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    Possible Violation of AICPA's Code of Professional Conduct

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    The following situations involve a possible violation of the AICPA's Code of Professional Conduct. For each situation:
    1. Determine the applicable rule number from the Code,
    2. Decide whether or not the Code has been violated, and
    3. Briefly explain how the situation violates (or does not violate) the Code.

    1. Kelley Brent, CPA, is a partner in the CPA firm that audits Dane, Inc., a closely held corporation. Kelley's sister is the chief financial officer in Dane, Inc.
    2. Sarah Marin, CPA, is a senior auditor in the San Francisco office of Coopers & Snoopers, CPAs. Sarah's father is employed as the controller of Line Electronics, a large, publicly held company in Michigan. Line Electronics is one of Coopers & Snoopers' audit clients. Neither Sarah, nor the San Francisco office of Coopers & Snoopers, is involved in the audit of Line Electronics.
    3. On August 20, 1999, Barbie Anderson, CPA and partner, was offered and accepted the engagement to audit the annual financial statements of Jungmann Corporation for the fiscal and calendar years ended December 31, 1999. The audit began on September 15, 1999, and ended on March 7, 2000. Jungmann Corporation is regulated by the SEC. Barbie served as controller of Jungmann Corporation from November 5, 1995, until January 10, 1999, at which time she terminated her employment with Jungmann. Barbie owned a material amount of Jungmann Corporation's common stock from November 5, 1995, until August 15, 1999, at which time she sold the stock.

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    Solution Preview

    AICPA Rule of Conduct Rule No: 101 Independence
    The code has been violated. Kelley's sister is a "close family relationship" and in a "key position" so she is presumed to be biased with a family member in management.

    AICPA Rule of Conduct Rule No: 101 ...

    Solution Summary

    A sentence or two explains the rule.