Question Tag: Professional competence

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MGE – May 2018 – L2 – Q3a – Ethics in Business

Explores the quality of professionalism required for accountants and the purpose of corporate code of ethics.

There is an increasing demand for professional accountants to pay close attention to ethical standards as they carry out their professional duties. This requires, among other considerations, that accountants act professionally and in the public interest. They are also expected to abide by the code of ethics of their profession and the corporate code of ethics of the organizations in which they work.

i. As an Accountant, explain the quality of professionalism you need to exhibit in the discharge of your duties. (6 Marks)

ii. Discuss the nature and purpose of a corporate code of ethics. (9 Marks)

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BMF – May 2018 – L1 – SA – Q13 – The Role of Professional Accountants in Business and Society

Identifies main ethical threats in accountancy.

The main threats to ethical behaviour in the accountancy profession fall into the following categories EXCEPT
A. Professional competence threat
B. Intimidation threat
C. Self-interest threat
D. Familiarity threat
E. Advocacy threat

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FR – Nov 2019 – L2 – Q5b – Professional and Ethical Issues in Financial Reporting

Identify ethical principles and apply them to a scenario involving errors in previous accounts and inexperience with complex tax issues.

Mr. Charles Agyekum is a qualified ICAG member who prepares accounts on behalf of a small independent trader. An annual practicing certificate is not required.

This is the first year the member has prepared these accounts. When compiling the most recent accounts, he noticed that some errors were noted in the previous accounts. It appeared that the accounts were based on incomplete records as certain costs were excluded, either intentionally or because records were not maintained.

The client has also requested some additional work to be completed on a complex tax issue. However, the member has no prior experience and does not feel competent to do the work. The client would also like him to provide an audit opinion as they are planning to apply for a bank loan and the bank would like some additional assurance.

Required:
In accordance with IFAC’s code of ethics, explain which ethical principles apply and comment on their relevance to the above scenario.

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AA – May 2021 – L2 – Q2a – Professional and Ethical Considerations

Explain the five fundamental principles of the Code of Ethics for audit practitioners.

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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CR – Nov 2021 – L3 – Q3c – Regulatory Framework and Ethics

Assess the ethical principles breached in a workplace scenario and recommend actions in accordance with the IFAC Code of Ethics.

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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CR – Aug 2022 – L3 – Q3c – Regulatory framework and ethics

This question discusses ethical breaches committed by staff members and the finance director related to cash management and accountability in Gogo Ltd.

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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CR – July 2023 – L3 – Q3b – Regulatory framework and ethics

Identify ethical issues in financial statement adjustments and recommend actions for the new Finance Director to address these breaches.

b) Axim Manufacturing plc has just employed Mr. Kennedy Owusu as the Finance Director of the company. The previous Finance Director, Mr. Ebenezer Anokye, completed the financial statements for the year ended 31 December 2021 before he left. The Auditors of the company are also done with the audit of the financial statement for the year, expressing an unmodified opinion on the accounts. Mr. Ebenezer Anokye is loved by the General staff, Management members and the Board of Directors for his ability in making the organisation profitable over the years, and “guaranteeing” increased end-of-year bonus payments to staff, as a consequence.

Mr. Kennedy Owusu wanted to familiarise himself with the operations of the company, and therefore decided to go through the financial statements for the previous year. He is dismayed to find several errors in the financial statements. The previous Finance Director, Mr. Ebenezer Anokye, passed several adjusting entries in January, 2022 to reflect in the 2021 financial statements. In one of such instances, Mr. Ebenezer Anokye recognised revenue on a large order received on December 28, 2021 but shipped on January 3, 2022. The narration or explanation given to this adjusting entry is, “omission of previous year sales, now recorded”.

Also, purchase of inventory in October 2021, which was fully sold by the end of the year had been recognised in January 2022. Finally, depreciation expense had been reduced by GH¢230,000. All these adjustments were designed to increase profit after tax or earnings per share, culminating in increased bonus payment to Management and the General staff.

Required:

i) Identify the ethical issues involved in the adjustments made by Mr. Ebenezer Anokye.

(5 marks)

ii) Recommend the possible actions that Mr. Kennedy Owusu, the new Finance Director, should take to resolve the ethical breaches and to reverse the wrong accounting treatments. (5 marks)

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CSEG – May 2016 – L2 – Q5c – Business ethics

Identify and justify fundamental ethical principles that could be breached in two scenarios involving financial reporting and providing tax advice.

You recently qualified as a professional accountant and received promotion in your company. One of your key responsibilities is to prepare management accounts to facilitate management decision making. You require important sales information from the sales department to incorporate into the final figures. Unfortunately, due to staff sickness and other inefficiencies, the sales report for the month has been delayed. Thus, you will not receive the information until few hours before the accounts are due for presentation to the Chief Finance Officer.

In a related situation, while on lunch break, you overhead the marketing manager asking another employee in the finance department to advise her on some investment decisions she has to make. She has recently inherited a considerable sum of money and would like your colleague to calculate her inheritance tax as well as capital gains tax liabilities.

Required: Identify the fundamental ethical principle(s) that could be in breach and justify why they may constitute a breach. (6 marks)

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AAA – Mar 2024 – L3 – Q1a – Rules of professional conduct, Professional responsibility and liability, The audit approach

Evaluation of ethical threats impacting audit independence and advice on mitigating actions.

You are an audit manager of Afari & Partners and have been assigned to the audit of Jericho Plant Company Ltd (Jericho Plant), which has been an audit client for 6 years and specialises in manufacturing fertilizers in Ghana.

The company was introduced to the firm by Mr. Lartey 6 years ago when he was a Commissioner at the Ghana Revenue Authority (GRA). Mr. Lartey is not a member of the Institute of Chartered Accountants, Ghana. However, since his retirement from GRA, last year, he joined the firm as a tax partner to provide tax consultancy services. He has good relations with the client as his daughter is married to the son of the CEO for Jericho Plant.

Mr. Andani, who has been the audit engagement partner for Jericho Plant for the past 6 years, has recently been rotated off the audit engagement. The current audit partner, Mr. Nti, has suggested that in order to maintain a close relationship with Jericho Plant, Mr. Lartey should undertake the role of an engagement quality reviewer this year. In addition, Jericho Plant has requested that Mr. Andani assist them by attending their audit committee meetings, as a non-executive director has recently left the company.

Jericho Plant has also asked Mr. Lartey and the other partners at Afari & Partners to help them in recruiting a new non-executive director.

Fees paid by Jericho Plant form 35% of the firm’s total fee income (both audit and non-audit fees) and the partners have anticipated that the fees for this year would be greater than last year. Since joining as a tax partner, Mr. Lartey has been aggressive in generating revenue for the tax department and does not keep records of his work. He argues that the most important issue is for the firm to generate revenue, which he does. Some of the clients have complained about the cash collected by Mr. Lartey as part of his consultancy services.

The audit manager for Jericho Plant last year has just announced that he is leaving Afari & Partners to join Jericho Plant as the financial controller.

Required:

Using the information above

i) Evaluate FOUR (4) ethical threats which may affect the independence of Afari & Partners. (6 marks)

ii) For each threat, advise on how it might be mitigated to an acceptable level. (4 marks)

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AAA – May 2019 – L3 – Q2b Practice Management, Rules of Professional Conduct

Recommend safeguards necessary to eliminate or reduce threats associated with accepting new engagements.

A Chartered Accountant in practice should agree to provide only those services that they are competent to perform. Before accepting a specific client engagement, they should consider whether acceptance would create any threats to compliance with the fundamental principles. A Chartered Accountant in practice should evaluate the significance of identified threats associated with an engagement; if they are other than clearly insignificant, safeguards should be applied as necessary to eliminate them or reduce them to an acceptable level.

Required:

Recommend FIVE (5) safeguards necessary to eliminate or reduce threats associated with accepting new engagements.

(5 marks)

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MGE – May 2018 – L2 – Q3a – Ethics in Business

Explores the quality of professionalism required for accountants and the purpose of corporate code of ethics.

There is an increasing demand for professional accountants to pay close attention to ethical standards as they carry out their professional duties. This requires, among other considerations, that accountants act professionally and in the public interest. They are also expected to abide by the code of ethics of their profession and the corporate code of ethics of the organizations in which they work.

i. As an Accountant, explain the quality of professionalism you need to exhibit in the discharge of your duties. (6 Marks)

ii. Discuss the nature and purpose of a corporate code of ethics. (9 Marks)

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BMF – May 2018 – L1 – SA – Q13 – The Role of Professional Accountants in Business and Society

Identifies main ethical threats in accountancy.

The main threats to ethical behaviour in the accountancy profession fall into the following categories EXCEPT
A. Professional competence threat
B. Intimidation threat
C. Self-interest threat
D. Familiarity threat
E. Advocacy threat

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FR – Nov 2019 – L2 – Q5b – Professional and Ethical Issues in Financial Reporting

Identify ethical principles and apply them to a scenario involving errors in previous accounts and inexperience with complex tax issues.

Mr. Charles Agyekum is a qualified ICAG member who prepares accounts on behalf of a small independent trader. An annual practicing certificate is not required.

This is the first year the member has prepared these accounts. When compiling the most recent accounts, he noticed that some errors were noted in the previous accounts. It appeared that the accounts were based on incomplete records as certain costs were excluded, either intentionally or because records were not maintained.

The client has also requested some additional work to be completed on a complex tax issue. However, the member has no prior experience and does not feel competent to do the work. The client would also like him to provide an audit opinion as they are planning to apply for a bank loan and the bank would like some additional assurance.

Required:
In accordance with IFAC’s code of ethics, explain which ethical principles apply and comment on their relevance to the above scenario.

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AA – May 2021 – L2 – Q2a – Professional and Ethical Considerations

Explain the five fundamental principles of the Code of Ethics for audit practitioners.

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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CR – Nov 2021 – L3 – Q3c – Regulatory Framework and Ethics

Assess the ethical principles breached in a workplace scenario and recommend actions in accordance with the IFAC Code of Ethics.

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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CR – Aug 2022 – L3 – Q3c – Regulatory framework and ethics

This question discusses ethical breaches committed by staff members and the finance director related to cash management and accountability in Gogo Ltd.

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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CR – July 2023 – L3 – Q3b – Regulatory framework and ethics

Identify ethical issues in financial statement adjustments and recommend actions for the new Finance Director to address these breaches.

b) Axim Manufacturing plc has just employed Mr. Kennedy Owusu as the Finance Director of the company. The previous Finance Director, Mr. Ebenezer Anokye, completed the financial statements for the year ended 31 December 2021 before he left. The Auditors of the company are also done with the audit of the financial statement for the year, expressing an unmodified opinion on the accounts. Mr. Ebenezer Anokye is loved by the General staff, Management members and the Board of Directors for his ability in making the organisation profitable over the years, and “guaranteeing” increased end-of-year bonus payments to staff, as a consequence.

Mr. Kennedy Owusu wanted to familiarise himself with the operations of the company, and therefore decided to go through the financial statements for the previous year. He is dismayed to find several errors in the financial statements. The previous Finance Director, Mr. Ebenezer Anokye, passed several adjusting entries in January, 2022 to reflect in the 2021 financial statements. In one of such instances, Mr. Ebenezer Anokye recognised revenue on a large order received on December 28, 2021 but shipped on January 3, 2022. The narration or explanation given to this adjusting entry is, “omission of previous year sales, now recorded”.

Also, purchase of inventory in October 2021, which was fully sold by the end of the year had been recognised in January 2022. Finally, depreciation expense had been reduced by GH¢230,000. All these adjustments were designed to increase profit after tax or earnings per share, culminating in increased bonus payment to Management and the General staff.

Required:

i) Identify the ethical issues involved in the adjustments made by Mr. Ebenezer Anokye.

(5 marks)

ii) Recommend the possible actions that Mr. Kennedy Owusu, the new Finance Director, should take to resolve the ethical breaches and to reverse the wrong accounting treatments. (5 marks)

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CSEG – May 2016 – L2 – Q5c – Business ethics

Identify and justify fundamental ethical principles that could be breached in two scenarios involving financial reporting and providing tax advice.

You recently qualified as a professional accountant and received promotion in your company. One of your key responsibilities is to prepare management accounts to facilitate management decision making. You require important sales information from the sales department to incorporate into the final figures. Unfortunately, due to staff sickness and other inefficiencies, the sales report for the month has been delayed. Thus, you will not receive the information until few hours before the accounts are due for presentation to the Chief Finance Officer.

In a related situation, while on lunch break, you overhead the marketing manager asking another employee in the finance department to advise her on some investment decisions she has to make. She has recently inherited a considerable sum of money and would like your colleague to calculate her inheritance tax as well as capital gains tax liabilities.

Required: Identify the fundamental ethical principle(s) that could be in breach and justify why they may constitute a breach. (6 marks)

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AAA – Mar 2024 – L3 – Q1a – Rules of professional conduct, Professional responsibility and liability, The audit approach

Evaluation of ethical threats impacting audit independence and advice on mitigating actions.

You are an audit manager of Afari & Partners and have been assigned to the audit of Jericho Plant Company Ltd (Jericho Plant), which has been an audit client for 6 years and specialises in manufacturing fertilizers in Ghana.

The company was introduced to the firm by Mr. Lartey 6 years ago when he was a Commissioner at the Ghana Revenue Authority (GRA). Mr. Lartey is not a member of the Institute of Chartered Accountants, Ghana. However, since his retirement from GRA, last year, he joined the firm as a tax partner to provide tax consultancy services. He has good relations with the client as his daughter is married to the son of the CEO for Jericho Plant.

Mr. Andani, who has been the audit engagement partner for Jericho Plant for the past 6 years, has recently been rotated off the audit engagement. The current audit partner, Mr. Nti, has suggested that in order to maintain a close relationship with Jericho Plant, Mr. Lartey should undertake the role of an engagement quality reviewer this year. In addition, Jericho Plant has requested that Mr. Andani assist them by attending their audit committee meetings, as a non-executive director has recently left the company.

Jericho Plant has also asked Mr. Lartey and the other partners at Afari & Partners to help them in recruiting a new non-executive director.

Fees paid by Jericho Plant form 35% of the firm’s total fee income (both audit and non-audit fees) and the partners have anticipated that the fees for this year would be greater than last year. Since joining as a tax partner, Mr. Lartey has been aggressive in generating revenue for the tax department and does not keep records of his work. He argues that the most important issue is for the firm to generate revenue, which he does. Some of the clients have complained about the cash collected by Mr. Lartey as part of his consultancy services.

The audit manager for Jericho Plant last year has just announced that he is leaving Afari & Partners to join Jericho Plant as the financial controller.

Required:

Using the information above

i) Evaluate FOUR (4) ethical threats which may affect the independence of Afari & Partners. (6 marks)

ii) For each threat, advise on how it might be mitigated to an acceptable level. (4 marks)

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AAA – May 2019 – L3 – Q2b Practice Management, Rules of Professional Conduct

Recommend safeguards necessary to eliminate or reduce threats associated with accepting new engagements.

A Chartered Accountant in practice should agree to provide only those services that they are competent to perform. Before accepting a specific client engagement, they should consider whether acceptance would create any threats to compliance with the fundamental principles. A Chartered Accountant in practice should evaluate the significance of identified threats associated with an engagement; if they are other than clearly insignificant, safeguards should be applied as necessary to eliminate them or reduce them to an acceptable level.

Required:

Recommend FIVE (5) safeguards necessary to eliminate or reduce threats associated with accepting new engagements.

(5 marks)

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