The following situations may violate the Code of Ethics for Professional Accountants. Assume, in each case, that the public accountant is a partner.

1. Able, CA, owns a substantial limited unit trust in a block of units in Tasmania. Frederick Marshall is a 100% owner in Marshall Marine Company Ltd. Marshall also owns a substantial interest in the same unit trust as Able. Able does the audit of Marshall Marine Company Ltd.

2. Baker, CA, approaches a new client and tells the general manager she has an idea that could result in a substantial tax refund in the prior year's tax return by application of a technical provision in the tax law that the client had overlooked. Baker adds that the fee will be 50% of the tax refund after it has been resolved by the ATO. The client agrees to the proposal.

3. Contel, CPA, advertises in the local paper that his firm does the audit of six of the eight largest finance companies in the city. The advertisement also states that the average audit fee, as a percentage of total assets for the companies he audits, is lower than that of any other public accounting firm in the city.

4. Tan, CA, sets up a small-loan company specialising in loans to business executives and small companies. Tan doesn't spend much time in the business because she works full-time in her accounting practice. No employees of Tan's accounting firm are involved in the small-loan company.

5. Elbert, FCPA, owns a material number of shares in a mutual fund investment company, which in turn owns shares in Elbert's largest audit client. Reading the investment company's most recent financial report, Elbert is surprised to learn that the company's ownership in his client has increased dramatically.

6. Finigan, CPA, does the audit, tax return, bookkeeping and management services work for Gilligan Construction Company Pty Ltd. Mildred Gilligan follows the practice of calling Finigan before she makes any major business decision to determine the effect on her company's taxes and the financial statements. Finigan attends continuing education courses in the construction industry to make sure she is technically competent and knowledgeable about the industry. Finigan normally attends board of directors meetings and accompanies Gilligan when she is seeking loans. Mildred Gilligan often jokingly introduces Finigan with this statement: 'I have my three business partners-my banker, the government and my accountant; but Finny's the only one who is on my side.'

REQUIRED

Discuss whether the facts in any of the situations indicate violations of the ethical rules. If so, identify the nature of the violation(s).