| Course | D550 Ethics for Accountants |
|---|---|
| Task | Task 2 |
| Paper type | Code of conduct violation memo |
| Length | About 1,000 words, 2 pages |
| Format | APA 7 |
| School | Western Governors University (WGU) |
| Program | MS Accounting |
| Updated | September 2026 |
Free sample paper for D550 Task 2
Memorandum
To: Engagement Partner
From: Audit Senior, Granite Peak Apparel engagement
Date: February 18, 2026
Re: Significant violations of Granite Peak's Code of Ethical Conduct for Senior Officers and recommended actions
Purpose
During fieldwork on the December 31 audit of Granite Peak Apparel, a composite publicly traded maker of outdoor clothing, the team found evidence that three senior officers acted contrary to the company's Code of Ethical Conduct for Senior Officers. Public companies must disclose whether they have adopted a code of ethics for their principal executive and financial officers, and the SEC rules implementing that requirement describe such a code as standards reasonably designed to deter wrongdoing and promote honest and ethical conduct, including the ethical handling of conflicts of interest, full and accurate disclosure and compliance with laws (Securities and Exchange Commission [SEC], 2003). This memo summarizes the violations, explains why they matter to the audit and the firm, and recommends actions.
Violation 1: Undisclosed Related-Party Purchases by the CFO
Finding: Granite Peak paid $1.4 million during the year to Cedar Line Packaging for shipping boxes and hang tags. Cedar Line is owned by the chief financial officer's brother. The relationship was not disclosed to the audit committee, and purchasing records show Cedar Line's prices were about 12% above two competing bids that were rejected without documented reasons.
Code provision: Section 2 of the code requires senior officers to avoid conflicts of interest and to disclose any material transaction or relationship that could reasonably create one to the audit committee in advance.
Why it matters: the transactions are related-party transactions that require disclosure in the financial statements, and the concealment raises questions about the CFO's integrity, which bears on every representation he makes to us.
Violation 2: Gifts Accepted by the Vice President of Sales
Finding: expense reports and emails show that the vice president of sales and his spouse accepted a four-night stay at a mountain resort, valued at about $6,000, paid for by Northwind Textiles, Granite Peak's largest fabric supplier, two weeks before Northwind's contract was renewed at higher prices.
Code provision: Section 3 prohibits senior officers from accepting gifts or entertainment worth more than $250 from any current or prospective supplier.
Why it matters: the amount is small relative to the financial statements, but the gift was given by a major supplier shortly before a contract decision, which suggests the purchasing process can be influenced and weakens the control environment.
Violation 3: Pressure to Delay Recording Returns
Finding: the controller told us, and emails confirm, that the chief executive officer directed her in late December to hold $900,000 of approved customer return credits until January 3. Recording them in December would have reduced fourth-quarter revenue below the level needed to meet the interest coverage covenant in the company's credit agreement.
Code provision: Section 4 requires senior officers to ensure that books and records are complete and accurate and that financial reports are full, fair, accurate and timely; Section 6 prohibits directing or pressuring any employee to misstate financial information.
Why it matters: this is the most serious violation. It is a deliberate attempt to misstate revenue and conceal a covenant violation, which is a fraud risk that auditing standards require us to respond to, and it involves the most senior officer of the company.
Professional Standards That Apply to Us
Our own obligations are governed by the AICPA Code of Professional Conduct, which requires integrity, objectivity and due care, and, for public company audits, by independence and auditing standards (American Institute of Certified Public Accountants [AICPA], 2014). Integrity means we cannot subordinate our judgment to management's preferences, even under fee or timing pressure. The company's own controller is bound by the Institute of Management Accountants' standards, which direct management accountants to communicate information fairly and objectively and to take steps to resolve ethical conflicts, including by going above an immediate supervisor when that supervisor is involved (Institute of Management Accountants [IMA], 2017). Her decision to tell us, rather than follow the CEO's instruction, is consistent with those standards and should be protected.
Recommended Actions
1. Report all three matters promptly to the audit committee chair, in writing, because they involve senior management and one involves possible fraud. Communication should not go through the CEO or CFO.
2. Require the $900,000 of returns to be recorded in December and evaluate the effect on the covenant, the classification of the debt and the going concern assessment.
3. Require disclosure of the Cedar Line transactions as related-party transactions and review all payments to Cedar Line for the past three years.
4. Reassess the risk of material misstatement due to fraud, expand testing of revenue cutoff and journal entries made by senior officers, and reconsider the reliance we place on management's representations.
5. Ask the audit committee to commission an independent investigation by outside counsel, and evaluate its results before we sign the report.
6. Ensure that the controller is protected from retaliation and that the company's whistleblower procedures are working.
7. Consult the firm's risk management group about whether we can continue to rely on the CEO's and CFO's representations and, if not, whether the firm should continue the engagement.
Effect on the Engagement Timeline
The report deadline is March 12. The investigation and expanded procedures are likely to take longer. I recommend that you inform the audit committee now that the timeline may move, rather than compressing our work to meet it. A delayed filing is far less damaging to the company, and to the firm, than an opinion on statements that conceal a covenant violation.
Conclusion
The violations range from a gift that weakens purchasing controls to a deliberate attempt by the CEO to delay recording returns to avoid a covenant breach. Together they show a tone at the top inconsistent with the company's own code. Reporting them to the audit committee, correcting the accounts, expanding our procedures and protecting the controller are the steps that meet our professional obligations and protect investors who rely on Granite Peak's statements.
References
American Institute of Certified Public Accountants. (2014). AICPA code of professional conduct. https://pub.aicpa.org/codeofconduct/
Institute of Management Accountants. (2017). IMA statement of ethical professional practice. https://www.imanet.org/career-resources/ethics-center/statement
Securities and Exchange Commission. (2003). Disclosure required by sections 406 and 407 of the Sarbanes-Oxley Act of 2002 (Release No. 33-8177). https://www.sec.gov/rules/final/33-8177.htm
What the D550 Task 2 instructions ask
The second D550 task asks you to identify code of conduct violations and recommend actions. You will usually describe each violation with evidence, identify the code provision breached, explain the professional standards that apply to the auditor, recommend actions and consider effects on the engagement. Evaluators expect violations supported by specific evidence, code provisions cited, auditor obligations described accurately, actions that follow required communication channels and attention to fraud risk where it appears. A memo that describes misconduct without explaining the auditor's own duties will not meet the standards aspects. Write the memo to the person who must act, with the most serious matter clearly identified.
How this D550 Task 2 example is built
The memo opens with its purpose and the engagement. Each violation has a heading and three parts: finding, the code provision breached and why it matters for the audit. Evidence such as expense reports and emails is described specifically. A section explains the auditor's obligations under professional standards, including communication with those charged with governance and possible illegal acts. Recommended actions are numbered in order of urgency. A section on the timeline explains why the report date may move. The conclusion ranks the violations by seriousness and explains how together they affect the auditor's assessment of management's integrity. Each finding names the evidence behind it.
Where the D550 Task 2 rubric puts the marks
D550 Task 2 aspects are scored competent, approaching competence or not evident. A violations aspect asks for breaches identified with evidence. A code aspect rewards provisions cited accurately. A standards aspect looks for the auditor's own obligations. An actions aspect wants recommendations that follow proper channels. An engagement aspect asks how the findings affect the audit. Evaluators notice when fraud risk is recognized and communication with the audit committee is recommended, and they expect professional the auditing standards for public companies cited accurately. Clear headings for each violation help the partner act quickly. Numbered actions in order of urgency show judgment about what matters most. A memo that explains how the findings affect the auditor's view of management's integrity shows the professional skepticism evaluators want to see.
D550 Task 2 help: what sends it back
D550 memos are weakest when violations are described without evidence. Name the documents. Code provisions may be paraphrased loosely, so cite them. The auditor's obligations are often missing; explain what standards require the team to do. Actions can skip governance, when matters involving senior management belong with the audit committee. Last, consider the engagement timeline and the effect on the opinion, since the partner must plan for both. Keep the tone factual and avoid conclusions about intent that the evidence does not support. Describe how evidence will be preserved. Explain whether the findings require additional audit procedures, such as expanded testing of related-party transactions and returns, and what effect they may have on the opinion.
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D550 Task 2 questions, answered
Who receives the D550 Task 2 memo?
The engagement partner, who decides how the firm responds. The memo recommends that the partner report all three matters to the audit committee chair in writing. Write for that reader.
Is the D550 client real?
No. Granite Peak Apparel and its officers are invented for the sample. The professional standards and code provisions discussed in the memo are real. Use the findings your course provides when you write your own memo, and cite the standards that apply to the auditor.
Why involve the audit committee in D550?
Because the matters involve senior management and possible fraud. Standards require auditors to communicate such matters to those charged with governance. Management cannot investigate itself, so the audit committee must oversee the response.
How serious is the CEO's instruction in D550?
The most serious of the three. Directing staff to delay recording returns to avoid a covenant breach suggests intent to misstate financial statements, which raises fraud risk.
Where can I find a free D550 Task 2 sample paper?
The memo on three officers' violations appears above, with notes on each finding. Tell us the findings your D550 Task 2 covers, and your first custom memo costs nothing.