Topic: Regulatory Framework and Ethics

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  • 5 Marks

CR – May 2020 – Q3b(i) – Ethical Issues in Contract Bidding

This question requires a discussion on the ethical issues related to conflict of interest, confidentiality, and professional behavior in a contract bidding scenario.

You have just obtained your full membership with the Institute of Chartered Accountants (Ghana). Following this successful achievement, you have been appointed as the Head of Finance at Asasiyemedeh Company Limited, a Ghanaian company, which provides catering services. Your former employer, Akwaba Limited, is a large public sector organization operating in Accra, where, as the Financial Accountant, you had the opportunity to work on areas relating to financial accounting, procurement, contracts, and bids. One of Asasiyemedeh Company Limited’s major contracts is with Akwaba Limited, your former employer. The contract is now due for renewal, and Asasiyemedeh Company Limited is preparing a competitive bid for this contract.

You have been tasked to lead the team responsible for bidding for this contract, but you are concerned as a professional that you might breach confidentiality if you accept this role. You also suspect that your knowledge and experience of Akwaba Limited were seen as good reasons for appointing you to the position of Head of Finance at Asasiyemedeh Company Limited. You do not in any way want to let your new employer down as you are aware that the loss of such a major contract would have a significant effect on the financial performance of Asasiyemedeh Company Limited, and its performance-related bonus scheme for management members.

Required:
Discuss the ethical issues raised in the above scenario.

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  • 5 Marks

CR – May 2020 – Q3b(ii) – Ethical Actions in Contract Bidding

This question requires recommendations for maintaining ethical standards in a contract bidding situation involving a conflict of interest.

Recommend the possible courses of action that you will take in order to be ethically responsible as expected from a Professional Accountant.

 

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  • 20 Marks

CR – Nov 2020 – L3 – Q3c – Ethical Issues Facing Accountant in Costing Task

Ethical issues faced by an accountant pressured to produce a costing exercise under tight deadlines.

Goodman recently qualified as accountant with the Institute of Chartered Accountants (Ghana). He works with a manufacturing company in Tamale, Ghana, and he has been asked, by his line manager, to complete a costing exercise and given a very short deadline as well as limited resources for the exercise. Goodman thinks that the President of the company is planning to use this information to restructure the company, including making some of Goodman’s close colleagues redundant. Goodman is very worried that the outcome of his work cannot be robust enough to be used for such a big business decision by the company, but his line manager is putting him under a lot of pressure to complete the work pretty much quickly.

Required:
Evaluate FOUR (4) ethical issues facing Goodman and recommend FOUR (4) possible courses of action Goodman should consider taking. (10 marks)

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  • 10 Marks

CR – May 2021 – L3 – Q3c – Ethical Dilemmas and Actions for a Finance Director

Discuss the ethical dilemmas and potential actions a finance director must take to avoid breaching IFAC's Code of Ethics.

You are the Finance Director of a limited liability company. The company started trading with a handful of employees but now has a workforce of 200. You are aware that staff purchases of goods manufactured by the company are authorised by production managers and then processed outside the accounting system. The proceeds from these sales are used to fund the company’s annual Christmas party, organised for Directors of the company.

Required:
Discuss the possible actions that you will take in order not to breach the fundamental principles of the IFAC’s Code of Ethics. (10 marks)

 

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  • 6 Marks

CR – May 2019 – L3 – Q5c – Regulatory framework and ethics

The question asks for four reasons why the IASB found it necessary to revise the conceptual framework, as part of its effort to improve financial reporting.

The Framework for the Preparation and Presentation of Financial Statements was originally issued in 1989. In 2004, the IASB and the FASB decided to review and revise the conceptual framework. However, this decision changed priorities and the slow progress in the project led to the project being abandoned in 2010. This was after only Phase A of the original joint project was finalized and introduced into the existing framework as Chapters 1 and 3 in September 2010.
The current form of the conceptual framework as at May 2018 provides a revised and complete version of the framework.

Required:
Explain FOUR (4) primary reasons why the IASB believed it was necessary to revise its conceptual framework. (4 marks)

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  • 10 Marks

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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  • 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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  • 10 Marks

CR – April 2022 – L3 – Q3b – Regulatory framework and ethics

Explain the ethical principles involved in the given scenario and recommend the appropriate actions based on the IFAC Code of Ethics.

b) You are a newly qualified accountant in your fifth year of employment in a limited liability company. Your immediate supervisor has been on sick leave, and you are due for study leave. You have been told by the Finance Director that, before you go on leave, you must finish a task that should have been completed by your immediate supervisor. The deadline suggested to complete the task appears unrealistic, given the complexity of the task.

You feel that you are not sufficiently experienced to complete the task alone and would need additional supervision to complete it to the required standard. The Finance Director appears unable to offer the necessary support in this regard. Should you try to complete the work within the proposed timeframe but fail to meet the expected quality, you could face repercussions on your return from study leave. You feel slightly intimidated by the Finance Director and also feel pressure to do what you can for the company in these challenging times.

Required:

i) Using the IFAC Code of Ethics as a guide, explain the ethical principles that apply in the above scenario. (5 marks)

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

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  • 6 Marks

CR – Nov 2018 – L3 – Q5c – Regulatory framework and ethics

Evaluate the finance director's suggestion to early adopt a revised accounting standard for Navrongo Ltd’s 2018 financial statements.

You are the financial controller of Navrongo Ltd (Navrongo), a company that experienced a relatively difficult trading during the year ended 30 September 2018. Reporting deadlines for the 2018 financial statements are rapidly approaching, and you have a number of matters to finalize. The finance director made the following suggestion in an email:

“A revised accounting standard that is relevant to Navrongo is expected to be issued by the IASB during the 2019 calendar year. Based on the content of the corresponding exposure draft, the revisions to the accounting standard would be beneficial to Navrongo in the year of adoption. The 2018 Navrongo financial statements should be prepared using the proposed new accounting standard on the basis of voluntary early adoption of the new standard.”

Required:
Explain to the finance director, justifying whether you agree or disagree with the suggestion above

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  • 10 Marks

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

Appraise the ethical issues arising from the email received by Peter Anokye regarding liquidity challenges and lease accounting implications in Nanton Ltd

You are Peter Anokye, a newly qualified accountant and have recently been appointed as the deputy financial controller in Nanton Ltd (Nanton). You report directly to the finance director, Maria Wakasu. Just last week, you received the following email from Maria.

“As you are aware, I have to present some financial information at the board meeting scheduled in two days’ time and I need your help. I should be grateful if you could give me some advice on this issue. I don’t know whether you heard the news that Mamprugo Ltd (Mamprugo), an important customer of ours, is having some liquidity challenges. I think it is a case of not being able to manage their working capital cycle effectively. I know the financial controller of Mamprugo well, and he has mentioned that they have approached Yendi Ltd (Yendi) for credit. Of course, if they are successful, we should have no problems in getting paid. Today, I have received a request from Yendi asking for a credit reference for Mamprugo. I think if you check their credit history you will find they were good payers. Do you think I should mention anything about the liquidity issue to Yendi?

As I mentioned to you yesterday, over coffee, the Chief Executive Officer (CEO) regards leasing as an important method of financing the company. However, you are probably more up to date with the existing accounting requirements than me. The current accounting standard has some significant deficiencies and no longer meets the needs of users of financial statements. On 1 January 2016, we entered into a sale and finance leaseback transaction with our bank. The arrangement involved the sale, at fair value, of a building for GH¢8 million. The book value of the building in the financial statements at that date was GH¢6 million. I know that the CEO is particularly concerned that showing the lease as a finance lease could be detrimental to any loan applications that we might make over the next twelve months. Between you and I, we need to keep him happy: my year-end bonus could be in jeopardy if we get this area wrong. In the medium term, I am worried about the implications of the introduction of IFRS 16: Leases, particularly the effects on the statement of financial position, statement of profit and loss and other comprehensive income, and our key financial ratios. Surely our gearing ratio will be higher. Maybe we can get round the problem of including leases on the statement of financial position by classifying some of them as short-term (i.e., less than twelve months).

Peter, I should be grateful if you could give me some advice on this issue.”

Required:
Appraise the ethical issues arising from the information provided in the mail sent by Maria, and propose and justify appropriate steps that Peter Anokye should take to address them.

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  • 5 Marks

CR – May 2020 – Q3b(i) – Ethical Issues in Contract Bidding

This question requires a discussion on the ethical issues related to conflict of interest, confidentiality, and professional behavior in a contract bidding scenario.

You have just obtained your full membership with the Institute of Chartered Accountants (Ghana). Following this successful achievement, you have been appointed as the Head of Finance at Asasiyemedeh Company Limited, a Ghanaian company, which provides catering services. Your former employer, Akwaba Limited, is a large public sector organization operating in Accra, where, as the Financial Accountant, you had the opportunity to work on areas relating to financial accounting, procurement, contracts, and bids. One of Asasiyemedeh Company Limited’s major contracts is with Akwaba Limited, your former employer. The contract is now due for renewal, and Asasiyemedeh Company Limited is preparing a competitive bid for this contract.

You have been tasked to lead the team responsible for bidding for this contract, but you are concerned as a professional that you might breach confidentiality if you accept this role. You also suspect that your knowledge and experience of Akwaba Limited were seen as good reasons for appointing you to the position of Head of Finance at Asasiyemedeh Company Limited. You do not in any way want to let your new employer down as you are aware that the loss of such a major contract would have a significant effect on the financial performance of Asasiyemedeh Company Limited, and its performance-related bonus scheme for management members.

Required:
Discuss the ethical issues raised in the above scenario.

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  • 5 Marks

CR – May 2020 – Q3b(ii) – Ethical Actions in Contract Bidding

This question requires recommendations for maintaining ethical standards in a contract bidding situation involving a conflict of interest.

Recommend the possible courses of action that you will take in order to be ethically responsible as expected from a Professional Accountant.

 

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  • 20 Marks

CR – Nov 2020 – L3 – Q3c – Ethical Issues Facing Accountant in Costing Task

Ethical issues faced by an accountant pressured to produce a costing exercise under tight deadlines.

Goodman recently qualified as accountant with the Institute of Chartered Accountants (Ghana). He works with a manufacturing company in Tamale, Ghana, and he has been asked, by his line manager, to complete a costing exercise and given a very short deadline as well as limited resources for the exercise. Goodman thinks that the President of the company is planning to use this information to restructure the company, including making some of Goodman’s close colleagues redundant. Goodman is very worried that the outcome of his work cannot be robust enough to be used for such a big business decision by the company, but his line manager is putting him under a lot of pressure to complete the work pretty much quickly.

Required:
Evaluate FOUR (4) ethical issues facing Goodman and recommend FOUR (4) possible courses of action Goodman should consider taking. (10 marks)

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  • 10 Marks

CR – May 2021 – L3 – Q3c – Ethical Dilemmas and Actions for a Finance Director

Discuss the ethical dilemmas and potential actions a finance director must take to avoid breaching IFAC's Code of Ethics.

You are the Finance Director of a limited liability company. The company started trading with a handful of employees but now has a workforce of 200. You are aware that staff purchases of goods manufactured by the company are authorised by production managers and then processed outside the accounting system. The proceeds from these sales are used to fund the company’s annual Christmas party, organised for Directors of the company.

Required:
Discuss the possible actions that you will take in order not to breach the fundamental principles of the IFAC’s Code of Ethics. (10 marks)

 

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  • 6 Marks

CR – May 2019 – L3 – Q5c – Regulatory framework and ethics

The question asks for four reasons why the IASB found it necessary to revise the conceptual framework, as part of its effort to improve financial reporting.

The Framework for the Preparation and Presentation of Financial Statements was originally issued in 1989. In 2004, the IASB and the FASB decided to review and revise the conceptual framework. However, this decision changed priorities and the slow progress in the project led to the project being abandoned in 2010. This was after only Phase A of the original joint project was finalized and introduced into the existing framework as Chapters 1 and 3 in September 2010.
The current form of the conceptual framework as at May 2018 provides a revised and complete version of the framework.

Required:
Explain FOUR (4) primary reasons why the IASB believed it was necessary to revise its conceptual framework. (4 marks)

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  • 10 Marks

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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  • 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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  • 10 Marks

CR – April 2022 – L3 – Q3b – Regulatory framework and ethics

Explain the ethical principles involved in the given scenario and recommend the appropriate actions based on the IFAC Code of Ethics.

b) You are a newly qualified accountant in your fifth year of employment in a limited liability company. Your immediate supervisor has been on sick leave, and you are due for study leave. You have been told by the Finance Director that, before you go on leave, you must finish a task that should have been completed by your immediate supervisor. The deadline suggested to complete the task appears unrealistic, given the complexity of the task.

You feel that you are not sufficiently experienced to complete the task alone and would need additional supervision to complete it to the required standard. The Finance Director appears unable to offer the necessary support in this regard. Should you try to complete the work within the proposed timeframe but fail to meet the expected quality, you could face repercussions on your return from study leave. You feel slightly intimidated by the Finance Director and also feel pressure to do what you can for the company in these challenging times.

Required:

i) Using the IFAC Code of Ethics as a guide, explain the ethical principles that apply in the above scenario. (5 marks)

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

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  • 6 Marks

CR – Nov 2018 – L3 – Q5c – Regulatory framework and ethics

Evaluate the finance director's suggestion to early adopt a revised accounting standard for Navrongo Ltd’s 2018 financial statements.

You are the financial controller of Navrongo Ltd (Navrongo), a company that experienced a relatively difficult trading during the year ended 30 September 2018. Reporting deadlines for the 2018 financial statements are rapidly approaching, and you have a number of matters to finalize. The finance director made the following suggestion in an email:

“A revised accounting standard that is relevant to Navrongo is expected to be issued by the IASB during the 2019 calendar year. Based on the content of the corresponding exposure draft, the revisions to the accounting standard would be beneficial to Navrongo in the year of adoption. The 2018 Navrongo financial statements should be prepared using the proposed new accounting standard on the basis of voluntary early adoption of the new standard.”

Required:
Explain to the finance director, justifying whether you agree or disagree with the suggestion above

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  • 10 Marks

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

Appraise the ethical issues arising from the email received by Peter Anokye regarding liquidity challenges and lease accounting implications in Nanton Ltd

You are Peter Anokye, a newly qualified accountant and have recently been appointed as the deputy financial controller in Nanton Ltd (Nanton). You report directly to the finance director, Maria Wakasu. Just last week, you received the following email from Maria.

“As you are aware, I have to present some financial information at the board meeting scheduled in two days’ time and I need your help. I should be grateful if you could give me some advice on this issue. I don’t know whether you heard the news that Mamprugo Ltd (Mamprugo), an important customer of ours, is having some liquidity challenges. I think it is a case of not being able to manage their working capital cycle effectively. I know the financial controller of Mamprugo well, and he has mentioned that they have approached Yendi Ltd (Yendi) for credit. Of course, if they are successful, we should have no problems in getting paid. Today, I have received a request from Yendi asking for a credit reference for Mamprugo. I think if you check their credit history you will find they were good payers. Do you think I should mention anything about the liquidity issue to Yendi?

As I mentioned to you yesterday, over coffee, the Chief Executive Officer (CEO) regards leasing as an important method of financing the company. However, you are probably more up to date with the existing accounting requirements than me. The current accounting standard has some significant deficiencies and no longer meets the needs of users of financial statements. On 1 January 2016, we entered into a sale and finance leaseback transaction with our bank. The arrangement involved the sale, at fair value, of a building for GH¢8 million. The book value of the building in the financial statements at that date was GH¢6 million. I know that the CEO is particularly concerned that showing the lease as a finance lease could be detrimental to any loan applications that we might make over the next twelve months. Between you and I, we need to keep him happy: my year-end bonus could be in jeopardy if we get this area wrong. In the medium term, I am worried about the implications of the introduction of IFRS 16: Leases, particularly the effects on the statement of financial position, statement of profit and loss and other comprehensive income, and our key financial ratios. Surely our gearing ratio will be higher. Maybe we can get round the problem of including leases on the statement of financial position by classifying some of them as short-term (i.e., less than twelve months).

Peter, I should be grateful if you could give me some advice on this issue.”

Required:
Appraise the ethical issues arising from the information provided in the mail sent by Maria, and propose and justify appropriate steps that Peter Anokye should take to address them.

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