You are a manager for David and Blue, LLP, a public accounting firm which has 10 offices and 30 partners. An expert in ethics and professional conduct, you have been contacted by various individuals in the firm and have been asked to provide advice.

Situation A (4 marks)

Jamie, CPA is an audit senior. He has just has just called you for advice. He was at his desk when he overheard his colleague Teresita having a phone conversation. She told the person on the other end of the call that Drake Co. Ltd., a public company listed in the Toronto Stock Exchange, and one of the firm's largest audit client, is about to release the company's audited annual financial statements and the results are spectacular. Teresita said that she just bought some shares as she expects that the share price will go up.

Situation B (4 marks)

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Situation C (4 marks)

Bobby James, CPA, has just returned from a meeting with a potential new audit client, Star Alliance Advertising. Bobby has recently returned to public practice after working in advertising industry as a CFO for a large company. David and Blue recruited him as an audit partner for his contacts within the industry. Part of his compensation is tied to the number of new clients he is able to recruit. It has been eight years since Bobby has performed any audit engagements; however, he is confident that he can rely upon his industry knowledge to assess the resources needed to perform the audit engagement. During the meeting, he reads over the prior year's financial statements and tells the client he will accept the engagement. He tells the client that he will do a substantive-based audit; therefore, he can guarantee that the fee will be less than the fee charged by the previous auditor.

Situation D (4 marks)

Sarah Wong, CPA, is a senior manager at the firm HMZ LLP. One of Sarahs largest clients is Lenovo Inc. a publicly traded retailer of high-end electronics. This years audit has been challenging; Sarah has been working extra hours on the audit, as Lenovo implemented a new IT system. Furthermore, the controller has been disputing a number of audit adjustments that Sarah has proposed. The auditors have been working in one of the spare offices located close to the warehouse. One evening, Sarah notices a shipment of tablets that had not been locked up. To compensate herself for the additional hours she has been working on the file, she takes one of the tablets and slips it into her laptop bag on her way out of the client site.

Required

For each of the independent situations above Evaluate and Perform the following:

• Identify and explain the ethical and professional conduct issues
• Recommend any actions necessaery in response to the issues identified