Question

In January 2018, it was discovered that William Borchard, who handled due diligence for clients of PwC interested in mergers and acquisitions, divulged controversial plans to Gregory Raben, an auditor at the firm, and Raben used the information to buy stock ahead of a series of corporate takeovers. The SEC found the two guilty of insider trading, a violation of the law. Assume none of the clients were audit clients. What are the ethical issues involved in engaging in such transactions? Were any of the AICPA rules of conduct violated? Explain.

Answer 1

Answer

This is a violation of records request and discreditable acts. The CPA did not communicate clearly with the client on meeting or setting deadlines and completing the work in a timely manner. Acts discreditable include not responding within a reasonable amount of time to repeated requests and not returning the client’s records when requested.State boards of public accountancy may have additional rules on records request, including a time deadline for the records to be returned. It is possible that integrity was also violated.

If the client was promised the completed return at a certain date when the CPA did not have the means to meet the deadline, then integrity was violated. Beyond theCode, the basic ethical standard of diligence and the pursuit of excellence, both required for virtue-based behavior, clearly did not exist.