Question Tag: Professional Conduct

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  • 10 Marks

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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  • 5 Marks

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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  • 6 Marks

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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  • 1 Marks

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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  • 1 Marks

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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  • 1 Marks

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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  • 1 Marks

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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  • 1 Marks

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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  • 20 Marks

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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  • 20 Marks

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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  • 10 Marks

CR – May 2018 – L3 – Q5b – Regulatory Framework and Ethics

Identify the ethical issue related to inventory adjustment and explain the Finance Manager’s course of action.

The Finance Manager of Integrity Sports, a Takoradi-based manufacturer and retailer of sporting goods, prepares quarterly accounts for his boss, the Finance Director. At the end of the first quarter of 2017, the Finance Manager identified that net assets were below the level required by a bank covenant that the company had entered into with Unique Bank. He therefore alerted the Finance Director to this. The following week, the Finance Manager identified that amended quarterly accounts had been sent to the bank by the Finance Director, in which the inventory figure had been increased. The same issue arose at the end of the second quarter of 2017, and again the Finance Manager noted that the accounts sent to the bank included a different inventory figure from those that he had prepared the previous week. The Finance Manager is sure that cut-off procedures and valuation were correctly adhered to and this was done under his supervision. He therefore asked the Finance Director why the figures had changed, and the Finance Director responded:

“The adjustment is just for some goods held at one of our customer’s retail premises – we missed it out from the stock count. Don’t worry, I’ve got it all in hand!”

The Finance Manager then reviewed the contract with the customer in question and noted that it clearly states that the customer will be supplied with goods as ordered and has no right of return in the case of unsold goods. He also noted that Integrity Sports has sold goods to this customer for a number of years on the same terms, and no adjustment has ever been made before. Both the Finance Manager and Finance Director are Chartered Accountants.

Required:
i) Explain why the inventory adjustment suggests an ethical issue. (6 marks)
ii) Explain FOUR courses of action that the Finance Manager should take in respect of the issue that he has identified. (4 marks)

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  • 3 Marks

TX – May 2019 – L3 – Q3D – Ethical principles in taxation

Examine the ethical and professional issues that tax consultants must consider when dealing with taxpayers.

d) Section 18 of the Revenue Administration Act 2016 (Act 915) makes provision for the use of Tax Consultant by a taxpayer.

Required:
Examine THREE (3) ethical and professional issues that a tax consultant may consider in dealing with a taxpayer. (3 marks)

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  • 10 Marks

CR – Mar 2024 – Q3c – Regulatory framework and ethics

Analyze ethical issues in a takeover scenario, including views on considering ethics and potential conflicts of interest.

The directors of Akilapa Ltd are involved in takeover talks with Bongo Partners. In the discussions, Mr Mensah, the Managing Director of Akilapa Ltd stated that there was no point in considering issues of ethics because the purpose of the takeover is to increase the market share of the company and ultimately increase the profit of the firm. In seconding his point, Miss Benkro indicated that in adopting a pragmatic approach to the takeover, there was no ethical issue in considering a third-party in relation to Bongo Partners because, in her opinion, the takeover will not benefit the third party but the company and the society.

During the meeting, Dr Worlanyo who was the previous Accountant of Bongo Partners before moving to Akilapa Ltd was involved in drafting the financial statements and provided a positive approval of the takeover bid. Upon receipt of the recommendation, a member of the board of directors found that there are indications that several of Bongo Partners’s Non-current assets might be impaired.

Required: i) Comment on the views of Mr Mensah and Miss Benkro regarding the fact that there is no point in considering ethical issues in the takeover bid. (4 marks)

ii) Assess the ethical issues in this scenario and explain how they should be addressed. (6 marks)

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  • 10 Marks

CR – Dec 2022 – L3 – Q3c – Regulatory Framework and Ethics

Address ethical issues surrounding special treatment of a cashier at Salisu Medical Centre and propose remedies.

Salisu Medical Centre runs 24-hour services every day. To ensure smooth cash collection from walk-in clients, the company also operates a 24-hour cash office. The cashiers work on a shift basis to cover the morning, afternoon, evening, and night services. There are five (5) cashiers employed by the firm, who are all supposed to work at least once in each of the shift periods before the year ends. Jennifer, one of the cashiers, has never worked on night duties since she was employed. The Finance Director of the company prepares the duty roster (time-schedule) for the cashiers’ shifts together with the Chief Cashier.

Jennifer’s special treatment has been continuously justified by the Finance Director due to her place of abode being far from the workplace. However, there are other cashiers who come on night-shift staying in her vicinity.

Jennifer is also known in the company for her frequent “excuse” duty from Doctors at the medical centre, allowing her to stay away from work, as well as her spontaneous use of annual leave days, sometimes obtaining additional casual leave. This behavior of Jennifer continuously affects workflow at the Cash Office, leading to another cashier being called to stand in for her, resulting in overtime payments for that cashier.

The conduct of Jennifer and the manner in which the Finance Director handles her case has caused concern among the other cashiers.

Required:

i) Describe the ethical issues involved and their implications on work output at Salisu Medical Centre.
(4 marks)

ii) Recommend possible measures that could be instituted to prevent such ethical challenges in the future.
(6 marks)

(Total: 10 marks)

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  • 10 Marks

MA – May 2021 – L2 – Q3b – Other aspects of performance measurement

b) The Estate Manager of Swift International Company was charged to coordinate the procurement process for the award of a contract to construct a warehouse for the company. In the process, the Chief Executive Officer (CEO) called on the manager to ensure the contract is awarded to Gyidi Construction Works, whose owner is the CEO's friend. When the bids were evaluated, Gyidi placed fourth in terms of responsiveness but being guided by the CEO’s directive, the project was awarded to Gyidi Construction Works. Being guilty of not acting professionally, the estate manager admitted that he had acted unethically. Required: Identify and explain FOUR (4) threats to ethical behaviour as a Management Accountant. (10 marks)

b) The Estate Manager of Swift International Company was charged to coordinate the procurement process for the award of a contract to construct a warehouse for the company. In the process, the Chief Executive Officer (CEO) called on the manager to ensure the contract is awarded to Gyidi Construction Works, whose owner is the CEO’s friend. When the bids were evaluated, Gyidi placed fourth in terms of responsiveness but being guided by the CEO’s directive, the project was awarded to Gyidi Construction Works. Being guilty of not acting professionally, the estate manager admitted that he had acted unethically.

Required:
Identify and explain FOUR (4) threats to ethical behaviour as a Management Accountant. (10 marks)

 

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  • 10 Marks

AAA – July 2023 – L3 – Q1b – Rules of professional conduct | Professional responsibility and liability | Reporting

Assess ethical and professional implications in scenarios involving audit team members and client requests.

You are the Audit Manager at Ndaa & Associates whose client portfolio includes ABC Credit Plc, a listed financial institution offering loans and credit facilities to both commercial and retail customers. You have received an email from the Audit Supervisor who is currently supervising interim testing on systems and controls in relation to the audit of ABC Credit Plc for the year ending 31 October 2022. The email gives the following details for your consideration:

  1. One of the audit team members, Obiba JK, has provisionally agreed to apply for a loan from ABC Credit Plc to finance the purchase of a domestic residence. The loan will be secured on a property, and the client’s business manager has promised Obiba JK that he will ensure that she gets ‘the very best deal which the bank can offer.’ (5 marks)
  2. The payroll manager at ABC Credit Plc has asked the audit supervisor if it would be possible for Ndaa & Associates to provide a member of staff on secondment to work in the payroll department. The payroll manager has struggled to recruit a new supervisor for the organisation’s main payroll system and wants to assign a qualified member of the audit firm’s staff for an initial period of six months. (5 marks)

Required:
Assess the ethical and professional implications of the issues raised in respect of the audit of ABC Credit Plc and recommend actions to be taken in each case by the audit firm.

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  • 3 Marks

BCL – May 2020 – L2 – Q3d – Governance and Ethical Issues Relating to Business

Identify three codes of ethics for accountants in Ghana.

Code of Ethics are drawn up to be followed by all the company’s structures and professionals. It serves as a guide to professional conduct and guarantees concerns about efficiency, competitiveness, and profitability.

Required:

Identify THREE (3) codes of ethics for Accountants in Ghana.
(3 marks)

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  • 5 Marks

BMIS – Nov 2021 – L1 – Q2c – Professional ethics in accounting and business

Outline actions by accountants that demonstrate acting in the public interest.

Although a professional code of ethics does not clearly define ‘public interest’, an Accountant would be deemed to be acting in the public interest when he takes certain actions to perform his duties.

Required:
Outline FIVE (5) of such actions. (5 marks)

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  • 10 Marks

AAA – Nov 2016 – L3 – Q1a – Rules of professional conduct | Professional responsibility and liability

Discuss ethical and professional issues raised concerning auditors holding shares, fund management by a company with ties to the audit firm, and an audit team member’s spouse inheriting shares in an audit client.

a) i) Sampson Quaye & Co. has been auditors for Stawac plantations Ltd (a company engaged in rubber production) for the past 10 years. Sampson Quaye & Co owns 1% of the shares in Stawac Plantation Ltd., since it is required by the policy of Stawac Plantation Ltd. for their auditors to do so.

ii) United Funds Ltd. are the fund managers of Sampson Quaye & Co.’s Provident Fund Scheme. United Funds Ltd. owns shares in Standard Group, a company listed on the Ghana Stock Exchange with many subsidiaries. Sampson Quaye & Co has been invited by Akroma Ltd., a Subsidiary of Standard Group to tender for its audit.

iii) Nenebi is the audit senior of Sampson Quaye & Co. responsible for the audit of Minimade Ltd. a company listed on the Ghana Stock Exchange. Two weeks into the audit of the accounts of Minimade Ltd for the year ended 31 December 2014, Narteykie, the wife of Nenebi, inherited 2000 equity shares owned by her late father in Minimade Ltd.

Required: Comment on the ethical and other professional issues raised by the above matters. (10 marks)

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  • 10 Marks

AAA – Nov 2017 – L3 – Q2a – Rules of Professional Conduct, Professional Responsibility and Liability

Discuss ethical issues and recommended actions related to long-term audit engagements and conflicts of interest in two separate cases.

You are the Ethics partner of the firm Minnow Associates and the following issues have been brought to your attention for a number of clients for the audit for the year ended 29 February 2016. Each case is separate:

i) Forest Hotel Limited
This has been an audit client of your firm for over fifteen years. The partners and audit teams have been rotated every four to five years. A review of the audit file shows that the company acquired a number of flat screen televisions for a refurbished section of the hotel. These flat screen televisions were imported from China in the names of the children of the directors to avoid paying import duties. The audit engagement partner did not make any comment on this, though an audit note from the Audit Manager had requested direction from the engagement partner on what needed to be done on the issue.

Further investigation revealed that the Procurement Advisory Section of your firm had handled the importation and clearing of the TVs for the client.

ii) Kwahu Microfinance Limited (KML)
Kwahu Microfinance is a first-time audit client. The audit was acquired through a bidding process supervised by Bank of Ghana (BOG) as the previous auditors had not performed to the satisfaction of the regulator.

The Engagement partner has reported that the time and cost budgets have all been substantially exceeded due to unforeseen difficulties associated with getting reliable information for agreeing the opening balances. The current year’s information and its audit, however, did not seem to pose any problems.

However, a business controlled by the husband of the Audit Manager has been found to have taken a huge loan from KML just before the start of the bidding process for the audit. The engagement partner reported that this loan has been written off by the company in the year without any payments being made. The Audit Manager says she is unaware of the loan write-off because she’s not a director of her husband’s company. She was, however, aware of the loan when she was asked to become the manager on the audit. The Financial Manager of Kwahu Microfinance Limited believes that this is not an audit matter.

Required:
For each issue above, discuss the ethical issues raised and recommend the relevant actions to be taken by your firm.

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