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L21 Notes_Part_26 - authorization from the audit client...

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© W.R. Knechel Ethical Cases c. A client requests assistance of J. Bacon, CPA, in the installation of a computer system for maintaining production records. Bacon had no experience in this type of work and no knowledge of the client's production records, so he obtained assistance from a computer consultant. The consultant is not in the practice of public accounting, but Bacon is confident of his professional skills. Because of the highly technical mature of the work, Bacon is not able to review the consultant's work. Five small Gainesville CPA firms have become involved in an information project by taking part in an interfirm working paper review program. Under the program, each firm designates two partners to review the audit files, including the tax returns and the financial statements of another CPA firm taking part in the program. At the end of each review, the auditors who prepared the working papers and the reviewers have a conference to discuss the strengths and weaknesses of the audit. They do not obtain
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Unformatted text preview: authorization from the audit client before the review takes place. © W.R. Knechel Ethical Cases James Thurgood, CPA stayed longer than he should have at the annual Christmas party of Nevada firm, Thurgood and Thurgood, CPAs. One his way home he drove through a red light and was stopped by a policeman, who observed that he was intoxicated. In a jury trial, Thurgood was found guilty of driving under the influence of alcohol. Since this was not his first offense, he was sentence to 30 days in jail and his driver's license was revoked for 1 year. Bill Wendal, CPA, set up a casualty and fire insurance agency to complement his auditing the tax services. He does not use his own name on anything pertaining to the insurance agency and has a highly competent manager, Frank Jones, who runs it. Wendal frequently requests Jones to review the adequacy of a client's insurance with management if it seems underinsured. He feels that he provides a valuable service to clients by informing them when they are underinsured....
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