Is it permissible for Charlie, a CPA engaged as a peer reviewer, to purchase stock in a client he has knowledge of being acquired?

The scenario revolves around the ethical implications of a CPA's actions regarding buying stock in a client they are involved with as a peer reviewer. According to the AICPA Code of Professional Conduct and relevant federal regulations, CPAs must avoid any actions that present a conflict of interest or could compromise their objectivity and independence.

When a CPA has knowledge of a client that is in the process of being acquired, this may constitute material non-public information, and trading on that information can lead to insider trading violations under federal securities laws. Buying stock in such a scenario can be viewed as exploiting undisclosed financial insights that have not yet been made available to the public, which is inherently unethical and illegal.

Therefore, investing in a client under these circumstances breaches professional ethics and legal standards, emphasizing the importance of maintaining objectivity and independence as established by both federal laws and the CPA profession's ethical guidelines. By adhering to these principles, CPAs can uphold the reputation and integrity of their profession.