Violation of the Independence Rule of the AICPA’s Code of Professional Conduct

Each of the following situations involves a possible violation of the Independence
Rule of the AICPA’s Code of Professional Conduct. Indicate whether each situation
violates the Code. If it violates the Code, explain why.
a. Julia Roberto, a sole practitioner, has provided extensive advisory services
for her audit entity, Leather Ltd. She has interpreted financial statements,
provided forecasts and other analyses, counseled on potential expansion plans,
and counseled on banking relationships but has not made any management
decisions. Leather is a privately held entity.
b. Steve Rackwill, CPA, has been asked by his audit entity, Petry Plumbing
Supply, to help implement a new control system. Rackwill will arrange
interviews for Petry’s hiring of new personnel and instruct and oversee the
training of current entity personnel. Petry Plumbing is a privately held company.
Petry will make all hiring decisions and supervise employees once they are
c. Kraemeer & Kraemeer recently won the audit of Garvin Clothiers, a large
manufacturer of women’s clothing. Jock Kraemeer had a substantial investment
in Garvin prior to bidding on the engagement. In anticipation of winning the
engagement, Kraemeer placed his shares of Garvin stock in a blind trust.

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