

Mr. Dewey doesnt reply to the notice of the error, there are unexpected delays in the production of other documents requested from the law firm, and the audited financial statements have yet to be issued.

Mr. Dewey requests a copy of the correcting journal entry.

Scenario 3

Mr. Dewey acknowledges the error and is provided with a copy of the correcting journal entry, the work papers and financial statements are adjusted to reflect the correction, and the audited financial statements are issued.

Mrs. Cheatem requests a copy of the correcting journal entry.

Question 1

For each scenario, answer the following question based on the applicable California rule / regulation:

Is the CPA firm required to provide the correcting journal entry to the client? Please explain your answer, to include identifying the applicable California rule or regulation.

Question 2

Following the same fact patterns, would your answers to any (or all) of the scenarios change if the only applicable rules / regulations were those within the AICPA Code of Professional Conduct (i.e. if California formally adopted the AICPAs Code rather than establish its own rules / regulations)? Please explain why or why not.