Question Tag: Professional Ethics

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  • 10 Marks

AAA – Nov 2024 – L3 – Q5b – Anti-Money Laundering Regulations and Auditor Responsibilities

Discuss anti-money laundering regulations in Ghana and auditors' responsibilities in compliance.

Lamsey Jewelers is a family-owned business specializing in high-end jewellery, located in Dunkwa-On-Offin in the Central Region of Ghana. The company sources gold from various suppliers in the small-scale mining sector. Recently, the Minerals Commission received anonymous tips suggesting that Lamsey Jewelers may be involved in laundering money through its operations. Authorities suspect that the business could be used to conceal the origins of illicit funds through gold purchases and sales.

To investigate these suspicions, regulatory authorities have appointed Baba Yara and Associates, an independent auditing firm, to conduct a thorough review of Lamsey Jewelers’ operations and financial transactions. During the audit, Baba Yara and Associates discovered that Lamsey Jewelers has been accepting large cash payments for custom jewellery orders without conducting proper due diligence on the customers. Several transactions involving cash payments exceed typical retail amounts, raising suspicions of potential money laundering.

Required:

i) Discuss the key legal and regulatory requirements in Ghana related to anti-money laundering relevant to Lamsey Jewelers.

ii) Discuss the obligations placed on professional firms such as Baba Yara and Associates in relation to money laundering.

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  • 10 Marks

AA – Nov 2024 – L2 – Q1b – Engagement Letter Contents

Explains the key contents of an audit engagement letter, highlighting the responsibilities and scope of an audit.

A firm or individual having accepted an appointment as an auditor of a client company shall submit an engagement letter to the board of directors of the client company. The engagement letter can be seen as the basis for the contract between the company and the auditor.

Required:
In relation to the above statement, state and explain FIVE contents of the engagement letter.

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  • 30 Marks

AAA – May 2019 – L3 – Q1 – Forensic Auditing

Analyze forensic accounting, discuss ethical principles, and outline procedures for Ayeniromo Microfinance Bank forensic investigation.

Ayeniromo Microfinance Bank Limited has been operating for more than five years in Ekemode Local Government area of a state in Nigeria. The bank opened three cash centres in three locations in the local government area in 2013.

Business activities have been very encouraging in one of the cash centres until a sudden change in activities in 2016. This resulted in the negative performance of the cash centre. The managing director thereafter decided to investigate the causes of the problems in the cash centre.

An interim report of the preliminary investigation on the cash centre identified infractions on cash takings from customers by some staff of the cash centre during the year 2016.

The managing director and the board decided to engage your firm as forensic accountants with the following terms of reference:

  1. Investigate whether fraud has actually occurred and if so, to obtain evidence to support that assertion in a court of law.
  2. Identify the individual(s) who has/have committed the fraud and obtain evidence that can be used in a court of law to link them with the fraud.
  3. Estimate the financial loss that has occurred because of the fraud.

You are required to:
a. Discuss the concept of forensic accounting and explain the nature of forensic investigation and forensic audit. (10 Marks)
b. Analyse and apply the FIVE fundamental principles of the IFAC’s Code of Ethics for professional accountants to forensic investigation. (10 Marks)
c. Explain the procedures to be followed in a forensic investigation engagement for Ayeniromo Microfinance Bank Limited. (10 Marks)

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  • 14 Marks

AAA – May 2021 – L3 – Q1a – Ethical Issues in Auditing

Discussion of ethical issues and professional challenges in the audit of Blackmart Plc, and recommendations for addressing them.

Blackmart Plc is one of your listed audit clients which offers property management, property financing, and mortgage services to its clients. During the audit of the company, the following matters came to your attention:

(i) Grace Sadiku, one of the audit team members, has provisionally agreed to take out a mortgage facility with a duration of 10 years using the facility of Blackmart Plc to finance her first residential property. In the area where the property is located, the first residential property gets a full tax waiver on the entire installments paid within the first 5 years, which is usually a significant tax incentive. The mortgage facility would be secured by the property and it has been defined as the best offer available in the market.

(ii) Also, during the period, the Human Resources (HR) Manager of Blackmart Plc resigned, and the company had reached out to your firm to provide a staff on secondment till a substantive HR Manager is appointed.

(iii) The management of Blackmart has also informed your audit team that the company maintains only two bank accounts and there will be no need to circularise the banks as the auditors can rely on the balances as generated from the bank’s portal as at the end of the year.

(iv) The audit committee has asked your firm to work with the internal audit team to design internal controls over the part of the accounting system which deals with revenue, and also evaluate the operating effectiveness of the internal controls.

Required:
Prepare a memo to your Manager, commenting on the professional and ethical issues arising from the audit of Blackmart Plc and also suggest to him/her on how to manage the identified issues. (15 Marks)

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  • 15 Marks

AAA – Nov 2013 – L3 – SB – Q6 – Auditor’s Legal Liability

Discuss criminal charges against accountants, reasons auditors prefer out-of-court settlements, and the disadvantages of such settlements.

Auditors’ liabilities may arise under common law and statute. Statutory liability may be civil or criminal. Professional accountants are increasingly guiding against incidences of litigation that may impact negatively on their work.

You are required to:

(a) Outline SIX ways through which accountants may be charged for criminal offenses. (6 Marks)

(b) Explain SIX reasons why auditors are willing to settle legal matters with their clients out of court. (6 Marks)

(c) State THREE disadvantages of an out-of-court settlement. (3 Marks)

(Total: 15 Marks)

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  • 1 Marks

AAA – Nov 2013 – L3 – AII – Q19 – Ethical Issues in Auditing

Identify the term for codified moral rules and regulations guiding professional behavior.

The codified rules and regulations which are mainly based on moral duties and obligations on how professionals should carry out their duties and how to behave in the society are known as……………….

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  • 10 Marks

CR – May 2021 – L3 – Q7a – Ethical Issues in Corporate Reporting

Discuss unethical organizational acts and recommend the actions the Chief Accountant should take in a scenario of misrepresentation in financial reporting.

Femmy PLC operates in a city where a major insurance company has just announced a restructuring that will lay off 4,000 employees. For Femmy PLC, accounts receivable represents one of the major assets of the company. Although the company’s annual uncollectible accounts are not out of line, they are material in size. The company is about to submit its application for a bank loan. Sales and net income have declined in the past year, and some customers are falling behind in settling their accounts.

A steady financial performance is necessary to be able to secure the anticipated bank loan. Therefore, management felt there is the need to underestimate the uncollectible accounts this year to show a small growth in earnings. They believe that future successful years will average out the losses.

More so, since the company has a history of success, the adjustments are seen as mere accounting measures and estimates. The Chief Accountant viewed management’s action as unethical.

Required:
i. Discuss the meaning of unethical acts by organizations. (5 Marks)
ii. What should the Chief Accountant do under this circumstance? (5 Marks)

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  • 15 Marks

AAA – Nov 2021 – L3 – Q5 – Ethical Issues in Auditing

Evaluate ICAN requirements on advertising for competing firms and discuss the tendering process, including the concept of "low balling."

Yeye Oge Limited has decided to change its auditors after the current year’s audit. The present auditor has served for a number of years, and there is a mutual agreement on the change. The relationship between the company’s key officials and the partner of the present audit firm had become so cordial that both parties are now concerned about a potential deviation from a professional relationship, hence the mutual agreement for the change of auditors.

You work for the present audit firm, and your partner involved in this case has been asked to participate in the selection of a new audit firm for this client. Both the Chief Executive of the company and your partner have agreed to follow due processes in selecting the new auditor. To ensure proper understanding, certain background processes required for professional selection need to be provided to the chief executive of the company.

Required:

a. Evaluate the requirements of the Institute on advertising and publicity that need to be focused on while considering the competing firms. (5 Marks)

b. Discuss the approved tendering process and evaluation of tenders as a guide, giving proper meaning to the term “Low balling.” (10 Marks)

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  • 1 Marks

AAA – Nov 2011 – L3 – SA – Q14 – Regulatory Investigations and Disciplinary Actions

Identifies a sanction not applicable for ICAN members' misconduct.

Which ONE of the following sanctions may NOT be imposed by The Institute of Chartered Accountants of Nigeria on its members for misconduct?

  • A. Reprimand
  • B. Suspension from membership
  • C. Expulsion from membership
  • D. Sealing off practice office
  • E. Payment of costs

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  • 20 Marks

AAA – May 2018 – L3 – SB – Q4 – Ethical Issues in Auditing

Educate staff on IFAC’s Code of Ethics principles, types of independence, and general sources of ethical threats in accounting.

You are the HR partner in Ekemode & Company (Chartered Accountants). As part of the continuous training program of your firm, you are to organize an in-house seminar to educate the staff of your firm on Rules of Professional Conduct. You have decided to emphasize the IFAC’s Code of Ethics for Professional Accountants published by the International Ethics Standard Board for Accountants (IESBA), which was recently adopted by ICAN into their localized code called “The Professional Code of Conduct and Guide for Members.”

Required:

a. Explain briefly the FIVE fundamental principles of the IFAC’s Code of Ethics for Professional Accountants. (7½ Marks)

b. Explain independence of mind and independence of appearance to the staff. (5 Marks)

c. Explain briefly THREE general sources of threat to the fundamental principles of the IFAC’s Code of Ethics for Professional Accountants. (7½ Marks)

(Total 20 Marks)

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  • 12 Marks

AA – May 2016 – L2 – Q2a – Professional and Ethical Considerations

This question examines ethical threats and their mitigation in the context of audit engagements.

(a) You are a manager in the audit firm of ABC & Co; and this is your first time you have worked on one of the firm’s established clients, Tark Co. The main activity of Tark Co is providing investment advice to individuals regarding saving for retirement, purchase of shares and securities, and investing in tax-efficient savings schemes. Tark is regulated by the relevant financial services authority.

You have been asked to start the audit planning for Tark Co, by Mr. Soon, a partner in ABC & Co. Mr. Soon has been the engagement partner for Tark Co for the past nine years and has excellent knowledge of the client. Mr. Soon has informed you that he would like his daughter, Afi, to be part of the audit team this year; Afi is currently studying for her first set of knowledge-level papers for her ICAG qualification. Mr. Soon also informs you that Mr. Fac, the audit senior, received investment advice from Tark Co during the year and intends to do the same next year.

In an initial meeting with the finance director of Tark Co, you learned that the audit team will not be entertained on Tark Co.’s yacht this year as this could appear to be an attempt to influence the opinion of the audit. Instead, he has arranged a balloon flight costing less than one-tenth of the expenses of using the yacht and hopes this will be acceptable. The director also states that the fee for taxation services this year should be based on a percentage of tax saved, and he trusts that your firm will accept a fixed fee for representing Tark Co in a dispute regarding the amount of sales tax payable to the taxation authorities.

Required:

(i) Explain the ethical threats which may affect the auditor of Tark Co. (6 marks)

(ii) For each ethical threat, discuss how the effect of the threat can be mitigated. (6 marks)

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  • 5 Marks

AA – May 2017 – L2 – Q1b – Professional and Ethical Considerations

Identification of major threats to compliance with professional ethics.

The IFAC International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants sets out the five fundamental principles of professional ethics and provides a conceptual framework for applying those principles. Professional Accountants must apply this conceptual framework to identify threats to compliance with the principles, evaluate their significance, and apply appropriate safeguards to eliminate or reduce them so that compliance is not compromised.

Required: Identify FIVE major threats identified in the code of ethics, giving examples of each

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  • 10 Marks

AA – Aug 2022 – L2 – Q2c – Professional and Ethical Considerations

Explains factors to consider before accepting a new audit client and preconditions for agreeing to an audit engagement.

There are factors to consider and procedures to follow before accepting a new client, a new engagement for an existing client, or agreeing to the terms of any new engagement. It could be an audit, a non-audit engagement, or an assurance engagement. Acceptance decisions are critical since new clients and/or engagements can impair the objectivity or expose the firm to an audit risk, both of which must be carefully considered.

Required:
i) Explain TWO (2) factors a professional accountant in public practice should consider before accepting a new audit client.
(5 marks)

ii) Explain TWO (2) preconditions that should exist when agreeing to the Terms of Audit Engagement.
(5 marks)

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  • 5 Marks

FR – Nov 2021 – L2 – Q5b – Professional and Ethical Issues in Financial Reporting

Advising a Chartered Accountant on how to handle an ethical dilemma in relation to confidentiality and fraudulent acts in compliance with IFAC’s code of ethics.

Ata Kwaku, a Chartered Accountant, signed a confidentiality agreement with his employer, Therry Ltd, before accepting the offer of employment. Unfortunately, Ata Kwaku inadvertently came across a fraudulent act perpetrated by the shareholders of Therry Ltd. The shareholders also managed the business, and before Ata Kwaku’s appointment, one of the shareholders managed the accounts. The auditors of the Ghana Revenue Authority’s tax compliance unit are asking for documents that might expose the fraudulent act.

Required:

In accordance with IFAC’s Code of Ethics, advise Ata Kwaku on how to respond appropriately in relation to the ethical principles that apply. (5 marks)

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  • 5 Marks

FR – March 2024 – L2 – Q5a – Professional and Ethical Issues in Financial Reporting

Advise Esther on the appropriate actions to take in response to unethical pressure in financial reporting.

Esther is a Chartered Accountant who works in a team that reports to Ameka, the Finance Director of Novak Ltd. Ameka is also a Chartered Accountant and has a domineering personality. Novak Ltd revalues commercial properties in line with IAS 16: Property, Plant and Equipment. Valuation information received last year showed that the fair value of the property portfolio was 2% less than the carrying amount of the properties (with no single property being more than 4% difference). A downward revaluation was not recognised on the grounds that the carrying amount was not materially different from the fair value.

This year’s valuation shows a continued decline in the fair value of the property portfolio. It is now 5% less than the carrying amount of the properties with some properties now being 15% below the carrying amount. Esther submitted workings to Ameka in which she had recognised the downward revaluations in accordance with IAS 16. Ameka has sent Esther an email in response in which he wrote: “Stop bothering me with this rubbish. There is no need to write the properties down. The fair value of the portfolio is only 5% different from its carrying amount. Restate the numbers immediately.”

Required:
Advise Esther on the appropriate actions to take.
(5 marks)

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  • 10 Marks

FR – Nov 2018 – L2 – Q5b – Professional and Ethical Issues in Financial Reporting

Explanation of the importance of 'Substance Over Form' and features indicating that the economic substance of a transaction may differ from its legal form.

Under the IASB’s Conceptual Framework for Financial Reporting, certain qualitative characteristics of useful financial information are identified. These are subdivided into characteristics considered fundamental and those considered to be enhancing. The two fundamental characteristics identified by the framework are ‘relevance’ and ‘faithful representation’. In order for financial transactions to be represented faithfully in the financial statements, the principle of ‘substance over form’ should be applied. This means that wherever there is a difference between the legal form of a transaction and its economic substance, the financial statements should reflect the economic substance.

Required:
i. Discuss the importance of the concept of ‘substance over form’.
(4 marks)

ii. Describe FOUR (4) features of a transaction that suggest that its economic substance may differ from its legal form.
(6 marks)

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  • 5 Marks

CSEG – Nov 2015 – L2 – Q6a – Business ethics

Outline three personal qualities and two professional qualities expected of an accountant.

The personal qualities as well as the professional qualities of an accountant can influence his/her role in the strategic management process. Outline three personal qualities and two professional qualities expected of an accountant. [5marks]

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  • 6 Marks

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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  • 6 Marks

CSEG – May 2017 – L2 – Q3b – Business ethics

Explain four safeguards to address actual and threatened litigation in the accounting profession.

Professional accountants face many threats in the performance of their duties that may negatively affect accountants’ objectivity and independence. One of such threats is intimidation threat which may arise from close business relationships, family and personal relationships, and assurance staff members moving to employment with clients as well as actual and threatened litigation.

Required:

Explain FOUR safeguards you will consider to deal with actual and threatened litigation as a professional accountant. (6 marks)

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  • 12 Marks

CSEG – Nov 2017 – L2 – Q2b – Business ethics

Discuss specific threats to independence for professional accountants and suggest measures to minimize these threats.

The International Federation of Accountants (IFAC) Code of Ethics discusses the need for professional accountants to be aware of and avoid conflict of interest situations as well as maintain independence in carrying out their professional duties. The professional accountant is exposed to several threats to independence, which are likely to lead to conflict of interest. A threat may arise where an assurance firm provides services other than assurance services to an assurance client.

Required:

i) Identify the specific threat a professional accountant or assurance firm faces by providing the following services:

  • Preparing accounting records and financial statements
  • Valuation services (8 marks)

ii) Suggest TWO measures each a professional accountant can take to minimize the threats identified in (i). (4 marks)

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