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I. Questions 1. “Role” refers to the relationship of the CPA as a consultant to the client management and personnel. The basic role of the CPA in performing MAS is to provide advice and technical assistance to the client. 2. Practice standards are necessary in the consulting practice in order to promote the highest quality of performance of the practitioner. 3. Refer to page 71, par 2 4. Refer to page 71, par(s) 4 and 5 5. Refer to page 72, par 3 6. Refer to page 73, par 1 7. Refer to page 74, par(s) 2 to 4 8. Refer to page 75, par(s) 2 to 6 9. Refer to page 75, par 4 II. Multiple Choice Questions 1. 2. 3. 4. 5. D A C D D 6. 7. 8. 9. D C D D

III. Cases 5-1

2. as owner. You have a responsibility to discuss it first with the president. 3. Company with several shareholders in which the president holds a controlling number of shares: Discuss the matter with the president. Otherwise. however. This is unwise. installed the system. If the president accepts the recommendation and resigns. the first step is to report the matter to the chairman of the board. or the shareholders. In a publicly held company. you may need to report the problem to the chairman of the board if the impact on the annual report is serious. If he doesn’t. Case 4 5-2 . the matter should be discussed with the chairman of the board and the board of directors. Justice Department. Probably. can make the decision.Chapter 5 MAS Practice Standards and Ethical Considerations Case 1 Nondisclosure is not considered an acceptable alternative because it makes you an accessory to the fact. and this is a privately held company in which he has control. Bureau of Internal Revenue. A large publicly held company: The tendency here is to step over the president and go directly to the chairman of the board. the problem is resolved.may result in the destruction of part of the evidence. you have accomplished your task. may require that the matter be referred to an external body such as the Securities and Exchange Commission. as controller. Disclosure to the offending party only .with no action . Case 2 The appropriate action depends on the type of company: 1. If he understands the danger in which he is putting himself with regard to a possible dissident shareholder. Privately held company in which the president is the owner: Discuss the matter with the president who. Case 3 The honest and ethical solution is to tell it as it is. pointing out the vast growth of the company and the tremendous changes in technology that have occurred since he. The most tactful approach is to make a full disclosure to the president privately. he probably will acquiesce and agree to go forward. Circumstances.

MAS Practice Standards and Ethical Considerations Chapter 5 Professional ethics requires that you accept only those engagements which are felt to be beneficial to the client. you should not serve a client under terms or conditions that might impair objectivity. Clearly. The internal consultant wrote the report based on the available facts and was discharged. therefore. Case 6 Professional ethics require honesty. Further. and the president refused to pay the consultant’s fee. the client will be benefited. as opposed to an external consultant. The question. however. This decision was justified by what the consultant thought was the client’s best interest. Case 5 Ethical conduct requires that you not misrepresent facts and never subordinate judgment to others. or integrity. The fact that this is an internal consultant. Ultimately. is whether a 50 percent chance of benefit is sufficient to pursue the study. that this will result. There is only a 50 percent chance. Case 7 This is considered an ethical issue because its solution involves the future of the consultant’s personal doctrine and nonprofessional associations as well as the effectiveness and integrity of the consultation process in which the 5-3 . and placing the interests of the client or prospective client ahead of personal interests. independence. The consultant who faced this situation declined the engagement and suggested that the client should use the money set aside for the feasibility study to employ an advertising firm to help them sell the bonds. makes no difference. if the results of the study are favorable. the fee was settled and no report was issued. and you should reserve the right to withdraw if conditions develop that interfere with successful conduct of the assignment. Many consultants would answer yes to this question and accept the engagement because of the potential profit. The president wanted to use the consultant as a means for firing a vice president. The consultant who was faced with this situation refused to follow the direction of the president. integrity.

Case 8 This arrangement is not acceptable under professional ethics.Chapter 5 MAS Practice Standards and Ethical Considerations consultant is about to engage. The fact that the client came first and the commission came second in this case makes no difference. The matter was brought to the ethics committee and. Case 9 You are not in a good position from an ethical point of view. A consultant should not pay a fee or commission to obtain a client or franchise a business practice. The consultant willingly cooperated with the attorney in prosecution of the case. Although accepting such engagements would not be in violation of the code of ethics. The consultant who was faced with this situation accepted the engagement. His willingness to assist in the prosecution and the fact that he was not prosecuted in the case were significant in this decision. By being both director and consultant for the same company. Your position as a director provides you with a significant influence over the direction of the company. it was discovered that the city manager’s brother owned the public relations agency. you have a responsibility to do what is best for the company. while the consultant was in violation of the ethics code. acceptance would be ethical only if the consultant’s relationship with the client firm were completely divorced from the consultant’s personal doctrine and the client was made aware of the consultant’s values. which is in violation of the code of professional ethics. This disclosure was made in conjunction with the city’s audit. Your responsibility to the consulting firm is to secure employment to keep your people busy. you are in a position that creates a conflict of interest. The commission is being paid to franchise a business practice. As such. After it was completed and he had paid the fee to the public relations agency. he was discharged with a reprimand. Another problem is your planned conduct in the upcoming board meeting. and the consultant would be justified in declining such an engagement because of a conflict of norms. These circumstances are not likely. The principles involved in this case are not uncommon. It is not honest and ethical for you to remain silent when you have relevant 5-4 .

5-5 . The solution here is to resign from the board of directors and become an advisor to the chairman. An objective decision can then be made by the board on all the available facts. You have a responsibility to express your feelings about the proposed engagement even if it means losing the engagement.MAS Practice Standards and Ethical Considerations Chapter 5 information on a decision. You should point out how you feel about the installation of the sophisticated system at this time.