Each of the Following Situations Involves a Possible Violation of the Independence

question 36

Essay

Each of the following situations involves a possible violation of the independence requirements of the provincial institutes' Rules of Professional Conduct.For each situation,(1)decide whether the Rules have been violated,and (2)briefly explain how the situation violates (or does not violate)the Rules.A)Mike Lednicky,public accountant,is a partner in the Oshawa office of Arthur & Thompson,public accountants.Mike's brother is employed as an inventory warehouse supervisor (an audit-sensitive position)by Sweeny Appliances,a publicly held company in Manitoba.Sweeny Appliances is one of Arthur & Thompson's audit clients.Neither Mike nor the Oshawa office of Arthur & Thompson is involved in the audit of Sweeny Appliances.
Violation? Yes No
Explanation:
B)The accounting firm of Finke & Hersley,public accountants,provides bookkeeping and tax services for Hendershot Corporation.Finke & Hersley also performs the annual audit of Hendershot Corporation.
Violation? Yes No
Explanation:
C)Brent Shaw,public accountant,is the auditor of Cafe Eccel.A couple of weeks ago,Cafe Eccel's management expressed an intention to commence litigation against Brent,alleging he was negligent in last year's audit.Brent believes there is a strong possibility that management will proceed with the litigation.However,Cafe Eccel has not fired Brent as its auditor,and he is now working on the current year's audit of Cafe Eccel.
Violation? Yes No
Explanation:
D)Melissa Barry,public accountant,is the auditor of Audio Video Inc.Audio Video has not paid Melissa's audit fee for the past two years.Melissa is working on the current year's audit of Audio Video.
Violation? Yes No

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Definitions:

Sample Points

Individual items or cases from a larger population used in a statistical sample for analysis.

Sample Space

The set of all possible outcomes or results in a probability experiment.

Mutually Exclusive

A statistical term describing events that cannot happen at the same time; each occurrence is independent and prevents any other from happening concurrently.

P(A ∩ B)

Represents the probability of both event A and event B occurring simultaneously.