The following are a number of scenarios that might constitute a violation of the AICPAs Code of Professional Conduct. For each of the five scenarios, indicate which PRINCIPLE would be violated, or if none would be violated. The principles are responsibility, integrity, objectivity and independence, due care, and scope and nature of services.

1. Tom Hart, CPA, does the bookkeeping, prepares the tax returns, and performs various management services for Sanders, Incorporated, but does not do the audit. One management service involved the assessment of the computer needs and the identification of equipment to meet those needs. Hart recommended a product sold by Computer Company, which has agreed to pay Hart a 10% commission if Sanders buys its product.

2. Irma Stone, CPA, was scheduled to be extremely busy for the next few months. When a prospective client asked if Stone would do its next years audit, she declined but referred them to Joe Rock, CPA. Rock paid Stone $2,000 for the referral.

3. Nancy Heck, CPA, has agreed to perform an inventory control study and recommend a new inventory control system for Ettes, Incorporated, a new client. Currently, Ettes engages another audit firm to audit its financial statements. The financial arrangement is that Ettes will pay Heck 50% of the savings in inventory costs over the two-year period following the implementation of the new system.

4. Brad Gage, CPA, has served as the auditor for Hi-Dee Company for several years. In addition, Gage has performed other services for the company. This year, the financial vice president has asked Gage to perform a major computer system evaluation.

5. Due to the death of its controller, an audit client had its external auditor, Gail Klate, CPA, perform the controllers job for a month until a replacement was found.