Topic: Professional and Ethical Considerations

Search 500 + past questions and counting.

AA – Nov 2024 – L2 – Q1b – Engagement Letter Contents

Explains the key contents of an audit engagement letter, highlighting the responsibilities and scope of an audit.

Question

A firm or individual having accepted an appointment as an auditor of a client company shall submit an engagement letter to the board of directors of the client company. The engagement letter can be seen as the basis for the contract between the company and the auditor.

Required:
In relation to the above statement, state and explain FIVE contents of the engagement letter.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Contract, Audit Scope, Auditor Responsibilities, Client Expectations, Engagement letter, IAASB, Professional Ethics
Level: Level 2

Topic: Professional and Ethical Considerations
Series: Nov 2024

FR – May 2020 – L2 – Q5a – Ethical Dilemmas in Tendering Process

This question focuses on the ethical course of action in tendering when faced with insider information in the internal audit context.

Question

Mrs. Stella Amoah (Stella), a Chartered Accountant and Head of Internal Audit in Ningo Communications Authority (NCA), is about to tender for a contract in Internal Audit Service. A new member of her team, Mr. Stephen Appiah Coker (Stephen), has been recruited from the Internal Audit Service, where he previously worked in the department responsible for devising the tender contract. Although Stephen was not involved with the tender process, his former colleague and friend is responsible for the tender specification document and the evaluation process.

Stephen had sight of some of the requirements and has offered to share with Stella information that may be of use when preparing the tender. However, this information is confidential and should not be seen by any of the tendering parties.

It will be an open tender process for both external and internal providers. Bids from external providers are being encouraged. The evaluation process has been designed with this in mind. If the contract is awarded externally, Stella will be unsure of her personal position in the organization. She understands that using any insider knowledge of the tendering process would be inappropriate when preparing the tender proposal, but she feels she would have a better chance of success if she used this confidential information.

Required:
Advise Mrs. Stella Amoah on THREE (3) courses of action she should take in order to act ethically in the tendering process given in the above scenario.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Confidentiality, Ethics, Internal Audit, Professional Responsibility, Tender Process
Level: Level 2

Topic: Professional and Ethical Considerations, Professional and Ethical Issues in Financial Reporting

AA – July 2023 – L2 – Q5b – Audit and Assurance Evidence, Professional and Ethical Considerations

Explanation of five benefits of documenting audit work.

Question

b) ISA 230: Audit Documentation deals with the auditor’s responsibility to prepare audit documentation for an audit of financial statements.

Required:
State FIVE (5) benefits of documenting audit work. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Documentation, Audit Work, Benefits, ISA 230
Level: Level 2

Topic: Audit and Assurance Evidence, Professional and Ethical Considerations
Series: JULY 2023

AA – July 2023 – L2 – Q5a – Professional and Ethical Considerations

Explanation of the five fundamental principles of the ICAG Code of Ethics.

Question

a) As a member of the International Federation of Accountants (IFAC), the Institute of Chartered Accountants, Ghana (ICAG) subscribes to the code of ethics prescribed by the International Ethics Standards Board for Accountants (IESBA).

Required:
Explain each of the FIVE (5) fundamental principles of the Code of Ethics of the Institute of Chartered Accountants, Ghana (ICAG). (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Code of Ethics, Fundamental Principles, ICAG, IFAC
Level: Level 2

Topic: Professional and Ethical Considerations
Series: JULY 2023

AA – July 2023 – L2 – Q3b – Audit and Assurance Risk Environment, Professional and Ethical Considerations

Factors external auditors should consider when engaging an actuary for evaluating an insurance company's reserves and premium rates.

Question

b) Fritz Insurance is a large insurance company that provides a wide range of insurance products to individuals and businesses. As part of their annual audit, the external auditor has engaged the services of an Actuary to assist with the evaluation of the company’s reserves and the adequacy of its premium rates.

Required:
Explain FIVE (5) factors to be considered by External Auditors in engaging the services of an Actuary to assist with the evaluation of the company’s reserves and the adequacy of its premium rates. (10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Actuary, External Auditor, Insurance, Premium Rates, Reserves
Level: Level 2

Topic: Audit and Assurance Risk Environment, Professional and Ethical Considerations
Series: JULY 2023

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

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

Question

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)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Auditor Independence, Auditor Relationships, Ethical considerations, Safeguards
Level: Level 2

Topic: Professional and Ethical Considerations
Series: JULY 2023

AA – July 2023 – L2 – Q1c – Audit and Assurance Evidence, Professional and Ethical Considerations

Explanation of fraud risk factors in risk assessment procedures according to ISA 240.

Question

c) ISA 240 (Redrafted): The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements requires the Auditor to perform procedures to identify the risk of material misstatement due to fraud. The Auditor must evaluate information obtained from other risk assessment procedures to see if any fraud risk factors are present.

Required:
Explain FIVE (5) risk factors in risk assessment procedures with regard to fraud. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Fraud, ISA 240, Misstatement, Risk Assessment
Level: Level 2

Topic: Audit and Assurance Evidence, Professional and Ethical Considerations
Series: JULY 2023

AA – July 2023 – L2 – Q1a – Institutional Regulation and Standard-Setting, Professional and Ethical Considerations

Requirements in the composition and functions of Audit Committees in corporate governance.

Question

a) Boards rely on the Audit Committee to offer effective oversight of the financial reporting process, making it one of the cornerstones for effective corporate governance. Effective Audit Committee is vital for protecting investors and the health of the capital markets.

Required:
i) Identify THREE (3) requirements in the composition of Audit Committees in accordance with the best practice in Corporate Governance. (3 marks)
ii) List TWO (2) functions of an Audit Committee. (2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Committees, Best Practices, Composition, Corporate Governance, Functions
Level: Level 2

Topic: Institutional Regulation and Standard-Setting, Professional and Ethical Considerations
Series: JULY 2023

AA – Nov 2023 – L2 – Q2b – Professional and Ethical Considerations, Audit and Assurance Risk Environment

This question discusses five key factors to consider before accepting an audit engagement.

Question

Afrak and Associates is an Audit Firm that has been providing audit and assurance services for over 20 years. The firm has recently received a request from a new client, XYZ Ltd., to provide audit services. The audit engagement will cover the financial statements for the year ended December 31, 2022.

Required:
Explain FIVE (5) factors Afrak and Associates must consider prior to accepting the audit engagement, paying attention to, risk areas that may give rise to liability, including fraud, error, and non-compliance.
(10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Engagement, Audit Risk, Client Acceptance, Ethical considerations, Fraud risk
Level: Level 2

Topic: Audit and Assurance Risk Environment, Professional and Ethical Considerations
Series: NOV 2023

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.

Question

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.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Conflict of Interest, Ethics, IFAC Code of Ethics, Independence
Level: Level 2

Topic: Professional and Ethical Considerations
Series: NOV 2019

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

Discuss the conceptual framework for maintaining independence in audit and assurance engagements.

Question

The independence of a practicing accounting firm needs to be critically assessed, whether performing an audit or other assurance engagements. The independence requirements for audit and review engagements apply to the firm, network firms, and members of the audit review team. The IESBA Code for Professional Accountants outlines a key conceptual framework approach to be applied by accountants in practice.

Required:
Discuss this key conceptual framework approach.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Engagement, Conceptual Framework, IESBA Code, Independence
Level: Level 2

Topic: Professional and Ethical Considerations
Series: MAR 2023

AA – Mar 2023 – L2 – Q2a – Professional and Ethical Considerations

Identify factors to consider before accepting a client for an audit engagement.

Question

M&G Chartered Accountants has been presented with two potential clients. They have written to the firm to appoint them as their external auditors.

Required:
State FIVE (5) factors you will take into consideration before making this client acceptance decision.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Engagement, Client Acceptance, Ethical considerations, ICAG Act
Level: Level 2

Topic: Professional and Ethical Considerations
Series: MAR 2023

AA – Mar 2023 – L2 – Q1b – Professional and Ethical Considerations

Explain the concept of professional skepticism and its importance in auditing a loss-making entity.

Question

You are the Audit Manager of Golden Beach Hotels Ltd (GBHL), which has been making losses in its operations due to various factors such as competition, renovation of non-current assets, and non-compliance with laws and regulations in the hospitality industry. These factors are not obvious in the draft financial statements submitted for auditing.

Required:
Explain what is meant by professional skepticism, and why this is necessary to understand the financial performance and position of GBHL.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Financial Performance, Professional Skepticism
Level: Level 2

Topic: Professional and Ethical Considerations
Series: MAR 2023

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

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

Question

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.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Auditor Independence, Ethical Issues, IFAC Code of Ethics, Professional Conduct
Level: Level 2

Topic: Professional and Ethical Considerations
Series: NOV 2020

AA – May 2016 – L2 – Q3c – Professional and Ethical Considerations

This question explores the different responsibilities of internal and external auditors in the prevention, detection, and reporting of fraud and error.

Question

(c) There are similarities and differences between the responsibilities of internal and external auditors. Both internal and external auditors have responsibilities relating to the prevention, detection, and reporting of fraud, for example, but their responsibilities are not the same.

Required:
Explain the difference between the responsibilities of internal auditors and external auditors for the prevention, detection, and reporting of fraud and error. (6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Responsibilities, External audit, Fraud Detection, Fraud Prevention, Internal Audit, Reporting Fraud
Level: Level 2

Topic: Professional and Ethical Considerations
Series: MAY 2016

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

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

Question

(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)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Conflict of Interest, Ethical Threats, Independence, Professional Ethics, Safeguards
Level: Level 2

Topic: Professional and Ethical Considerations
Series: MAY 2016

AA – Nov 2015 – L2 – Q4 – Professional and Ethical Considerations, Regulatory Framework and Audit Responsibilities

Identifying threats to independence, resolving those threats, and determining whether to accept an audit appointment.

Question

You work for a firm of accountants and auditors which has eight partners. The audit firm has been invited by the Managing Director (MD) and majority shareholder of Wellbeing Co. to accept appointment as statutory auditor of the company, replacing the current firm of auditors who will not be re-appointed.

The principal activity of Wellbeing Co. is the manufacture and distribution of healthcare products. Your firm has several companies operating in the healthcare sector in its client portfolio.

The MD of Wellbeing has requested that your firm assists with the preparation of the company’s tax computation and provides consultancy services on an ongoing basis in connection with his plans to grow the business.

The MD has also suggested that a partner in your firm joins the board of Wellbeing Co. as a non-executive director.

Required:

a) Identify and explain the threats to independence and objectivity which may arise from the provision of the services requested by the Wellbeing MD, and state how these threats should be resolved.
(8 marks)

b) Describe the matters, other than independence and objectivity, to be considered and the procedures to be performed in order to determine whether it is appropriate for your firm to accept appointment as statutory auditor of Wellbeing Co.
(7 marks)

c) Set out the benefits to audit firms and their clients of having audit and non-audit services provided by the same firm of accountants.
(5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Auditor Independence, Consultancy Services, Non-Audit Services, Objectivity, Statutory Auditor
Level: Level 2

Topic: Professional and Ethical Considerations, Regulatory Framework and Audit Responsibilities
Series: NOV 2015

AA – Dec 2022 – L2 – Q4b – Professional and Ethical Considerations

Discusses the advantages and disadvantages of outsourcing the internal audit function in an organization.

Question

Your management has decided to outsource the internal audit function in your organization. You have been assigned to make a presentation to management.

Required:
Discuss THREE (3) advantages and TWO (2) disadvantages of outsourcing the Internal Audit function in your presentation

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Function, Decision Making, Internal Audit, Management, Outsourcing
Level: Level 2

Topic: Professional and Ethical Considerations
Series: DEC 2022

AA – Dec 2022 – L2 – Q2c – Professional and Ethical Considerations

Describes the five procedures an auditor must follow to comply with legal and professional requirements before accepting an audit engagement.

Question

You have been nominated as an Auditor to replace a professional colleague who is retiring from an engagement after having served the mandatory period of six years as required by statute.

Required:
Describe FIVE (5) procedures you should follow to fulfill the legal and professional requirements for the acceptance of the engagement.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Acceptance Procedures, Audit Engagement, Audit Firm, Legal Requirements, Professional Responsibility
Level: Level 2

Topic: Professional and Ethical Considerations
Series: DEC 2022

AA – Dec 2022 – L2 – Q1c – Professional and Ethical Considerations

Explains the need for a quality control system in accounting firms, with reference to the audit of God First Microfinance.

Question

You are the manager in charge of the audit of God First Microfinance Co. Ltd for the year ended 31 December, 2021. Due to the highly regulated environment in which such companies have to operate, your partner has requested that, right from the planning stage of the audit, you strictly apply the requirement of ISA 220: Quality Control for an audit of financial statements.

Required:
State FIVE (5) reasons for the need for a quality control system in accounting firms.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting, Audit Firms, ISA 220, Quality control, Regulatory Environment
Level: Level 2