Purchase Solution

Should CPA firm employees be required to sell stock

Not what you're looking for?

Ask Custom Question

Suppose you were a CPA and you had invested in IBM when IBM was not one of
your firm's clients. Two years later, after IBM's stock price had fallen considerably,
your firm won the IBM audit contract. You will not in any way be involved in working
with the IBM audit, which will be done by one of your firm's other offices in a
different state. You know that your firm's rules, as well as U.S. law, require that you
sell your shares immediately. If you do sell immediately, you will sustain a large loss.
Do you think this is fair? What would you do?

Purchase this Solution
Solution Summary

The issue of independence is discussed in everyday language suitable for a novice and why this is a fair requirement.

Solution Preview

Is it fair? From the CPA that is holding the stock, it seems unfair. But it really isn't. In fact, the loss has already occurred, right? The loss didn't happen because they got the client. They were unrelated. Yes, the fact that the loss much now be realized (by selling it) prevents the holder from perhaps enjoying a ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
Recent Feedback
  • "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
  • "Thank, this is more clear to me now."
  • "Awesome job! "
  • "ty"
  • "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Motivation

This tests some key elements of major motivation theories.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

View More Free Quizzes
Related BrainMass Solutions

  • Human Resourse Management: Part-time Employee Benefits

    Alan's initial reaction is that they need to offer all benefits to both full-time and part-time workers in order to be competitive with other CPA firms. However, the costs to do so are significant.

  • Accounting information for different users

    Role of CPA is different from other accountants as the CPA is the independent person or firm and who is not an employee of the company .On the other hand, the accountants are employees of the company to compile the accounting data and report the accounting

  • Income statement; financial performance; expected value

    Both are expected to provide benefits over a 10-year period, and each has a required investment of $3,000. The firm uses a 10% cost of capital.

  • Stock Price

    The firm just paid a dividend of $4; given a required return of 10%, what should the stock sell for today?

  • Stock valuation

    Given a required return of 18%, what should the stock sell for today? 4. McIntyre's Moats, Inc. currently pays no dividends, but the firm will begin paying dividends in 3 years.

  • the stock price

    Given a required return of 15%, what should the stock sell for today?

  • Calculating WACC

    If the discount rate is 12 percent, at what price should the preferred sell? b. At what price should the stock sell 1 year from now? c.

  • CSSC external audit: pre-audit planning meeting goals

    The mix of employees assigned to this audit should be modified to include experienced people. Reference general standard 1.

  • six-step approach to resolve three ethical dilemmas

    The reputation of the CPA firm, TPC, the employees of TPC, the shareholders, the creditors, and lender of TPC are likely to be affected by an action taken by Fredrick.

View More Related Solutions