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The management of QQ Limited had engaged an expert valuer, Segun & Company, in the valuation of its investment property situated at Ojo Oniyun Street, Victoria Island for disclosure in the financial statements as at year-end.
Required:
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Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
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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Which of the following best describes the concept that an accountant must NOT allow his professional or business judgment to be affected by conflict of interest?
A. Due care
B. Objectivity
C. Professional competence
D. Confidentiality
E. Integrity
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The accounting principle that requires financial statements information to be supported by evidence other than someone’s opinion or imagination is known as:
A. Consistency
B. Prudence
C. Accrual
D. Aggregation
E. Objectivity
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a)
i) Explain how you could potentially act in order not to breach each of the FIVE (5) fundamental principles of the IFAC’s code of ethics. (5 marks)
ii) Recommend FIVE (5) possible actions that you should take as a member of the Institute of Chartered Accountants, Ghana in dealing with the situation. (5 marks)
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ISA 620: Using the Work of an Expert explains how an auditor may use an expert to obtain audit evidence.
Required:
State THREE (3) factors that the external auditor should consider when assessing the competence and objectivity of the expert.
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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)
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The IFAC Code of ethics governs the practice of auditing to ensure that practitioners will act in the public interest. Furthermore, in an audit, many relevant auditing standards must be followed to perform work that will serve the needs of the users of the Auditor’s report.
Required:
Explain each of the FIVE (5) fundamental principles of the Code of Ethics and conduct for professional audit practitioners. (5 marks)
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You are a newly qualified accountant in practice, and you lead a team providing management consultancy services. In recent years, your practice has undertaken several assignments on manufacturing efficiency improvements for medium-sized, listed groups of companies in Ghana. One of the Regional Directors has requested an urgent investigation into Project A due to delays and potential cost overruns. After some initial investigation, your team discovers significant issues that could cause a delay of at least three months and additional costs of GH¢7 million to GH¢10 million, not including possible compensation claims.
One week before the final report is due, the Finance Director of the group calls you and asks for an update on Project A’s status. He mentions that the Regional Director informed the Board that the additional costs would only be GH¢4 million to GH¢5 million, with a delay of about six to eight weeks. He asks for confirmation of this information before the upcoming Board meeting, where they will discuss remedial actions for the group’s cash flow.
Required:
i) Discuss the potential ethical issues involved in breaching the fundamental principles of IFAC’s Code of Ethics. (5 marks)
ii) Recommend the possible actions that you should take as a newly admitted member of the Institute of Chartered Accountants, Ghana, in dealing with this ethical dilemma. (5 marks)
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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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Linda is a junior member of an audit firm and has just returned to work after taking compassionate leave to care for her sick mother. For financial reasons, Linda needs to work full-time. Linda has been having difficulties with her mother’s home care arrangements, causing her to miss several team meetings, which usually occur at the start of each day, and she needs to leave work early as well.
In terms of her capabilities, Linda is very competent at her work, but her frequent absence puts severe pressure on her and her overworked colleagues. Linda’s manager knows that workflow through the practice is coming under intense pressure, and in order that the team’s output is not affected, had a discussion with the audit team on Linda’s circumstances. This has, however, led to some members of the audit team undermining Linda at every given opportunity, putting Linda under even greater stress.
Required:
i) In accordance with the IFAC’s code of ethics, assess THREE (3) possible fundamental ethical principles that might have been breached. (5 marks)
ii) Recommend the possible actions that the manager should take as a member of the Institute of Chartered Accountants, Ghana in dealing with this ethical dilemma. (5 marks)
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Mr. Ben Terkper, the Finance Director of Gogo Ltd, is known to be very strict in managing his staff and his dealings with other employees. A new product introduced by the company is yielding high sales. This has led to increases in cash shortages. In order to reduce the cash shortages, Management employed Hannah, a cousin of the Managing Director, Mr. Okantey.
It is the policy of the company to recover cash shortages made by cashiers by the end of the next working day. Over the years, Mr. Terkper has applied this policy without fear or favor. However, since her employment as a cashier, Hannah has made several cash shortages that have come to the attention of Mr. Terkper and Mr. Okantey. However, Hannah has never been asked to refund any of the cash shortages made so far. The financial statements for the year ended 31 December 2021 are being prepared, and Mr. Okantey has instructed Mr. Terkper to write off the losses made by Hannah.
Required:
i) Assess the possible ethical breaches committed by Hannah, Mr. Terkper, and Mr. Okantey. (4 marks)
ii) Recommend FOUR (4) possible actions that should be taken in dealing with the ethical breaches raised above. (6 marks)
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Mr. Odorkor Asare is a partner of Fobes Chartered Accountants, an auditing firm. Mr. Asare was informed by the other partners to take a “compulsory leave” because he was in breach of the firm’s independence rules as his wife was the Finance Director of Millenium Insurance (an audit client). He was to resume after completion of the audit. Mr. Asare was disturbed by this notice even though he was not the reporting partner.
Required:
Discuss the stance taken by the other partners of the firm and its effect on the objectivity of Fobes Chartered Accountants.
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BYF Health Facility offers varied medical services; it is known for its high-quality laboratory services. In 2021, the company added to its laboratory services, testing for Covid-19 following the increased demand by airlines that travelers must have negative Covid-19 status either through PCR or Antigen tests. Consequently, the company recruited additional workers in the year to work in the new Covid-19 Lab on a part-time basis. All part-time employees (Locum staff) are paid based on hours worked, either on an 8-hour or 12-hour cycle.
As a precondition, part-time workers are to log in and also log out on every working day, for hours worked to be computed by the log-in device.
Bismark Appau (Bismark), a brother of the Director of Health Services of BYF Health Facility, is one of the employees who was employed on a part-time basis at the Covid-19 Lab on an 8-hour cycle. Bismark has permanent employment with KBT hospital and hardly gets time to work at the Covid-19 Lab of BYF Health Facility. However, in preparing payroll of Locum staff, the Director of Health Services continuously insists that in the case of Bismark, the full hours for the total working days in the month on the 8-hour cycle should be used, regardless of the hours he worked. Colleague workers are aware of this special treatment to Bismark, and are unhappy about this preferential treatment.
Required: i) Based on the scenario above, justify the possible ethical principles that might have been breached and its effect on productivity. (6 marks)
ii) Recommend the possible actions to be taken in dealing with this ethical dilemma. (4 marks)
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Salisu Medical Centre runs 24-hour services every day. To ensure smooth cash collection from walk-in clients, the company also operates a 24-hour cash office. The cashiers work on a shift basis to cover the morning, afternoon, evening, and night services. There are five (5) cashiers employed by the firm, who are all supposed to work at least once in each of the shift periods before the year ends. Jennifer, one of the cashiers, has never worked on night duties since she was employed. The Finance Director of the company prepares the duty roster (time-schedule) for the cashiers’ shifts together with the Chief Cashier.
Jennifer’s special treatment has been continuously justified by the Finance Director due to her place of abode being far from the workplace. However, there are other cashiers who come on night-shift staying in her vicinity.
Jennifer is also known in the company for her frequent “excuse” duty from Doctors at the medical centre, allowing her to stay away from work, as well as her spontaneous use of annual leave days, sometimes obtaining additional casual leave. This behavior of Jennifer continuously affects workflow at the Cash Office, leading to another cashier being called to stand in for her, resulting in overtime payments for that cashier.
The conduct of Jennifer and the manner in which the Finance Director handles her case has caused concern among the other cashiers.
Required:
i) Describe the ethical issues involved and their implications on work output at Salisu Medical Centre.
(4 marks)
ii) Recommend possible measures that could be instituted to prevent such ethical challenges in the future.
(6 marks)
(Total: 10 marks)
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Fundamental principles require that a member of a professional accountancy body behave with integrity in all professional, business, and financial relationships and strive for objectivity in all professional and business judgments. Objectivity can only be assured if the member is and is seen to be independent. Conflicts of interest have an essential bearing on independence and the public’s perception of the accounting profession’s integrity, objectivity, and independence.
The following scenario is a press report on a multinational firm of accountants:
The regulatory body directed a partner in a firm that he must resign because he was in breach of the regulatory body’s independence rules. His brother-in-law was the Financial Controller of an audit client. He was informed that the alternative was for him to move his home and place of work at least 400 miles from the client’s office, even though he was not the reporting partner. This made his job untenable. The accounting firm saw the regulatory body as ‘taking its rules to absurd lengths’. Shortly after this comment, the multinational firm announced proposals to split the firm into the following areas: audit, tax and business advisory services; management consultancy; and investment advisory services.
Required:
In relation to integrity, objectivity and independence, discuss the impact the above events may have on the public perception of the multinational firm of accountants. (10 marks)
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