that the insurance company was unaware of the existing lien on the building , Gilbert had Bradley notify the insurance company of the fact that Grandtime ' s building was pledged as collateral for a term note .
Shortly after the events described above , Gilbert was charged with several violations of professional ethics .
Required :
Identify and discuss at least four ethical implications of those acts by Gilbert that were in violation of the AICPA Code of Professional Conduct .
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 may 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 .
Required :
If the public accounting firm was negligent , is it responsible for the loss sustained by the client ? Does the failure by Jensen , Inc ., to follow the auditors ' recommendation for better internal control have any bearing on the question of liability ? Explain .
4-26