Question Tag: Conflict of Interest

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  • 1 Marks

TAX – May 2021 – L1 – SA – Q6 – Ethical Issues in Tax Practice

Objective question about when a tax practitioner might face a conflict of interest in a professional activity.

When undertaking a professional activity, a tax practitioner may be faced with a conflict of interest when he:
A. Undertakes a professional service for a group of companies as per his brief
B. Undertakes a professional service for a new client
C. Undertakes a professional activity relating to a particular matter for two or more clients whose interests with respect to that matter are in conflict
D. Refuses to undertake a professional activity relating to a particular matter for two or more clients whose interests with respect to that matter are in conflict
E. Undertakes a professional activity relating to separate and distinct services for two different clients

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  • 5 Marks

CR – May 2020 – Q3b(i) – Ethical Issues in Contract Bidding

This question requires a discussion on the ethical issues related to conflict of interest, confidentiality, and professional behavior in a contract bidding scenario.

You have just obtained your full membership with the Institute of Chartered Accountants (Ghana). Following this successful achievement, you have been appointed as the Head of Finance at Asasiyemedeh Company Limited, a Ghanaian company, which provides catering services. Your former employer, Akwaba Limited, is a large public sector organization operating in Accra, where, as the Financial Accountant, you had the opportunity to work on areas relating to financial accounting, procurement, contracts, and bids. One of Asasiyemedeh Company Limited’s major contracts is with Akwaba Limited, your former employer. The contract is now due for renewal, and Asasiyemedeh Company Limited is preparing a competitive bid for this contract.

You have been tasked to lead the team responsible for bidding for this contract, but you are concerned as a professional that you might breach confidentiality if you accept this role. You also suspect that your knowledge and experience of Akwaba Limited were seen as good reasons for appointing you to the position of Head of Finance at Asasiyemedeh Company Limited. You do not in any way want to let your new employer down as you are aware that the loss of such a major contract would have a significant effect on the financial performance of Asasiyemedeh Company Limited, and its performance-related bonus scheme for management members.

Required:
Discuss the ethical issues raised in the above scenario.

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  • 5 Marks

CR – May 2020 – Q3b(ii) – Ethical Actions in Contract Bidding

This question requires recommendations for maintaining ethical standards in a contract bidding situation involving a conflict of interest.

Recommend the possible courses of action that you will take in order to be ethically responsible as expected from a Professional Accountant.

 

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  • 10 Marks

CR – May 2021 – L3 – Q3c – Ethical Dilemmas and Actions for a Finance Director

Discuss the ethical dilemmas and potential actions a finance director must take to avoid breaching IFAC's Code of Ethics.

You are the Finance Director of a limited liability company. The company started trading with a handful of employees but now has a workforce of 200. You are aware that staff purchases of goods manufactured by the company are authorised by production managers and then processed outside the accounting system. The proceeds from these sales are used to fund the company’s annual Christmas party, organised for Directors of the company.

Required:
Discuss the possible actions that you will take in order not to breach the fundamental principles of the IFAC’s Code of Ethics. (10 marks)

 

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  • 9 Marks

BL – Nov 2014 – L1 – SB – Q3a – Company Law

State distinctions between a limited liability company and a partnership, and explain a director’s duty regarding conflicts of interest.

a. Limited liability companies and partnerships are different in formation and characteristics.
You are required to:

i. State any FIVE distinctions between a limited liability company and a partnership.
(5 Marks)

ii. Explain briefly the duty that a director’s interest shall not conflict with his duties to the company and its consequences.
(4 Marks)

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  • 10 Marks

SCS – Apr 2022 – L3 – Q7 – Professional practice and codes of ethics

Discuss key governance issues based on Ghana’s Code of Best Practices considering the Board Chairman’s intentions.

In reference to Ghana’s Code of Best Practices in Corporate Governance, discuss FOUR (4) key issues that could determine how well or badly HPC is governed, taking into consideration the intention and business relationship of the Board Chairman. (10 marks)

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  • 10 Marks

BL – May 2022 – L1 – SB – Q6a – Business Ethics and Corporate Governance

Advise ABC Limited on the implication of two former directors executing a profitable contract on behalf of their own company.

Two of the directors of ABC Limited negotiated a road construction contract on behalf of the company. The company decided not to go ahead with the contract because it intends to start oil refining at the time. Considering that the road construction contract is profitable, the two directors resigned as directors of ABC Limited and established their own construction company, named Two Limited, which executed the contract at a good profit.

ABC Limited is aware of the situation and has approached you for advice.

Required:
Advise ABC Limited on the implication of the action of its former two directors.

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  • 1 Marks

BMF – Nov 2023 – L1 – SA – Q14 – The Role of Professional Accountants in Business and Society

Identify the accounting concept that ensures professional judgment is not affected by conflict of interest.

Which of the following best describes the concept that an accountant must NOT allow his professional or business judgment to be affected by conflict of interest?

A. Due care
B. Objectivity
C. Professional competence
D. Confidentiality
E. Integrity

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  • 10 Marks

AA – Nov 2019 – L2 – Q2b – Professional and Ethical Considerations

Discusses whether the audit firm complied with the IFAC Code of Ethics in relation to independence in two scenarios.

Sowah Quartey & Co., a firm of Auditors with a number of clients listed on the Ghana Stock Exchange, recently held a staff training session on quality control. During the session, staff raised matters from their experience relating to the ethical code on independence. Some of these matters are outlined below:

i) Shortly before commencing the final audit of a large listed company, a Junior Staff member on the audit team inherited a substantial number of shares in that company. No action was taken because, although representing a large investment for the staff member concerned, the number of shares was totally immaterial with respect to the company. Moreover, the partner knew that if the company’s results are announced, there will be a rise in the share price, and he did not think it was fair to require the staff member to sell them beforehand.
(5 marks)

ii) The Management Accountant of another listed client company had an accident and was away from work for three months. At the time of the accident, the audit senior was winding up the prior year’s audit. Given his familiarity with the company’s management accounting system, it was agreed that he would take over as Management Accountant for the three months.
(5 marks)

Required:
Discuss whether Sowah Quartey & Co had complied with the IFAC’s Code of Ethics or had acted unprofessionally in any other way with respect to each of the above scenarios.

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  • 12 Marks

AA – May 2016 – L2 – Q2a – Professional and Ethical Considerations

This question examines ethical threats and their mitigation in the context of audit engagements.

(a) You are a manager in the audit firm of ABC & Co; and this is your first time you have worked on one of the firm’s established clients, Tark Co. The main activity of Tark Co is providing investment advice to individuals regarding saving for retirement, purchase of shares and securities, and investing in tax-efficient savings schemes. Tark is regulated by the relevant financial services authority.

You have been asked to start the audit planning for Tark Co, by Mr. Soon, a partner in ABC & Co. Mr. Soon has been the engagement partner for Tark Co for the past nine years and has excellent knowledge of the client. Mr. Soon has informed you that he would like his daughter, Afi, to be part of the audit team this year; Afi is currently studying for her first set of knowledge-level papers for her ICAG qualification. Mr. Soon also informs you that Mr. Fac, the audit senior, received investment advice from Tark Co during the year and intends to do the same next year.

In an initial meeting with the finance director of Tark Co, you learned that the audit team will not be entertained on Tark Co.’s yacht this year as this could appear to be an attempt to influence the opinion of the audit. Instead, he has arranged a balloon flight costing less than one-tenth of the expenses of using the yacht and hopes this will be acceptable. The director also states that the fee for taxation services this year should be based on a percentage of tax saved, and he trusts that your firm will accept a fixed fee for representing Tark Co in a dispute regarding the amount of sales tax payable to the taxation authorities.

Required:

(i) Explain the ethical threats which may affect the auditor of Tark Co. (6 marks)

(ii) For each ethical threat, discuss how the effect of the threat can be mitigated. (6 marks)

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  • 1 Marks

TAX – May 2021 – L1 – SA – Q6 – Ethical Issues in Tax Practice

Objective question about when a tax practitioner might face a conflict of interest in a professional activity.

When undertaking a professional activity, a tax practitioner may be faced with a conflict of interest when he:
A. Undertakes a professional service for a group of companies as per his brief
B. Undertakes a professional service for a new client
C. Undertakes a professional activity relating to a particular matter for two or more clients whose interests with respect to that matter are in conflict
D. Refuses to undertake a professional activity relating to a particular matter for two or more clients whose interests with respect to that matter are in conflict
E. Undertakes a professional activity relating to separate and distinct services for two different clients

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  • 5 Marks

CR – May 2020 – Q3b(i) – Ethical Issues in Contract Bidding

This question requires a discussion on the ethical issues related to conflict of interest, confidentiality, and professional behavior in a contract bidding scenario.

You have just obtained your full membership with the Institute of Chartered Accountants (Ghana). Following this successful achievement, you have been appointed as the Head of Finance at Asasiyemedeh Company Limited, a Ghanaian company, which provides catering services. Your former employer, Akwaba Limited, is a large public sector organization operating in Accra, where, as the Financial Accountant, you had the opportunity to work on areas relating to financial accounting, procurement, contracts, and bids. One of Asasiyemedeh Company Limited’s major contracts is with Akwaba Limited, your former employer. The contract is now due for renewal, and Asasiyemedeh Company Limited is preparing a competitive bid for this contract.

You have been tasked to lead the team responsible for bidding for this contract, but you are concerned as a professional that you might breach confidentiality if you accept this role. You also suspect that your knowledge and experience of Akwaba Limited were seen as good reasons for appointing you to the position of Head of Finance at Asasiyemedeh Company Limited. You do not in any way want to let your new employer down as you are aware that the loss of such a major contract would have a significant effect on the financial performance of Asasiyemedeh Company Limited, and its performance-related bonus scheme for management members.

Required:
Discuss the ethical issues raised in the above scenario.

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  • 5 Marks

CR – May 2020 – Q3b(ii) – Ethical Actions in Contract Bidding

This question requires recommendations for maintaining ethical standards in a contract bidding situation involving a conflict of interest.

Recommend the possible courses of action that you will take in order to be ethically responsible as expected from a Professional Accountant.

 

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  • 10 Marks

CR – May 2021 – L3 – Q3c – Ethical Dilemmas and Actions for a Finance Director

Discuss the ethical dilemmas and potential actions a finance director must take to avoid breaching IFAC's Code of Ethics.

You are the Finance Director of a limited liability company. The company started trading with a handful of employees but now has a workforce of 200. You are aware that staff purchases of goods manufactured by the company are authorised by production managers and then processed outside the accounting system. The proceeds from these sales are used to fund the company’s annual Christmas party, organised for Directors of the company.

Required:
Discuss the possible actions that you will take in order not to breach the fundamental principles of the IFAC’s Code of Ethics. (10 marks)

 

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  • 9 Marks

BL – Nov 2014 – L1 – SB – Q3a – Company Law

State distinctions between a limited liability company and a partnership, and explain a director’s duty regarding conflicts of interest.

a. Limited liability companies and partnerships are different in formation and characteristics.
You are required to:

i. State any FIVE distinctions between a limited liability company and a partnership.
(5 Marks)

ii. Explain briefly the duty that a director’s interest shall not conflict with his duties to the company and its consequences.
(4 Marks)

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  • 10 Marks

SCS – Apr 2022 – L3 – Q7 – Professional practice and codes of ethics

Discuss key governance issues based on Ghana’s Code of Best Practices considering the Board Chairman’s intentions.

In reference to Ghana’s Code of Best Practices in Corporate Governance, discuss FOUR (4) key issues that could determine how well or badly HPC is governed, taking into consideration the intention and business relationship of the Board Chairman. (10 marks)

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  • 10 Marks

BL – May 2022 – L1 – SB – Q6a – Business Ethics and Corporate Governance

Advise ABC Limited on the implication of two former directors executing a profitable contract on behalf of their own company.

Two of the directors of ABC Limited negotiated a road construction contract on behalf of the company. The company decided not to go ahead with the contract because it intends to start oil refining at the time. Considering that the road construction contract is profitable, the two directors resigned as directors of ABC Limited and established their own construction company, named Two Limited, which executed the contract at a good profit.

ABC Limited is aware of the situation and has approached you for advice.

Required:
Advise ABC Limited on the implication of the action of its former two directors.

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  • 1 Marks

BMF – Nov 2023 – L1 – SA – Q14 – The Role of Professional Accountants in Business and Society

Identify the accounting concept that ensures professional judgment is not affected by conflict of interest.

Which of the following best describes the concept that an accountant must NOT allow his professional or business judgment to be affected by conflict of interest?

A. Due care
B. Objectivity
C. Professional competence
D. Confidentiality
E. Integrity

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  • 10 Marks

AA – Nov 2019 – L2 – Q2b – Professional and Ethical Considerations

Discusses whether the audit firm complied with the IFAC Code of Ethics in relation to independence in two scenarios.

Sowah Quartey & Co., a firm of Auditors with a number of clients listed on the Ghana Stock Exchange, recently held a staff training session on quality control. During the session, staff raised matters from their experience relating to the ethical code on independence. Some of these matters are outlined below:

i) Shortly before commencing the final audit of a large listed company, a Junior Staff member on the audit team inherited a substantial number of shares in that company. No action was taken because, although representing a large investment for the staff member concerned, the number of shares was totally immaterial with respect to the company. Moreover, the partner knew that if the company’s results are announced, there will be a rise in the share price, and he did not think it was fair to require the staff member to sell them beforehand.
(5 marks)

ii) The Management Accountant of another listed client company had an accident and was away from work for three months. At the time of the accident, the audit senior was winding up the prior year’s audit. Given his familiarity with the company’s management accounting system, it was agreed that he would take over as Management Accountant for the three months.
(5 marks)

Required:
Discuss whether Sowah Quartey & Co had complied with the IFAC’s Code of Ethics or had acted unprofessionally in any other way with respect to each of the above scenarios.

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  • 12 Marks

AA – May 2016 – L2 – Q2a – Professional and Ethical Considerations

This question examines ethical threats and their mitigation in the context of audit engagements.

(a) You are a manager in the audit firm of ABC & Co; and this is your first time you have worked on one of the firm’s established clients, Tark Co. The main activity of Tark Co is providing investment advice to individuals regarding saving for retirement, purchase of shares and securities, and investing in tax-efficient savings schemes. Tark is regulated by the relevant financial services authority.

You have been asked to start the audit planning for Tark Co, by Mr. Soon, a partner in ABC & Co. Mr. Soon has been the engagement partner for Tark Co for the past nine years and has excellent knowledge of the client. Mr. Soon has informed you that he would like his daughter, Afi, to be part of the audit team this year; Afi is currently studying for her first set of knowledge-level papers for her ICAG qualification. Mr. Soon also informs you that Mr. Fac, the audit senior, received investment advice from Tark Co during the year and intends to do the same next year.

In an initial meeting with the finance director of Tark Co, you learned that the audit team will not be entertained on Tark Co.’s yacht this year as this could appear to be an attempt to influence the opinion of the audit. Instead, he has arranged a balloon flight costing less than one-tenth of the expenses of using the yacht and hopes this will be acceptable. The director also states that the fee for taxation services this year should be based on a percentage of tax saved, and he trusts that your firm will accept a fixed fee for representing Tark Co in a dispute regarding the amount of sales tax payable to the taxation authorities.

Required:

(i) Explain the ethical threats which may affect the auditor of Tark Co. (6 marks)

(ii) For each ethical threat, discuss how the effect of the threat can be mitigated. (6 marks)

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