[1] The following are situations that may violate the Code of Professional Conduct. Assume, in each case, that the CPA is a partner, unless stated otherwise. Discuss whether the facts in any of the situations indicate violations of the Code of Professional Conduct. If so, identify the nature of the violation(s):
1. Contel, CPA, advertises in the local paper that his firm does the audit of 14 of the 36 largest community banks in the state. The advertisement also states that the average audit fee, as a percentage of total assets for the banks he audits, is lower than any other CPA firm’s in the state.
2. Jon Davis is a former partner at Davis, Harrison, Smith. He left the firm to work for an audit client of DHS. Since Davis was the only expert in the firm on not-for-profit clients, DHS pays him as a consultant when they have questions related to their not-for-profit audit engagements.
3. Elbert is a staff accountant at a CPA firm. Elbert’s wife works in human resources at one of the clients audited by Elbert’s firm, although Elbert is not on the audit engagement. As part of an employee stock ownership program at her company, Elbert’s wife receives shares of stock in her company.
[NO AI TOOLS SHOULD BE USED]