Question Tag: Ethics

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  • 5 Marks

SCS – Nov 2024 – L3 – Q5c – Board Independence and Accountability in Corporate Governance

Evaluation of how the governance structure at BOGML affects board independence and accountability.

There are a number of concepts of good corporate governance that every entity, including BOGML, must strive to adhere to.

Required:
Provide an evaluation of how the existing corporate governance structure at BOGML may undermine or compromise the following key concepts of good corporate governance, with particular reference to the current composition and organisation of the board.

i) Independence
ii) Responsibility and accountability

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  • 10 Marks

SCS – Nov 2024 – L3 – Q5b – Board Responsibilities in Corporate Governance

Evaluate the role of the board in corporate governance, focusing on responsibilities for strategy, oversight, and ethical leadership.

The role of the board of directors is critical in corporate governance. The National Corporate Governance Code for Ghana (the National Code) issued in November 2022 outlines the board’s core responsibilities.

Required:

Advise the board of BOGML on the FIVE key responsibilities of the board of directors as outlined in the National Code.

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  • 10 Marks

SCS – Nov 2024 – L3 – Q5b – Board Responsibilities in Corporate Governance

Identify and explain the five governance pillars in the National Corporate Governance Code for Ghana 2022.

It is evident that all is not well with the current corporate governance at BOGML. However, for the company to achieve sustainable growth and remain competitive, it must adhere to sound corporate governance principles.

Required:

Using the FIVE governance pillars identified in the National Corporate Governance Code for Ghana 2022 (the National Code), issued in November 2022 by the Institute of Directors-Ghana, advise the company on how to improve upon its current governance structure.

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  • 14 Marks

CR – Nov 2024 – L3 – Q5b – Financial Performance & Digital Technology Integration

Evaluating the financial performance of Nsawkaw PLC and addressing challenges of digital technology integration in accounting.

(a) Compute the following ratios for the years ended 2024 & 2023:
i) Operating profit margin
ii) Return on parent’s equity
iii) Earnings per share
iv) Current ratio
v) Trade receivables days
vi) Total liabilities to total assets %

(b) Write a report to the directors of DPEF evaluating the inter-period financial performance and position of NK using the above six (6) ratios. The report should draw attention to how the non-financial metrics combine with the financial counterparts to showcase the prospects and viability of NK.                                                                      c) The concept of double materiality is relevant to sustainability impacts and dependencies. It
incorporates financial materiality and impact materiality. 

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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

MA – Nov 2024 – L2 – Q2b – Ethical Standards in Business

Explanation of the need for ethical standards in business with reference to threats to ethical behavior.

According to the IESBA Handbook of the International Code of Ethics for Professional Accountants, 2024 Edition, a distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest and uphold ethical standards.

Required:

Explain the need for ethical standards in business (make reference to threats to ethical behavior).

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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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  • 5 Marks

AAA – May 2016 – L3 – Q2a – Ethical Issues in Auditing

Discuss the importance of ethical guidance for accountants in addressing money laundering concerns.

(a) Comment on the need for ethical guidance for accountants on money laundering.
(5 Marks)

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  • 15 Marks

CR – Nov 2016 – L3 – SC – Q5 – Ethical Issues in Corporate Reporting

Explain the concepts of creative accounting and window dressing, provide examples, reasons, and suggest preventive measures.

Manipulation of reporting entities book’s and records have been termed in many quarters as “Creative Accounting” and “Window Dressing”. The Management of Wastage Plc requires clarification of these two concepts.

Write a report to the management of Wastage Plc that includes:
a. Definitions of Creative Accounting and Window Dressing. (2 Marks)
b. Five examples of each concept. (5 Marks)
c. Three possible reasons for Creative Accounting and Window Dressing. (3 Marks)
d. Advice to management on five possible preventive measures of Creative Accounting. (5 Marks)

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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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  • 15 Marks

FM – Nov 2017 – L3 – Q6 – Ethical Issues in Financial Management

Explore ethical considerations in capital investment and apply the Black-Scholes model in company valuation.

You have recently taken up employment with Large Plc., a Nigerian company with manufacturing subsidiaries in many countries across Africa. As the Financial Analyst, you report directly to the Managing Director who currently requires briefings on the following areas:

(i) Ethical issues and capital investment decisions,
(ii) Options and company valuation

Required:

a. Explain, with examples, ethical issues that might affect capital investment decisions and discuss the importance of such issues for Strategic Financial Management. (8 Marks)

b. Explain the circumstances in which the Black-Scholes Option Pricing (BSOP) model could be used to assess the value of a company, including the data required for the variables used in the model. (7 Marks)

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  • 30 Marks

AA – Nov 2023 – L2 – Q1 – Professional Ethics and Code of Conduct for Auditors (IESBA Code)

Analyze ethical considerations for an auditor accepting a client, including MD's remarks on audit expectations and conflict-of-interest procedures.

Nigeria Water Resources Limited (NWR) is a limited liability company floated by the
Federal Government to control water related activities and resources. Its operations
cover surface and under water activities. The company is about three years old. As is the practice with entities having government interest, NWR wanted to change the company‟s auditors. It therefore, invited tenders for the audit assignment through a national newspaper. In order to score an advantage over other bidders, the firm of John Ibrahim and Co. (Chartered Accountants) decided to quote a seemingly unrealistic fee level in order to get the job. The Managing Director (MD) of the company did not see anything wrong with the low professional fee level since it will save costs for the company, especially that despite the clean audit report of the previous years, fraud and financial misdemeanour went undetected. The MD believed the annual statutory audit is just to “fulfil all righteousness”. John Ibrahim and Co. has been rated high since this firm
has as its client, another company in the same line of trade.

If the firm, John Ibrahim & Co., wins the bid to audit Nigeria Water Resources Limited (NWR):

a. Explain the ethical matters the firm should consider before client acceptance, at the point of engagement acceptance, and after accepting the appointment. (12 Marks)

b. Assess the remarks of the MD of NWR from the point of the expectation of the public as regards audit assignments. (8 Marks)

c. Explain the procedures the audit firm should undertake to avoid conflict of interests that could affect the judgment of the firm since John Ibrahim & Co. audits another client that is in direct competition with NWR. (6 Marks)

d. Explain the guidelines of the Institute’s Code with respect to advertisement by members. (4 Marks)

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  • 20 Marks

CR – Nov 2017 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain IFRS accounting treatment and ethical issues in Enugun Industries Ltd.’s draft financial statements for the year ended Dec 31, 2014.

Enugun Industries Limited
Atikun has recently been appointed as Financial Controller to Enugun Industries Limited. Until a month ago, Enugun Industries had a Finance Director, who resigned suddenly, due to ill health. Since Atikun joined the company, he has learned that his resignation was related to stress caused by a series of disagreements with the Managing Director about the performance of the business. The directors have not yet appointed a replacement.

It is now March 2015, and you have been asked to finalize the financial statements for the year ended December 31, 2014. The draft statement of profit or loss extract and statement of financial position are shown below:

Draft statement of profit or loss for the year ended December 31, 2014:

Profit before tax ₦’000
2,500

Draft statement of financial position as of December 31, 2014:

Item Amount (₦’000)
Property, plant, and equipment 12,000
Current assets 3,500
Total assets 15,500
Share capital 2,000
Retained earnings 6,000
Equity 8,000
Non-current liabilities 5,000
Current liabilities 2,500
Total equity and liabilities 15,500

During the year ended December 31, 2014, Enugun Industries entered into the following transactions:

  1. Just before the year-end, Enugun Industries signed a contract to deliver consultancy services for a period of 2 years at a fee of ₦500,000 per annum. The full amount of this fee has been paid in advance and is non-refundable.
  2. Enugun Industries has constructed a new factory. The construction has been financed from the pool of existing borrowings. Land at a cost of ₦1.8 million was acquired on February 1, 2014, and construction began on June 1, 2014. Construction was completed on September 30, 2014, at an additional cost of ₦2.7 million. Although the factory was usable from that date, full production did not commence until December 1, 2014. Throughout the year, the company’s average borrowings were as follows:
    Borrowing Type Amount (₦) Annual Interest Rate (%)
    Bank overdraft 1,000,000 9.75
    Bank loan 1,750,000 10
    Loan notes 2,500,000 8

    An amount of ₦450,000 has been included in property, plant, and equipment in respect of borrowing costs relating to the construction of the factory. The useful life of the factory has been estimated at 20 years. No depreciation has been charged for the year. The reason for this is that the factory has only been in use for one month and that the depreciation charge would be immaterial.

  3. A blast furnace with a carrying amount at January 1, 2014, of ₦3.5 million has been depreciated in the draft financial statements based on a remaining life of 20 years. In December 2014, the directors carried out a review of the useful lives of various significant items of plant and machinery, including the blast furnace. They concluded that the furnace’s useful life was 20 years as of December 31, 2014. The reasoning behind this judgment was that the lining of the furnace had been replaced in the last week of December 2014 at a cost of ₦1.4 million. Provided that the lining is replaced every five years, the life of the furnace can be extended accordingly. You have found a report commissioned by the previous Finance Director and prepared by a firm of asset valuation specialists, which assesses the remaining useful life of the main structure of the furnace as 15 years at January 1, 2014, and the lining of the furnace as 5 years. You have also found evidence that the Managing Director has seen this report.

Atikun has had a conversation with the Managing Director, who told him, “We need to make the figures look as good as possible, so I hope you’re not going to start being difficult. The consultancy fee is non-refundable, so there’s no reason why we can’t include it in full. I think we should look at our depreciation policies. We’re writing off our assets over far too short a period. As you know, we’re planning to go for a stock market listing in the near future, and being prudent and playing safe won’t help us do that. It won’t help your future with this company either.”

Required:

  1. Explain the required IFRS accounting treatment of these issues, preparing relevant calculations where appropriate.
    (16 Marks)
  2. Discuss the ethical issues arising from your review of the draft financial statements and the actions that you should consider.
    (4 Marks)

Total: 20 Marks

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  • 15 Marks

AA – May 2016 – L2 – Q5 – The Role and Responsibilities of Auditors

Steps for auditor replacement when incumbent auditors do not wish to resign, and brief overview of audit documentation.

Alhaji Abubakar Yusuf is the managing director of Nasara Tech Limited, a private company. Nasara Tech is currently audited by Mike and Co. Alhaji Abubakar has informed you that the directors of Nasara Tech wish to appoint your firm, Adewuyi Adeyemi and Co., as auditors in place of Mike and Co., but they consider that Mike and Co. will not be willing to resign.

Required:

a. Assuming that Mike and Co. are not willing to resign, set out the statutory and other procedures which will have to be followed by Nasara Tech Limited, your firm, and which may be adopted by Mike and Co. in connection with this proposed appointment. You should assume that Adewuyi Adeyemi and Co. have adequate resources to take on the audit of Nasara Tech Limited and that there are no issues surrounding independence or client integrity. (6 Marks)

b. Assuming that Mike and Co. are willing to resign part way through their term of office, set out the procedures to be followed by Mike and Co. and Nasara Tech Limited in order to effect the resignations. (4 Marks)

Your office has recently taken on a new trainee, John. You have been asked to explain to John what information is recorded in the audit process and where.

c. Set out a brief explanation for John. (5 Marks)

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  • 20 Marks

AA – May 2016 – L2 – Q3 – Ethical Issues in Auditing

Examination of ethical issues in client engagement, fundamental ethical principles, and lawful disclosure obligations for auditors.

You have recently been appointed the auditors of Spicer Plc, a company whose shares are traded on a stock exchange. The directors of Spicer Plc have recommended that you perform the following services:

  • The statutory audit of the annual accounts
  • Taxation services
  • Consultancy services in respect of the implementation of a new information technology system

Your firm has not acted for Spicer Plc before but does act as auditors to one of its major competitors.

Required:
a. Identify and explain the professional and ethical issues that should have been identified by your firm in relation to the provision of the services outlined above to Spicer Plc and describe the safeguards that should be in place in order to address these issues. (11 marks)

b. What are the five fundamental principles of ethics? Briefly explain their meaning. (5 marks)

c. A client’s affairs should not be disclosed to third parties. However, where a client has been guilty of an unlawful act, to whom should the auditor disclose this information, and in what order? (4 marks)

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  • 15 Marks

CSME – May 2017 – L2 – SC – Q7 – Corporate Governance

Explain the Nolan principles guiding public life and discuss standards for ethical conduct in the public sector.

Nolan Committee on standards in public life was set up to report on standards of behaviour amongst politicians, civil servants and public bodies. Provide an analysis of Nolan‟s‟ SEVEN Principles of Public Life. (15 Marks)

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  • 15 Marks

CSME – May 2017 – L2 – SC – Q6 – Ethics in Business

Explain agency problems and Tucker's model to guide ethical decisions for accountants.

a. Agency problems and conflicts are common in all organisations.
Required:
Explain the concept of agency problems and discuss FIVE types of agency conflicts that might exist in an organisation. (8 Marks)

b. Tucker‟s Five Question Model can be employed in training new professional accountants in ethics.
Required:
Explain the issues covered by the Tucker‟s Five Question Model. (7 Marks)

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  • 4 Marks

BL – Nov 2020 – L1 – SB – Q1d – Business Ethics and Corporate Governance.

Describe ethical codes and their purpose for professional accountants.

Accountants, like most professionals, are guided by the code of ethics of their profession when dealing with clients.

Required:
Explain:
i. Ethical codes
ii. The purpose of ethical codes for a professional accountant.

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  • 20 Marks

CSME – May 2017 – L2 – SB – Q2 – Corporate Culture and Strategy

Discuss the cultural web and the ethical principles for maintaining client confidentiality.

Johnson and Scholes suggested that there is a cultural web within an organization.

Required:

a. Discuss the idea of the cultural web and its interrelated elements in a way that would assist a new employee to understand this concept in a business organization. (15 Marks)

b. As a professional accountant, explain any TWO ethical principles or requirements you would consider in deciding whether or not to keep a promise to maintain confidentiality with regards to information acquired from a client in the ordinary course of business. (5 Marks)

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