Question Tag: Professional Conduct

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AAA – Nov 2024 – L3 – Q1a – Ethical Issues in Audit Engagements

Ethical issues and professional conduct in an audit engagement involving conflict of interest.

You are the Audit Partner of a mid-sized audit firm, Amoah Sonko and Associates. One of your major clients, Kudi LTD (Kudi), has approached you for a significant audit engagement. Kudi has been experiencing rapid growth and plans to get listed on the Ghana Alternative Market within the next year. During preliminary discussions, the Managing Director of Kudi, a friend, promised you a bonus if the audit report is completed quickly and is favourable, highlighting the company’s strengths.

In the course of the audit of Kudi, you came across a series of unusual financial transactions. These included large intercompany loans with its sister companies, other significant related-party transactions with the directors, and an unusually high volume of sales recorded a few days before the end of the financial year. Upon further investigation, your team found discrepancies in inventory records and evidence of potential non-compliance with revenue recognition standards. The Finance Manager insists these transactions are legitimate and necessary for the company’s rapid growth.

Additionally, you noticed that Kudi was involved in a high-profile legal battle with a major competitor, which was not fully disclosed in the financial statements. The lawyer for Kudi insists that you omit this information from the audit report, arguing it would damage the company’s reputation and its plans to get listed on the Ghana Alternative Market.

Required:
i) Identify TWO potential ethical issues in the scenario and explain the potential impact on your professional conduct.                      ii) Identify the steps you should take to address the conflict of interest presented by the Managing Director’s offer. 
iii) Discuss the potential sanctions for accepting the Managing Director’s offer and providing a favourable audit report without proper verification. 
iv) Evaluate the impact of the undisclosed legal battle on Kudi LTD’s financial statements and the upcoming initial public offer.

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FR – Nov 2024 – L2 – Q5b – Ethical Issues in Government Grants

Identification of ethical issues in recording a government grant and recommended corrective actions.

Dahn is a Chartered Accountant who works for a large Pharmaceutical Company, Nimely Company Ltd (Nimely), as an Assistant Financial Controller. The Financial Controller of Nimely is also a Chartered Accountant with more than ten years of experience.

During the year, Nimely received a vehicle worth GH¢800,000 from the government to support its operations. According to the Government Official who presented the vehicle to the management of Nimely, the company has been compliant in filing and paying its taxes.

At the year-end, the Financial Controller passed the following entry in the Tally Software of Nimely Company Ltd:

Dr Vehicle GH¢800,000
Cr Income GH¢800,000

Dahn explained to the Financial Controller that the grant should be treated in line with the provisions of IAS 20: Accounting for Government Grants and Disclosure of Government Assistance. It is the company’s policy that such grants should be treated as deferred income.

The Financial Controller agreed that the treatment should have been in line with IAS 20, but mentioned that the entries should not be changed since the current treatment may help them meet their profit targets.

It is Nimely’s policy to depreciate its vehicles at a rate of 25% per annum on a straight-line basis.

Required:

i) Identify the ethical issues involved.
ii) Recommend the appropriate actions to be taken by Dahn.

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FM – Nov 2024 – L2 – Q1b – Ethical Issues in Financial Management

Discuss four ethical issues in financial management and their impact on decision-making.

Finance Managers often encounter decisions that affect the organisation’s financial health and reflect its commitment to ethical standards. Balancing profitability with ethical considerations can be challenging, yet it is essential for sustaining long-term success and protecting an organisation’s reputation.

Required:
Discuss FOUR ethical issues in financial management.

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AAA – Nov 2012 – L3 – AII – Q11 – Ethical Issues in Auditing

Identifies the nature of ethical standards in the ICAN Code of Professional Conduct.

Ethical standards as contained in the ICAN Code of Professional Conduct for Members are ………….. principles and statements.

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AAA – Nov 2012 – L3 – SA – Q8 – Ethical Issues in Auditing

Identifying behaviors not generally applicable as unethical in financial services.

In a recent study involving different users of financial services in Nigeria, various types of unethical behaviour have been identified. Which of the following does NOT have general application in the industry?

A. Any act that does not follow the norms of a profession
B. Any act not in consonance with professional code of conduct
C. A conduct that is morally adjudged wrong, unbecoming, and below expectation
D. Behaviour that is based on moral or pre-modial principles
E. Deviations from standard and known code of conduct guiding an operation

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AAA – Nov 2011 – L3 – SAII – Q16 – Regulatory Investigations and Disciplinary Actions

Appeal rights for ICAN members indicted by the Disciplinary Tribunal.

A member of The Institute of Chartered Accountants of Nigeria who has been indicted by the Accountants’ Disciplinary Tribunal has a right of appeal to the …………………..

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AAA – Nov 2011 – L3 – SAII – Q5 – Regulatory Framework and Professional Standards

ICAN's authority to discipline members for ethical breaches.

The power of The Institute of Chartered Accountants of Nigeria to initiate disciplinary action against any member who has run foul of ethical standards rests with……………………….

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AAA – Nov 2011 – L3 – SA – Q15 – Quality Control in Audit Firms

Identifies an action that does not contribute to quality control in audits by professional bodies.

Quality control in audit is maintained by professional accountancy bodies through all the following EXCEPT:

  • A. Publishing of auditing standards
  • B. Publishing of accounting standards
  • C. Encouraging members to be computer literate
  • D. Publishing code of conduct for members
  • E. Establishment of public practice sector

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AT – May 2024 – L3 – SB – Q4 – Tax Planning and Management

Addressing ethical threats, safeguards, legal and ethical issues in tax, and ICAN's enforcement powers in professional accounting.

Professional ethics are essential for building trust and credibility with clients, colleagues, and society. The integrity and reputation of the profession are upheld by members who demonstrate ethical and globally accepted professional behavior. A retreat on “Ethics and professionalism in tax management in Nigeria” is to be organized by a reputable professional accounting firm for its newly employed audit officers and tax consultants.

Your professional accounting firm has been invited to send a resource person to present a paper at the workshop.

As the accounting firm’s Senior Manager (Audit), you are mandated to prepare and present the paper at the workshop covering the following areas:

a. Categories of threats that may pose a challenge to compliance with fundamental principles of the accounting profession. (3 Marks)
b. Safeguards that can be used to eliminate or reduce the identified threats. (4 Marks)
c. Identification of specific legal and ethical issues that could arise from tax engagements. (7 Marks)
d. Powers available to The Institute of Chartered Accountants of Nigeria (ICAN) in enforcing the ethical standards of its members. (6 Marks)
(Total 20 Marks)

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AAA – May 2018 – L3 – SB – Q4 – Ethical Issues in Auditing

Educate staff on IFAC’s Code of Ethics principles, types of independence, and general sources of ethical threats in accounting.

You are the HR partner in Ekemode & Company (Chartered Accountants). As part of the continuous training program of your firm, you are to organize an in-house seminar to educate the staff of your firm on Rules of Professional Conduct. You have decided to emphasize the IFAC’s Code of Ethics for Professional Accountants published by the International Ethics Standard Board for Accountants (IESBA), which was recently adopted by ICAN into their localized code called “The Professional Code of Conduct and Guide for Members.”

Required:

a. Explain briefly the FIVE fundamental principles of the IFAC’s Code of Ethics for Professional Accountants. (7½ Marks)

b. Explain independence of mind and independence of appearance to the staff. (5 Marks)

c. Explain briefly THREE general sources of threat to the fundamental principles of the IFAC’s Code of Ethics for Professional Accountants. (7½ Marks)

(Total 20 Marks)

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FR – MAY 2021 – L2 – Q5a – Ethical Compliance

Identify and evaluate ethical threats faced by KK in Dibimame Ltd's financial statements.

a) Kwadwo Kusi (KK), the Financial Accountant of Dibimame Ltd was reviewing the draft
financial statements prepared by an Accounts Officer and came across the following issues:
i) In calculating the interest on staff loan, the Accounts Officer in error applied 5% instead of
10% interest rate. KK is a beneficiary of the staff loan and a member of the staff loan
committee.
ii) The staff union has demanded a separate accounts for the staff loan. This they advise would
promote transparency and accountability in the process and approval of loans.
iii) Included in accounts receivables was a company known as Sede Ltd, owned by his motherin law. Instead of an outstanding amount of GH¢60,000, the account balance as per the
draft financial statements was GH¢80,000.
iv) The CEO who is known to be domineering has an outstanding balance of GH¢100,000.
This was as a result of cumulative unaccountable imprest which is against the accounting
policy of Dibimame Ltd.
Required:
Identify, evaluate and address the above threats to compliance with the fundamental
principles of good ethical behavior, KK is confronted with

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SCS – March 2023 – L3 – Q1 – Ethics and social responsibility

Explains the importance of good ethical behavior for accountants and reasons for the public’s high expectations from the accountancy profession.

a) At LCH, the Financial Accountant and the Internal Auditor have been designated as Ethics Focal Persons (EFP) to raise awareness of good ethical behavior among the staff.
As a student of ethics, explain FIVE (5) reasons why good ethical behavior (study and application of ethics) is important to today’s Accountant.
(5 marks)

b) The general public has high expectations of the accountancy profession and the idea of an ethical profession should be reinforced in their minds.
State THREE (3) reasons why the general public has high expectations of the accountancy profession to ensure good corporate governance practices.
(5 marks)

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BL – May 2017 – L1 – SB – Q4d – Business Ethics and Corporate Governance

Distinguishes the difference between a criminal offence and ethics in law and professional conduct.

There is a marked difference between criminal law and ethics.

Required:
Distinguish between an offence and ethics.

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BMF – Mar July 2020 – L1 – SB – Q4a – The Role of Professional Accountants in Business and Society

Listing and explaining five threats that can impair the conduct of a professional accountant.

A broad range of relationships and circumstances could compromise a professional accountant’s ability to comply with the fundamental principles of ethical behavior.

Required:
List and explain FIVE threats that can impair the conduct of a professional accountant in a business environment.

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BL – May 2016 – L1 – SA – Q7 – Business Ethics and Corporate Governance

Identify the statement that is not a purpose of ethical codes administered by professional bodies.

Ethical codes are administered by professional bodies to ensure all of the following EXCEPT
A. Maintain high standard in the profession
B. Protect the vulnerable client
C. Prevent arbitrary use of power
D. Prevent quackery in the profession
E. Maintain a monopoly of the profession

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FR – Nov 2023 – L2 – Q5a – Professional and Ethical Issues in Financial Reporting

Discuss potential actions to avoid breaching the five fundamental ethical principles and recommend possible actions in dealing with an ethical situation.

a)
i) Explain how you could potentially act in order not to breach each of the FIVE (5) fundamental principles of the IFAC’s code of ethics. (5 marks)

ii) Recommend FIVE (5) possible actions that you should take as a member of the Institute of Chartered Accountants, Ghana in dealing with the situation. (5 marks)

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BMF – May 2024 – L1 – SB – Q3a – The Role of Professional Accountants in Business and Society

Discuss the ethical threats faced by professional accountants and their impact on compliance with laws and regulations.

a. Explain briefly FIVE ethical threats that could compromise a professional accountant’s ability to comply with relevant laws and regulations. (5 Marks)

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AA – Nov 2020 – L2 – Q2c – Professional and Ethical Considerations

Evaluate compliance with IFAC’s Code of Ethics in two audit scenarios.

You are an audit manager with Kwabotwe & Co, a firm of Chartered Accountants. You have been assigned to handle the firm’s quality control in the first quarter. In your first meeting, you invited staff to raise matters from their experience relating to their compliance with IFAC’s code of ethics. The following issues came up:

i) In its management letter to another audit client, Kwabotwe & Co warned the company that its computer system lacked essential controls. The company subsequently decided to install a totally new system, and Kwabotwe & Co’s management consultancy department was appointed to design the new system.
(5 marks)

ii) Kwabotwe & Co was recently approached by a large company that was not an audit client at the time, for a second opinion on the audit of the financial statements. The company was in dispute with its existing auditors, who were proposing to issue a qualified audit opinion due to disagreement over inventory valuation. Kwabotwe & Co’s technical partner reviewed the evidence provided by the company and advised that its accounting treatment was in order. Shortly afterward, Kwabotwe & Co was invited to accept nomination as auditors. However, the reply to the letter of inquiry to the existing auditors made it clear that the inventory valuation dispute was not as straightforward as the company had made it out to be.
(5 marks)

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

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FR – Nov 2016 – L2 – Q5b -Professional and Ethical Issues in Financial Reporting

Discuss the ethical considerations for partners and accountants in the amalgamation process.

Amalgamating two or more firms into one presents ethical challenges.

Required:
Discuss TWO ethical considerations that the partners and their accountants should take into account in the process of the amalgamation of the partnerships.

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CR – May 2019 – L3 – Q5b – Regulatory framework and ethics

The question requires identifying and discussing the ethical issues arising from conflicts of interest, board dynamics, and related party transactions within Bolgatanga Ltd and how to address them appropriately.

Bolgatanga Ltd (Bolgatanga), currently operating in the biotechnology research and healthcare sector, is a Ghanaian listed company which prepares financial statements in accordance with International Financial Reporting Standards (IFRS) up to 31 December each year. On 1 January 2015, Bolgatanga acquired 80% interest in Wa Ltd (Wa). You are a newly qualified accountant at Bolgatanga and report directly to Mr. Dominic Atubiga, the Financial Controller (FC). Early 2017, Bolgatanga acquired Sissala Ltd (Sissala), a private company, and has recently had an application for additional funds rejected from its current bankers on the basis that there are insufficient assets to offer security.

You have been reviewing the minutes of Bolgatanga’s last board meeting, dated 28 December 2017. The minutes indicate that the sales director resigned on 1 December 2017. In her resignation letter to the board, the sales director states that she can no longer work with Dominic Atubiga, who is dominating the board and allowing a close friendship with, and advice from, Salifu Adams (Managing Director of Sissala) to compromise his judgement.

The Human Resources department is currently in the process of recruiting a new sales director. Dominic Atubiga tells the board that, in the interim, the marketing department will just have to cope until a replacement sales director is appointed. Speaking to other staff in Bolgatanga, you have become aware that the wife of the Managing Director of Bolgatanga is a partner in Brother and Co., a firm of solicitors which the company uses to provide legal advice in relation to the market development activities of Wa. However, Brother and Co. has confirmed that the FC’s wife works in a different division and that she has no involvement in the services provided. It is your understanding that legal fees of GH¢500,000 (included in administration expenses) were paid by Bolgatanga to Brother and Co. during the year ended 31 December 2017.

Required:
Discuss the ethical issues arising from the information provided, and the appropriate steps to address them.

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