Unformatted text preview: rohibits a member from charging contingency fees for an assurance
engagement. The engagement involves “validate” which suggests some level of
assurance and there is a contingency payment. Part B (7 marks)
The following rules of professional conduct relate to Ms Oh:
Ms. Oh failed to maintain the good reputation of the profession as indicated by the
specific rules of professional conduct.
RPC 201.4 Ms. Oh provided advocacy services in representing Belinda. It must be ensured that
71 the position of the client is supportable.
RPC 202 Requires a member to perform professional services with due care and integrity. The
preparation of false documents suggests a lack of integrity. RPC 203 Requires a member to be professionally competent in the services they provide. An
example of a breach by Ms. Oh was the initial strategy of suggesting a capital gains
exemption for five lots and a principle residence exemption for the sixth lot,
suggesting that Ms. Oh was not competent to be providing tax advice. RPC 204 Requires that a member be objective. The 5% indirect ownership creates a potential
objectivity issue or need for disclosure of the interest. RPC 205 Prohibits a member from signing or associating themselves with reports or
statements that they know are false or misleading. The filing of the original tax
return and the preparation of backdated documents are possible breaches of the rule. RPC 213 Prohibits members from lending themselves to unlawful activity. The creation of
backdated documents could be a breach of this rule.
Part C (3 marks)
The following rules of professional conduct relate to James, Richards and Thomas.
RPC 201 The partners failed to maintain the good reputation of the profession as indicated by
the specific rules of professional conduct. RPC 217 General advertising cannot be false and misleading. Stating that James, Richards and
Thomas is the oldest and largest firm is a probable breach of this rule. RPC 301 Limits the methods used to attract clients or solicit clients.
telemarketing firm is a breach of the rule. RPC 208.1 Prohibits a member from disclosing confidential information. The receptionist of the
firm provided confidential information to a reporter. The use of a Part D (4 marks)
The following rules of professional conduct relate to Jack Box and the other partners.
RPC 204 This rule requires a member to be objective. Box and Company may not be
independent in appearance due to their economic dependence on SPI. There are two
additional potential conflicts of interest. First, a retired partner works for SPI and
retains a right to influence the practice. Second, the management company owned by
family members owns shares in SPI.
72 The purchase of shares by the management company results in several possible breaches:
RPC 208 Prohibits a member from disclosing or using confidential information. The purchase
of shares is a breach of confidentiality. RPC 213 Prohibits members from lending themselves to unlawful activity. The possible
“insider trading” is an illegal activity. RPC 211 Requires a member to report breaches of rules of professional conduct. There was a
duty to report the above breaches to the Institute. 73 QUESTION 11 (7 marks)
Sheryl qualified in 1993 and since qualifying has limited technical updates with only teaching
introductory accounting courses. There is a concern as to whether she was technically competent
prior to starting her practice. RPC 203.1 requires a member to maintain their professional
competence. Sheryl may not have maintained her professional competence by not attending any
professional courses. Appropriate action –Sheryl should take courses to maintain or update her
The standards for a notice to reader do not require objectivity therefore Sheryl can complete the
engagement. RPC 204.3 requires disclosure of impairment of objectivity. Appropriate action –
Sheryl should disclose the nature of the relationship in the Notice to Reader.
The billing practices used by Sheryl could bring general disrepute to the profession, which is
prohibited by RPC201. In addition, the error on the tax return may be indicative of lack of
competence. Appropriate action – Sheryl should have an engagement letter, details provided when
billing and the bill based on time spent.
RPC 218 requires retention of records and documentation. This is very important for tax
information. The documents turning up in a public area indicates a breach of maintaining
confidential information for a client. In addition, calling up the client was not the proper way to
communicate with a client regarding such an important matter. Appropriate action –Sheryl should
retain documents. When it is appropriate to destroy documents they should be shredded.
Sheryl’s appearance in the advertisement and corresponding statement appear to be a breach of
RPC217.2 regarding endorsements. The statement “I have checked out” implies that some form of
assurance or engagement had occurred which is false or misleading. Appropriate action – Sheryl
should not do or accept this type of work.
Sheryl’s use of differential reporting for capitalization of costs is a breach of RPC206 as it is
technically wrong. Sheryl cannot switch from review to Notice to Reader for her reason. The
financial statements with Notice to Reader may now be misleading. Appropriate action – Sheryl
should comply with requirements of s. 8200. 74...
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