Due care – NBC Institute

AAA – May 2024 – L3 – SC – Q5 – Auditor’s Legal Liability

Assess the auditor's legal position and requirements for due care in Globamedia's case, and outline preventive steps.

Question

Globamedia is a company listed on The Nigerian Exchange (NGX) and is a long-established media company. In the last three years, it made some losses, though it is making investment in digital publishing. This investment and the company’s projected sound future prospects have led to a good market rating since it was generally seen that this digital publishing is a leading edge in the media industry. Its investments have been funded through the use of reserves built over many years.

However, a few weeks ago, Globamedia’s shares were suspended, having fallen by more than the stipulated threshold by The Nigerian Exchange Group on rumors that asset values have been significantly overstated and that the company was no longer financially viable. Your firm as the auditors has come under significant criticism and is considered as being negligent.

Required:

a. Evaluate the legal position of your firm. (5 Marks)

b. Discuss the requirements for due care. (5 Marks)

c. Highlight the steps and procedures that the firm could have taken to prevent such a situation from occurring. (5 Marks)

Answer

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Tags: Audit Procedures, Auditor's responsibility, Due care, Financial Viability, Legal Liability, Media Industry, Risk Management
Level: Level 3

Topic: Auditor’s Legal Liability
Series: MAY 2024

AA – May 2024 – L2 – SA – Q4 – The Role and Responsibilities of Auditors

This question explores the public interest, ethical concerns, and auditor responsibilities, particularly in the case of reduced maintenance costs at MetroPower Limited.

Question

MetroPower Limited, a major public utility company, was entrusted with providing electricity to millions of residents and businesses. Mr. Mark, the Lead Technician at MetroPower for many years, is responsible for maintaining the electrical grid to ensure reliable electricity supply to the city. MetroPower’s financial statements were subjected to annual audits.

When Mrs. Jennifer assumed her role as the department’s supervisor, she implemented cost-cutting measures aimed at reducing the budget allocated for routine maintenance. This decision raised significant ethical concerns, as Mr. Mark believed it would compromise the safety and reliability of the electrical grid. He knew that such actions could lead to power outages and electrical hazards.

Mr. Mark found himself in a dilemma, torn between his responsibility to make electricity available and the potential consequences of opposing his new supervisor’s cost-cutting measures. Mr. Mark documented his concerns, maintaining detailed records of previous maintenance schedules and their impact on the grid’s reliability.

The auditors came across the evidence of reduced costs of maintenance and inspections in MetroPower.

Required:

a. Describe public interest, using MetroPower as an example. (2 Marks)

b. Identify five matters with which public interest can be associated. (5 Marks)

c. In setting codes of ethics, it is stated that principle-based ethics are better than rule-based ethics. Justify this assertion. (5 Marks)

d. Explain why the concept of due care or reasonable care is important in a contract for the provision of services. (4 Marks)

e. State two likely implications of the auditors’ failing to act on the information they got in relation to reduced costs of maintenance and inspections at MetroPower. (4 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit failures, Due care, Ethical Conflicts, Professional Ethics, Public Interest
Level: Level 2

Topic: The Role and Responsibilities of Auditors
Series: MAY 2024

CR – Nov 2021 – L3 – Q3c – Regulatory Framework and Ethics

Assess the ethical principles breached in a workplace scenario and recommend actions in accordance with the IFAC Code of Ethics.

Question

Linda is a junior member of an audit firm and has just returned to work after taking compassionate leave to care for her sick mother. For financial reasons, Linda needs to work full-time. Linda has been having difficulties with her mother’s home care arrangements, causing her to miss several team meetings, which usually occur at the start of each day, and she needs to leave work early as well.

In terms of her capabilities, Linda is very competent at her work, but her frequent absence puts severe pressure on her and her overworked colleagues. Linda’s manager knows that workflow through the practice is coming under intense pressure, and in order that the team’s output is not affected, had a discussion with the audit team on Linda’s circumstances. This has, however, led to some members of the audit team undermining Linda at every given opportunity, putting Linda under even greater stress.

Required:

i) In accordance with the IFAC’s code of ethics, assess THREE (3) possible fundamental ethical principles that might have been breached. (5 marks)
ii) Recommend the possible actions that the manager should take as a member of the Institute of Chartered Accountants, Ghana in dealing with this ethical dilemma. (5 marks)

Answer

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Tags: Confidentiality, Due care, Ethical dilemma, Ethics, IFAC Code, Integrity, Objectivity, Professional competence
Level: Level 3

Topic: Regulatory Framework and Ethics
Series: NOV 2021

CSEG – May 2016 – L2 – Q5c – Business ethics

Identify and justify fundamental ethical principles that could be breached in two scenarios involving financial reporting and providing tax advice.

Question

You recently qualified as a professional accountant and received promotion in your company. One of your key responsibilities is to prepare management accounts to facilitate management decision making. You require important sales information from the sales department to incorporate into the final figures. Unfortunately, due to staff sickness and other inefficiencies, the sales report for the month has been delayed. Thus, you will not receive the information until few hours before the accounts are due for presentation to the Chief Finance Officer.

In a related situation, while on lunch break, you overhead the marketing manager asking another employee in the finance department to advise her on some investment decisions she has to make. She has recently inherited a considerable sum of money and would like your colleague to calculate her inheritance tax as well as capital gains tax liabilities.

Required: Identify the fundamental ethical principle(s) that could be in breach and justify why they may constitute a breach. (6 marks)

Answer

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Tags: Accounting principles, Due care, Integrity, Professional competence, Professional Ethics
Level: Level 2

Series: MAY 2016

AAA – May 2024 – L3 – SC – Q5 – Auditor’s Legal Liability

Assess the auditor's legal position and requirements for due care in Globamedia's case, and outline preventive steps.

Question

Required:

a. Evaluate the legal position of your firm. (5 Marks)

b. Discuss the requirements for due care. (5 Marks)

c. Highlight the steps and procedures that the firm could have taken to prevent such a situation from occurring. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Auditor's responsibility, Due care, Financial Viability, Legal Liability, Media Industry, Risk Management
Level: Level 3

Topic: Auditor’s Legal Liability
Series: MAY 2024

AA – May 2024 – L2 – SA – Q4 – The Role and Responsibilities of Auditors

This question explores the public interest, ethical concerns, and auditor responsibilities, particularly in the case of reduced maintenance costs at MetroPower Limited.

Question

The auditors came across the evidence of reduced costs of maintenance and inspections in MetroPower.

Required:

a. Describe public interest, using MetroPower as an example. (2 Marks)

b. Identify five matters with which public interest can be associated. (5 Marks)

c. In setting codes of ethics, it is stated that principle-based ethics are better than rule-based ethics. Justify this assertion. (5 Marks)

d. Explain why the concept of due care or reasonable care is important in a contract for the provision of services. (4 Marks)

e. State two likely implications of the auditors’ failing to act on the information they got in relation to reduced costs of maintenance and inspections at MetroPower. (4 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit failures, Due care, Ethical Conflicts, Professional Ethics, Public Interest
Level: Level 2

Topic: The Role and Responsibilities of Auditors
Series: MAY 2024

CR – Nov 2021 – L3 – Q3c – Regulatory Framework and Ethics

Assess the ethical principles breached in a workplace scenario and recommend actions in accordance with the IFAC Code of Ethics.

Question

Required:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Confidentiality, Due care, Ethical dilemma, Ethics, IFAC Code, Integrity, Objectivity, Professional competence
Level: Level 3

Topic: Regulatory Framework and Ethics
Series: NOV 2021

CSEG – May 2016 – L2 – Q5c – Business ethics

Identify and justify fundamental ethical principles that could be breached in two scenarios involving financial reporting and providing tax advice.

Question

Required: Identify the fundamental ethical principle(s) that could be in breach and justify why they may constitute a breach. (6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting principles, Due care, Integrity, Professional competence, Professional Ethics
Level: Level 2

Series: MAY 2016

Question Tag: Due care

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AAA – May 2024 – L3 – SC – Q5 – Auditor’s Legal Liability

Assess the auditor's legal position and requirements for due care in Globamedia's case, and outline preventive steps.

AA – May 2024 – L2 – SA – Q4 – The Role and Responsibilities of Auditors

This question explores the public interest, ethical concerns, and auditor responsibilities, particularly in the case of reduced maintenance costs at MetroPower Limited.

CR – Nov 2021 – L3 – Q3c – Regulatory Framework and Ethics

Assess the ethical principles breached in a workplace scenario and recommend actions in accordance with the IFAC Code of Ethics.

CSEG – May 2016 – L2 – Q5c – Business ethics

Identify and justify fundamental ethical principles that could be breached in two scenarios involving financial reporting and providing tax advice.

AAA – May 2024 – L3 – SC – Q5 – Auditor’s Legal Liability

Assess the auditor's legal position and requirements for due care in Globamedia's case, and outline preventive steps.

AA – May 2024 – L2 – SA – Q4 – The Role and Responsibilities of Auditors

This question explores the public interest, ethical concerns, and auditor responsibilities, particularly in the case of reduced maintenance costs at MetroPower Limited.

CR – Nov 2021 – L3 – Q3c – Regulatory Framework and Ethics

Assess the ethical principles breached in a workplace scenario and recommend actions in accordance with the IFAC Code of Ethics.

CSEG – May 2016 – L2 – Q5c – Business ethics

Identify and justify fundamental ethical principles that could be breached in two scenarios involving financial reporting and providing tax advice.

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Question Tag: Due care

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AAA – May 2024 – L3 – SC – Q5 – Auditor’s Legal Liability

Assess the auditor's legal position and requirements for due care in Globamedia's case, and outline preventive steps.

You're reporting an error for "AAA – May 2024 – L3 – SC – Q5 – Auditor’s Legal Liability"

AA – May 2024 – L2 – SA – Q4 – The Role and Responsibilities of Auditors

This question explores the public interest, ethical concerns, and auditor responsibilities, particularly in the case of reduced maintenance costs at MetroPower Limited.

You're reporting an error for "AA – May 2024 – L2 – SA – Q4 – The Role and Responsibilities of Auditors"

CR – Nov 2021 – L3 – Q3c – Regulatory Framework and Ethics

Assess the ethical principles breached in a workplace scenario and recommend actions in accordance with the IFAC Code of Ethics.

You're reporting an error for "CR – Nov 2021 – L3 – Q3c – Regulatory Framework and Ethics"

CSEG – May 2016 – L2 – Q5c – Business ethics

Identify and justify fundamental ethical principles that could be breached in two scenarios involving financial reporting and providing tax advice.

You're reporting an error for "CSEG – May 2016 – L2 – Q5c – Business ethics"

AAA – May 2024 – L3 – SC – Q5 – Auditor’s Legal Liability

Assess the auditor's legal position and requirements for due care in Globamedia's case, and outline preventive steps.

You're reporting an error for "AAA – May 2024 – L3 – SC – Q5 – Auditor’s Legal Liability"

AA – May 2024 – L2 – SA – Q4 – The Role and Responsibilities of Auditors

This question explores the public interest, ethical concerns, and auditor responsibilities, particularly in the case of reduced maintenance costs at MetroPower Limited.

You're reporting an error for "AA – May 2024 – L2 – SA – Q4 – The Role and Responsibilities of Auditors"

CR – Nov 2021 – L3 – Q3c – Regulatory Framework and Ethics

Assess the ethical principles breached in a workplace scenario and recommend actions in accordance with the IFAC Code of Ethics.

You're reporting an error for "CR – Nov 2021 – L3 – Q3c – Regulatory Framework and Ethics"

CSEG – May 2016 – L2 – Q5c – Business ethics

Identify and justify fundamental ethical principles that could be breached in two scenarios involving financial reporting and providing tax advice.

You're reporting an error for "CSEG – May 2016 – L2 – Q5c – Business ethics"

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