3-31 Ron Barber, CPA, is auditing the financial statements of DGF, Inc., a publicly held company. During the course of the audit, Barber discovered that DGF has been making illegal bribes to foreign government officials to obtain business, and he reported the matter to senior management and the board of directors of DGF.
a. If management and the board of directors take appropriate remedial action, should Barber be required to report the matter outside the company?
If they take the appropriate remedial action, then Barber is not required to report the matter outside the company. The company is able to report to SEC themselves within one business day and the auditors should get a copy if they did it.
b. Describe Barber’s appropriate
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Rule 301 was also an ethical implication which rule 301 is confidential client information. This rule is pretty self-explanatory which is that you are not allowed to disclose information to anyone without disclosure from the client. Gilbert had Bradley notify the insurance company of the building and the collateral for the note. They should not have waited and made sure the client made changes to the paperwork even though it did not affect the numbers of the audit. Bradley was not even allowed to disclose that information to the insurance company. Last is rule 505, which is the form of the organization and name. With the name that they are performing under is not right because they are not both CPA’s, which prohibits them from saying Professional Corporation. They are only allowed to state this when all members of the firm are indeed CPA’s.
4-21 Jensen, Inc., filed suit against a public accounting firm, alleging that the auditors’ negligence was responsible for failure to disclose a large defalcation that had been in process for several years. The public accounting firm responded that it might have been negligent, but that Jensen, Inc., was really to blame because it had completely ignored the public accounting firm’s repeated recommendations for improvements in internal control.
If the public accounting firm was negligent, is it responsible for the loss sustained by the client?
Yes the public accounting firm is responsible