Kotter Properties Inc Case Summary
Koger Properties, Inc
The Securities and Exchange Commission (SEC) claims that Michael Goodbread had violated independence rules set forth by the American Institute of CPAs (AICPA) Professional Code of Conduct and generally accepted auditing standards (GAAS). AICPAs Professional Code of Conduct considers an impairment of independence if during the engagement an auditor has “any direct or material indirect interest in the client.” (American Institute of Certified Public Accountants, 1988) Because Goodbread held shares of Kroger common stock and carried on with the audit assignment of Kroger, he violated the AICPAs professional code of conduct in relation to independence. To comply with the rules of conduct, Goodbread should have disclosed …show more content…
Financial Accounting Standards Board (FASB) requires an investor to document at acquisition the classification of an equity security. [FASB 320-10-25] The FASB requires entities to explain within their financial statements the rights and privileges of outstanding securities. [FASB 505-50-30] If there were any common stock dividends both Kroger and Goodbread would have to recognize the dividend on their taxes. Because of the recognition of the investment on both sides it would be a material investment for Goodbread. Given that there is a direct material interest in the client there is in violation of independence rules get by all the accounting governing …show more content…
(1988, January). Code of professional conduct responsibilities to clients. ET Section 101 - Independence. Retrieved October 28, 2011, from http://www.aicpa.org/Research/Standards/CodeofConduct/Pages/et_101.aspx#et_101
Auditing Standards Board. (1979, November). AU Section 504. Association With Financial Statements. Retrieved October 2011, 29, from http://pcaobus.org/Standards/Auditing/Pages/AU504.aspx#ps-pcaob_94fa4359-1212-4ad6-a901-f7eb90bd34c9
Financial Accounting Standards Board. (2008). Statement of Financial Accounting. Concepts No. 2. Retrieved October 2011, 29, from http://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175820900526&blobheader=application%2Fpdf
Financial Accounting Standards Board (FASB). Accounting Standards Codification (ASC) (2011). Investments- Debt and Equity Securities 320 – Overall 10 - Section 25 Recognition - Paragraph 2. http://asc.fasb.org
Financial Accounting Standards Board (FASB). Accounting Standards Codification (ASC). (2011). Equity 505 – Overall 10 - Section 50 Disclosure- Paragraph 3.
The Securities and Exchange Commission (SEC) claims that Michael Goodbread had violated independence rules set forth by the American Institute of CPAs (AICPA) Professional Code of Conduct and generally accepted auditing standards (GAAS). AICPAs Professional Code of Conduct considers an impairment of independence if during the engagement an auditor has “any direct or material indirect interest in the client.” (American Institute of Certified Public Accountants, 1988) Because Goodbread held shares of Kroger common stock and carried on with the audit assignment of Kroger, he violated the AICPAs professional code of conduct in relation to independence. To comply with the rules of conduct, Goodbread should have disclosed …show more content…
Financial Accounting Standards Board (FASB) requires an investor to document at acquisition the classification of an equity security. [FASB 320-10-25] The FASB requires entities to explain within their financial statements the rights and privileges of outstanding securities. [FASB 505-50-30] If there were any common stock dividends both Kroger and Goodbread would have to recognize the dividend on their taxes. Because of the recognition of the investment on both sides it would be a material investment for Goodbread. Given that there is a direct material interest in the client there is in violation of independence rules get by all the accounting governing …show more content…
(1988, January). Code of professional conduct responsibilities to clients. ET Section 101 - Independence. Retrieved October 28, 2011, from http://www.aicpa.org/Research/Standards/CodeofConduct/Pages/et_101.aspx#et_101
Auditing Standards Board. (1979, November). AU Section 504. Association With Financial Statements. Retrieved October 2011, 29, from http://pcaobus.org/Standards/Auditing/Pages/AU504.aspx#ps-pcaob_94fa4359-1212-4ad6-a901-f7eb90bd34c9
Financial Accounting Standards Board. (2008). Statement of Financial Accounting. Concepts No. 2. Retrieved October 2011, 29, from http://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175820900526&blobheader=application%2Fpdf
Financial Accounting Standards Board (FASB). Accounting Standards Codification (ASC) (2011). Investments- Debt and Equity Securities 320 – Overall 10 - Section 25 Recognition - Paragraph 2. http://asc.fasb.org
Financial Accounting Standards Board (FASB). Accounting Standards Codification (ASC). (2011). Equity 505 – Overall 10 - Section 50 Disclosure- Paragraph 3.