The case of non-simpatico audit
Ethics
Charles Selcer, CPA, MBA | February/March 2025 Footnote
Editor's note: Updated February 10, 2025
Seymour (Sim) Aarse invented a next generation portable latrine for events, fairs and campsites. Upon usage, it automatically sterilizes the toilet seat and deodorizes the latrine. His corporation is Sim’s Potty Co. In his former work life, Sim was a CPA in public practice. He kept his license and acts as CFO of Sim’s Potty Co. As his audit wrapped up, his outside CPA firm asked Sim to sign the management representation letter. The letter said, among other things, that management was not aware of any asserted claims against the company and that there were no revenue or tax audits in progress. However, there was a recent suit against the company for patent infringement and a Minnesota Revenue audit asserting unremitted sales taxes. Sims signed the letter without making any changes.
Q. Has Sim committed an ethics violation?
A. Yes as 2.130.03 says: When dealing with an employer’s external accountant, a member must be candid and not knowingly misrepresent facts or knowingly fail to disclose material facts. This would include, for example, responding to specific inquiries for which the employer’s external accountant requests written representation.
