Question Tag: Safeguards

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  • 15 Marks

CR – Nov 2022 – L3 – Q6 – Ethical Issues in Corporate Reporting

Evaluate ethical threats and recommend safeguards in corporate reporting practices.

Compliance with the fundamental ethical principles may potentially be threatened by a broad range of circumstances. It is expected for professional members to evaluate identified threats and put up enough safeguards as appropriate responses to such threats. Unless any threat is clearly insignificant, members must implement safeguards to eliminate the threats or reduce them to an acceptable level so that compliance with the fundamental principles is not compromised. Many threats fall into the following categories:

i. Self-interest;
ii. Self-review;
iii. Advocacy;
iv. Familiarity; and
v. Intimidation.

Required:
a. Evaluate two circumstances which may give rise to each of the categories of threats enumerated above. (10 Marks)
b. Recommend two safeguards to eliminate or reduce the threats to an acceptable level. (5 Marks)
(Total 15 Marks)

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  • 20 Marks

AA – May 2017 – L2 – SA – Q3 – Professional Ethics and Code of Conduct for Auditors

Identification of threats to ethical principles and safeguards for accountants.

There are a variety of circumstances that could give rise to the threats of self-interest, advocacy, familiarity, and intimidation against the five fundamental principles of integrity, objectivity, personal competence and due care, confidentiality, and professional behaviour as enunciated in the Code of Ethics. There are, however, safeguards created to help the Professional Accountant in such circumstances.

You are required to:

  1. (a) List FIVE safeguards created by the profession and legislation. (5 Marks)
  2. (b) Identify and explain FIVE safeguards that could be created by firms of Chartered Accountants. (10 Marks)
  3. (c) List FIVE possible safeguards that an individual Chartered Accountant could apply. (5 Marks)

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  • 20 Marks

AA – May 2018 – L2 – Q4 – Professional Ethics and Code of Conduct for Auditors (IESBA Code)

Focuses on ethical issues relating to independence and potential threats when auditors take management roles in audit clients.

Joe Adams was the engagement partner to Maikai Airlines Limited from 2012 to 2014. He retired from the firm of the Chartered Accountants and intends to join Maikai Airlines Limited as Finance Director. It is the policy of the firm to pay all partners in full when they disengage.

Required: a. Identify and explain FOUR ethical matters worthy of consideration as Joe Adams joins Maikai Airlines Limited. (8 Marks) b. Discuss the THREE threats that could arise should Joe Adams join Maikai Airlines Limited. (6 Marks) c. Explain THREE matters specified by the Code of Ethics as safeguards in relation to this matter. (6 Marks)

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  • 20 Marks

BMF – Nov 2023 – L1 – SB – Q6 – Basics of Business Finance and Financial Markets

Discuss economic stagnation, macroeconomic policy approaches, operations research techniques, and safeguards in accounting.

a. Briefly explain the concept “Economic stagnation.” (2 Marks)

b. State the THREE policy approaches used by governments to meet macroeconomic objectives. (3 Marks)

c. List and explain briefly FOUR operations research techniques. (8 Marks)

d. Safeguards are actions or other measures that may eliminate threats or reduce them to an acceptable level. Explain SEVEN safeguards created by the Profession in this regard. (7 Marks)

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  • 9 Marks

BMF – May 2023 – L1 – SB – Q4c – The Role of Professional Accountants in Business and Society

Identify safeguards against ethical threats in the accounting profession.

State SIX safeguards created by the profession, legislation or regulation against ethical threats and dilemmas.

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  • 5 Marks

FR – April 2022 – L2 – Q5c – Professional and Ethical Issues in Financial Reporting

Discuss safeguards for mitigating threats to ethical behavior in the context of tax compliance.

Question:
Michael Onipa, a Chartered Accountant, is under pressure from his employees to under declare sales for the year ended 2021 to save the company from paying the due tax for the year. He has evaluated the threat to his professional obligations to comply with the fundamental principles of good ethical behavior, as significant. He has therefore considered safeguards to eliminate or reduce the threat to an acceptable level.

Required:
Discuss TWO (2) safeguards Michael Onipa could consider to either eliminate or reduce the threats to an acceptable level.
(5 marks)

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  • 5 Marks

AA – July 2023 – L2 – Q2b – Professional and Ethical Considerations

Safeguards to be applied by an auditor in various relationships with clients.

b) What are the safeguards to be applied by an auditor in relation to the following?
i) Financial interest in the client.
ii) Loans and Guarantees to or from the client.
iii) Business relationship with the client.
iv) Family and personal relationship with the client.
v) Employment with an Assurance Client. (5 marks)

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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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  • 5 Marks

AA – May 2017 – L2 – Q1b – Professional and Ethical Considerations

Identification of major threats to compliance with professional ethics.

The IFAC International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants sets out the five fundamental principles of professional ethics and provides a conceptual framework for applying those principles. Professional Accountants must apply this conceptual framework to identify threats to compliance with the principles, evaluate their significance, and apply appropriate safeguards to eliminate or reduce them so that compliance is not compromised.

Required: Identify FIVE major threats identified in the code of ethics, giving examples of each

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  • 5 Marks

AA – Aug 2022 – L2 – Q2a – Professional and Ethical Considerations

Discusses the threats to auditor independence and objectivity when transferring clients and possible safeguards.

The Managing Partner of A & B Partners, Mr. Pumpa, has decided to put measures in place for the survival of the firm immediately after the enactment of the Company Act, 2019 (Act 992), which requires that “An Auditor shall hold office for a term of not more than six years and is eligible for re-appointment after a cooling-off period of not less than six years.”

Mr. Pumpa then had a gentle arrangement with his colleague, also a Managing Partner in C & D Associates, to transfer all clients who have exceeded their mandatory six years with A & B Partners and vice versa.

Required:
Discuss FIVE (5) major threats to the auditor’s independence and objectivity and how these inherent threats could be mitigated in the decision to transfer client C & D Associates.
(5 marks)

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  • 15 Marks

CR – Nov 2022 – L3 – Q6 – Ethical Issues in Corporate Reporting

Evaluate ethical threats and recommend safeguards in corporate reporting practices.

Compliance with the fundamental ethical principles may potentially be threatened by a broad range of circumstances. It is expected for professional members to evaluate identified threats and put up enough safeguards as appropriate responses to such threats. Unless any threat is clearly insignificant, members must implement safeguards to eliminate the threats or reduce them to an acceptable level so that compliance with the fundamental principles is not compromised. Many threats fall into the following categories:

i. Self-interest;
ii. Self-review;
iii. Advocacy;
iv. Familiarity; and
v. Intimidation.

Required:
a. Evaluate two circumstances which may give rise to each of the categories of threats enumerated above. (10 Marks)
b. Recommend two safeguards to eliminate or reduce the threats to an acceptable level. (5 Marks)
(Total 15 Marks)

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  • 20 Marks

AA – May 2017 – L2 – SA – Q3 – Professional Ethics and Code of Conduct for Auditors

Identification of threats to ethical principles and safeguards for accountants.

There are a variety of circumstances that could give rise to the threats of self-interest, advocacy, familiarity, and intimidation against the five fundamental principles of integrity, objectivity, personal competence and due care, confidentiality, and professional behaviour as enunciated in the Code of Ethics. There are, however, safeguards created to help the Professional Accountant in such circumstances.

You are required to:

  1. (a) List FIVE safeguards created by the profession and legislation. (5 Marks)
  2. (b) Identify and explain FIVE safeguards that could be created by firms of Chartered Accountants. (10 Marks)
  3. (c) List FIVE possible safeguards that an individual Chartered Accountant could apply. (5 Marks)

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  • 20 Marks

AA – May 2018 – L2 – Q4 – Professional Ethics and Code of Conduct for Auditors (IESBA Code)

Focuses on ethical issues relating to independence and potential threats when auditors take management roles in audit clients.

Joe Adams was the engagement partner to Maikai Airlines Limited from 2012 to 2014. He retired from the firm of the Chartered Accountants and intends to join Maikai Airlines Limited as Finance Director. It is the policy of the firm to pay all partners in full when they disengage.

Required: a. Identify and explain FOUR ethical matters worthy of consideration as Joe Adams joins Maikai Airlines Limited. (8 Marks) b. Discuss the THREE threats that could arise should Joe Adams join Maikai Airlines Limited. (6 Marks) c. Explain THREE matters specified by the Code of Ethics as safeguards in relation to this matter. (6 Marks)

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  • 20 Marks

BMF – Nov 2023 – L1 – SB – Q6 – Basics of Business Finance and Financial Markets

Discuss economic stagnation, macroeconomic policy approaches, operations research techniques, and safeguards in accounting.

a. Briefly explain the concept “Economic stagnation.” (2 Marks)

b. State the THREE policy approaches used by governments to meet macroeconomic objectives. (3 Marks)

c. List and explain briefly FOUR operations research techniques. (8 Marks)

d. Safeguards are actions or other measures that may eliminate threats or reduce them to an acceptable level. Explain SEVEN safeguards created by the Profession in this regard. (7 Marks)

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  • 9 Marks

BMF – May 2023 – L1 – SB – Q4c – The Role of Professional Accountants in Business and Society

Identify safeguards against ethical threats in the accounting profession.

State SIX safeguards created by the profession, legislation or regulation against ethical threats and dilemmas.

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  • 5 Marks

FR – April 2022 – L2 – Q5c – Professional and Ethical Issues in Financial Reporting

Discuss safeguards for mitigating threats to ethical behavior in the context of tax compliance.

Question:
Michael Onipa, a Chartered Accountant, is under pressure from his employees to under declare sales for the year ended 2021 to save the company from paying the due tax for the year. He has evaluated the threat to his professional obligations to comply with the fundamental principles of good ethical behavior, as significant. He has therefore considered safeguards to eliminate or reduce the threat to an acceptable level.

Required:
Discuss TWO (2) safeguards Michael Onipa could consider to either eliminate or reduce the threats to an acceptable level.
(5 marks)

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  • 5 Marks

AA – July 2023 – L2 – Q2b – Professional and Ethical Considerations

Safeguards to be applied by an auditor in various relationships with clients.

b) What are the safeguards to be applied by an auditor in relation to the following?
i) Financial interest in the client.
ii) Loans and Guarantees to or from the client.
iii) Business relationship with the client.
iv) Family and personal relationship with the client.
v) Employment with an Assurance Client. (5 marks)

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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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  • 5 Marks

AA – May 2017 – L2 – Q1b – Professional and Ethical Considerations

Identification of major threats to compliance with professional ethics.

The IFAC International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants sets out the five fundamental principles of professional ethics and provides a conceptual framework for applying those principles. Professional Accountants must apply this conceptual framework to identify threats to compliance with the principles, evaluate their significance, and apply appropriate safeguards to eliminate or reduce them so that compliance is not compromised.

Required: Identify FIVE major threats identified in the code of ethics, giving examples of each

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  • 5 Marks

AA – Aug 2022 – L2 – Q2a – Professional and Ethical Considerations

Discusses the threats to auditor independence and objectivity when transferring clients and possible safeguards.

The Managing Partner of A & B Partners, Mr. Pumpa, has decided to put measures in place for the survival of the firm immediately after the enactment of the Company Act, 2019 (Act 992), which requires that “An Auditor shall hold office for a term of not more than six years and is eligible for re-appointment after a cooling-off period of not less than six years.”

Mr. Pumpa then had a gentle arrangement with his colleague, also a Managing Partner in C & D Associates, to transfer all clients who have exceeded their mandatory six years with A & B Partners and vice versa.

Required:
Discuss FIVE (5) major threats to the auditor’s independence and objectivity and how these inherent threats could be mitigated in the decision to transfer client C & D Associates.
(5 marks)

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