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Rules-based code of ethics contains specific rules about how accountants should act in specific situations. Principles-based code of ethics specifies general principles of ethical behaviour and requires professional accountants to act in accordance with the principles. Both are issued by professional accountancy bodies to regulate the conduct of accountants in the course of performing their duties. All accountants who are members of a professional body, such as the Institute of Chartered Accountants of Nigeria, are required to comply with the regulations of that professional body which apply to both external and internal auditors. The reason for the wide reach of ethical guidelines is that the accountancy profession accepts that its members have a responsibility to act in the public interest while discharging their duties.
You are required to:
a. State THREE of the weaknesses of rules-based code of ethics. (3 Marks)
b. Identify FIVE key fundamental principles in the principles-based code. (5 Marks)
c. Explain the phrase “Duty of skill and care.” (2 Marks)
d. When are accountants said to be “acting in the public interest”? (5 Marks)
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Negligence is a tort that professional accountants must guard against in their relationship with their clients.
Required:
Define negligence and state the THREE elements that a litigant must prove to succeed in an action for negligence.
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Capare Industries Ltd, which already held shares in a company known as Logotex Co., later made a takeover bid on the strength of its accounts prepared by Dickman Ltd., a firm of auditors. Capare Industries Ltd realized that the accounts were inaccurate in that they showed a pre-tax profit of GH¢1.3 million when in actual fact there had been a loss of GH¢400,000. It was the case of Capare Industries Ltd that if they had known the true situation, they would not have made a bid at the price they did or may not have made a bid at all. They argued that they were owed a duty of care by the auditors as new investors and as existing shareholders who in reliance on the accounts had bought more shares.
Required:
Explain whether Capare Ltd would be justified in taking action against the firm of auditors.
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Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
a) Bobo Company Limited puts up an advert in the ‘Daily Times’ newspaper inviting members of the public to purchase shares. Mr. Kobina Fosu, an investor, decided to purchase some of the shares. He consulted an investment firm to advise on whether or not he should purchase the shares of the company. The investment firm advised Mr. Kobina Fosu that the company was buoyant and that its capital base was strong and attractive. As a result, Mr. Kobina Fosu bought a substantial number of shares of the company. Two months after the purchase of the shares, however, the company went bankrupt.
Required:
What advice, if any, will you give to Mr. Kobina Fosu? (10 marks)
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A firm of chartered accountants prepared the financial statements of Highskies Ltd knowing that the company was going to use the report to persuade Dr. Kwesi Antwi, a prospective investor, to invest money in Highskies Ltd. Relying on the accounts, Dr. Kwesi Antwi invested two million Ghana Cedis (GH¢2,000,000) in the company. However, a year later, the company collapsed. Dr. Kwesi Antwi, therefore, decided to take legal action against the firm of chartered accountants.
Required:
i) Advise whether Dr. Kwesi Antwi’s legal action in court will be successful. (3 marks)
ii) State THREE (3) effects of an agent acting without authority. (6 marks)
iii) Explain the phrase “term of Contract.” (3 marks)
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