Steve is deep in debt due to a gambling problem. He is the bookkeeper for a family-owned
business, Cal Poly Greenery. The company has only three employees – Steve, the husband,
and the wife. All three have been friends for many years. One day the loan shark who lent
Steve $20,000 comes knocking at his door asking for repayment of the loan. Steve
convinces the loan shark to give him another day. The following day Steve writes a check
on the company’s books to himself for $20,000. Since he reconciles the bank accounts and
prepares the financial statements, Steve knows it’s unlikely the owners will ever know
about what he has done. From an ethical perspective, Steve has:
Ty is a rising star at Texas State Country & Western Stores. He is the controller of the
company. His wife, Rosie, is the lead auditor of the CPA firm that examines Country &
Western’s financial statements and issues an audit opinion. Given the nature of the
relationships, Rosie would violate what ethical standard if she is allowed to conduct the
audit: