Question Tag: Safeguards

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CR – Nov 2022 – L3 – Q6 – Ethical Issues in Corporate Reporting

Evaluate ethical threats and recommend safeguards in corporate reporting practices.

Question

Compliance with the fundamental ethical principles may potentially be threatened by a broad range of circumstances. It is expected for professional members to evaluate identified threats and put up enough safeguards as appropriate responses to such threats. Unless any threat is clearly insignificant, members must implement safeguards to eliminate the threats or reduce them to an acceptable level so that compliance with the fundamental principles is not compromised. Many threats fall into the following categories:

i. Self-interest;
ii. Self-review;
iii. Advocacy;
iv. Familiarity; and
v. Intimidation.

Required:
a. Evaluate two circumstances which may give rise to each of the categories of threats enumerated above. (10 Marks)
b. Recommend two safeguards to eliminate or reduce the threats to an acceptable level. (5 Marks)
(Total 15 Marks)

Answer

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Tags: Advocacy, Ethical Threats, Intimidation, Safeguards, Self-Interest
Level: Level 3

Topic: Ethical Issues in Corporate Reporting
Series: NOV 2022

AA – May 2017 – L2 – SA – Q3 – Professional Ethics and Code of Conduct for Auditors

Identification of threats to ethical principles and safeguards for accountants.

Question

There are a variety of circumstances that could give rise to the threats of self-interest, advocacy, familiarity, and intimidation against the five fundamental principles of integrity, objectivity, personal competence and due care, confidentiality, and professional behaviour as enunciated in the Code of Ethics. There are, however, safeguards created to help the Professional Accountant in such circumstances.

You are required to:

(a) List FIVE safeguards created by the profession and legislation. (5 Marks)
(b) Identify and explain FIVE safeguards that could be created by firms of Chartered Accountants. (10 Marks)
(c) List FIVE possible safeguards that an individual Chartered Accountant could apply. (5 Marks)

Answer

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Tags: Code of Ethics, Familiarity Threat, Professional Conduct, Safeguards, Self-Interest Threat
Level: Level 2

Topic: Professional Ethics and Code of Conduct for Auditors
Series: MAY 2017

AA – May 2018 – L2 – Q4 – Professional Ethics and Code of Conduct for Auditors (IESBA Code)

Focuses on ethical issues relating to independence and potential threats when auditors take management roles in audit clients.

Question

Joe Adams was the engagement partner to Maikai Airlines Limited from 2012 to 2014. He retired from the firm of the Chartered Accountants and intends to join Maikai Airlines Limited as Finance Director. It is the policy of the firm to pay all partners in full when they disengage.

Required: a. Identify and explain FOUR ethical matters worthy of consideration as Joe Adams joins Maikai Airlines Limited. (8 Marks) b. Discuss the THREE threats that could arise should Joe Adams join Maikai Airlines Limited. (6 Marks) c. Explain THREE matters specified by the Code of Ethics as safeguards in relation to this matter. (6 Marks)

Answer

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Tags: Auditor Independence, Ethical Issues, Safeguards, Threats to Independence
Level: Level 2

Topic: Professional Ethics and Code of Conduct for Auditors
Series: MAY 2018

BMF – Nov 2023 – L1 – SB – Q6 – Basics of Business Finance and Financial Markets

Discuss economic stagnation, macroeconomic policy approaches, operations research techniques, and safeguards in accounting.

Question

a. Briefly explain the concept “Economic stagnation.” (2 Marks)

b. State the THREE policy approaches used by governments to meet macroeconomic objectives. (3 Marks)

c. List and explain briefly FOUR operations research techniques. (8 Marks)

d. Safeguards are actions or other measures that may eliminate threats or reduce them to an acceptable level. Explain SEVEN safeguards created by the Profession in this regard. (7 Marks)

Answer

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Tags: Economic Stagnation, Macroeconomics, Operations Research Techniques, Safeguards
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2023

BMF – May 2023 – L1 – SB – Q4c – The Role of Professional Accountants in Business and Society

Identify safeguards against ethical threats in the accounting profession.

Question

State SIX safeguards created by the profession, legislation or regulation against ethical threats and dilemmas.

Answer

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Tags: Code of Conduct, Ethical Threats, Professional Ethics, Safeguards
Level: Level 1

Topic: The Role of Professional Accountants in Business and Society
Series: MAY 2023

FR – April 2022 – L2 – Q5c – Professional and Ethical Issues in Financial Reporting

Discuss safeguards for mitigating threats to ethical behavior in the context of tax compliance.

Question

Question:
Michael Onipa, a Chartered Accountant, is under pressure from his employees to under declare sales for the year ended 2021 to save the company from paying the due tax for the year. He has evaluated the threat to his professional obligations to comply with the fundamental principles of good ethical behavior, as significant. He has therefore considered safeguards to eliminate or reduce the threat to an acceptable level.

Required:
Discuss TWO (2) safeguards Michael Onipa could consider to either eliminate or reduce the threats to an acceptable level.
(5 marks)

Answer

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Tags: Ethical Dilemmas, Professional Ethics, Safeguards, Tax Compliance
Level: Level 2

Topic: Professional and Ethical Issues in Financial Reporting
Series: APR 2022

AA – July 2023 – L2 – Q2b – Professional and Ethical Considerations

Safeguards to be applied by an auditor in various relationships with clients.

Question

b) What are the safeguards to be applied by an auditor in relation to the following?
i) Financial interest in the client.
ii) Loans and Guarantees to or from the client.
iii) Business relationship with the client.
iv) Family and personal relationship with the client.
v) Employment with an Assurance Client. (5 marks)

Answer

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Tags: Auditor Independence, Auditor Relationships, Ethical considerations, Safeguards
Level: Level 2

Topic: Professional and Ethical Considerations
Series: JULY 2023

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

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

Question

(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)

Answer

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Tags: Conflict of Interest, Ethical Threats, Independence, Professional Ethics, Safeguards
Level: Level 2

Topic: Professional and Ethical Considerations
Series: MAY 2016

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

Identification of major threats to compliance with professional ethics.

Question

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

Answer

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Tags: Code of Ethics, IESBA, IFAC, Professional Ethics, Safeguards, Threats
Level: Level 2

Topic: Professional and Ethical Considerations
Series: MAY 2017

AA – Aug 2022 – L2 – Q2a – Professional and Ethical Considerations

Discusses the threats to auditor independence and objectivity when transferring clients and possible safeguards.

Question

The Managing Partner of A & B Partners, Mr. Pumpa, has decided to put measures in place for the survival of the firm immediately after the enactment of the Company Act, 2019 (Act 992), which requires that “An Auditor shall hold office for a term of not more than six years and is eligible for re-appointment after a cooling-off period of not less than six years.”

Mr. Pumpa then had a gentle arrangement with his colleague, also a Managing Partner in C & D Associates, to transfer all clients who have exceeded their mandatory six years with A & B Partners and vice versa.

Required:
Discuss FIVE (5) major threats to the auditor’s independence and objectivity and how these inherent threats could be mitigated in the decision to transfer client C & D Associates.
(5 marks)

Answer

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Tags: Auditor Independence, Client transfer, Safeguards, Threats to objectivity
Level: Level 2

Topic: Professional and Ethical Considerations
Series: AUG 2022

AA – Nov 2021 – L2 – Q3c – Professional and Ethical Considerations

Discusses threats to audit independence due to personal relationships and financial incentives during audit engagements and suggests safeguards.

Question

Kom & Associates, an audit firm, has regularly been auditing Ake Ltd. At the beginning of the current financial year, the wife of Koffie, the engagement partner of Kom & Associates, was appointed the personal assistant to the Chief Executive of Ake Ltd. In the course of the fieldwork, the audit team was given lunch and money for transport by Ake Ltd.

Required:
Discuss the threats and safeguards for the audit.

Answer

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Tags: Ethical Threats, Financial Incentives, Independence, Personal Relationships, Safeguards
Level: Level 2

Topic: Professional and Ethical Considerations
Series: NOV 2021

AA – Nov 2021 – L2 – Q3b – Professional and Ethical Considerations

Discusses the threats and safeguards related to a former Finance Director reviewing audit work for their former company.

Question

Ackah Senzu had been the Finance Director of Keke Ltd for the immediate past eight years, influencing all the major financial policies of the company. Last year, he moved to Plus Associates, an audit firm, as a Partner. The Directors of Keke Ltd then appointed Plus Associates as their auditors because of the strong relationship with Ackah Senzu. The Senior Partner assumed the engagement responsibility of the audit of Keke Ltd but asked Ackah Senzu to review the audit work.

Required:
Discuss the threats and safeguards of this decision.

Answer

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Tags: Audit Independence, Ethical Issues, Familiarity Threat, Safeguards, Self-review threat
Level: Level 2

Topic: Professional and Ethical Considerations
Series: NOV 2021

AA – Nov 2018 – L2 – Q3d – Professional and Ethical Considerations

Explains safeguards to manage conflicts of interest when auditing competitors.

Question

The Finance Director of the Company informed the audit partner that the reason for appointing Add Consult as auditors was because they audit other similar companies, including the Company’s main competitor. The Finance Director doubts how Add Consult keeps information (obtained during the audit) confidential.

Required:
Explain the safeguards which your firm should implement to ensure that this conflict of interest is properly managed. (5 marks)

Answer

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Tags: Auditor Independence, Confidentiality, Conflict of Interest, Safeguards
Level: Level 2

Topic: Professional and Ethical Considerations
Series: NOV 2018

CSEG – May 2017 – L2 – Q3b – Business ethics

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

Question

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)

Answer

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Tags: Accountants' Independence, Litigation, Professional Ethics, Safeguards
Level: Level 2

Series: MAY 2017

CSEG – Nov 2017 – L2 – Q2b – Business ethics

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

Question

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)

Answer

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Tags: Conflict of Interest, Independence, Professional Ethics, Safeguards
Level: Level 2

Topic: Business ethics
Series: NOV 2017

AAA – May 2016 – L3 – Q1b – Professional responsibility and liability | Rules of professional conduct

Identify and evaluate ethical threats in an audit engagement and recommend safeguards to mitigate these threats.

Question

Dibidibi & Co., an audit and assurance firm, has been engaged as auditors for BCG Bank Ltd, a public limited liability company, for some time now. BCG Bank has sixty branches throughout the country and branches in Togo, Burkina Faso, and Cote d’Ivoire. The Bank is one of the banks in the country which can boast of large landed properties. Dibidibi & Co. receives about 20% of its income from this particular client. Before last year’s audit, the bank engaged the audit firm to value its Land and Buildings in all its branches and headquarters. This work was executed by the audit firm and a report has been issued to management. The report has been incorporated in this year’s financial statements to be audited soon. Dibidibi & Co. sees BCG Bank Ltd. as a very important client whose works are always executed with dispatch.

i) Identify and evaluate the significance of any threats to the Code of Ethics for Professional Accountants raised in the case. (4 marks)

ii) Recommend safeguards to eliminate the threats (mentioned in (i) above) or reduce them to an acceptable level. (6 marks)

Answer

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Tags: Code of Ethics, Ethical Threats, Safeguards, Self-Interest Threat, Self-review threat
Level: Level 3

Topic: Professional responsibility and liability, Rules of professional conduct
Series: MAY 2016

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

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

Question

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)

Answer

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Tags: Engagement Acceptance, Ethical considerations, Professional competence, Safeguards
Level: Level 3

Topic: Practice management, Rules of professional conduct

Question Tag: Safeguards

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CR – Nov 2022 – L3 – Q6 – Ethical Issues in Corporate Reporting

Evaluate ethical threats and recommend safeguards in corporate reporting practices.

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AA – May 2017 – L2 – SA – Q3 – Professional Ethics and Code of Conduct for Auditors

Identification of threats to ethical principles and safeguards for accountants.

You're reporting an error for "AA – May 2017 – L2 – SA – Q3 – Professional Ethics and Code of Conduct for Auditors"

AA – May 2018 – L2 – Q4 – Professional Ethics and Code of Conduct for Auditors (IESBA Code)

Focuses on ethical issues relating to independence and potential threats when auditors take management roles in audit clients.

You're reporting an error for "AA – May 2018 – L2 – Q4 – Professional Ethics and Code of Conduct for Auditors (IESBA Code)"

BMF – Nov 2023 – L1 – SB – Q6 – Basics of Business Finance and Financial Markets

Discuss economic stagnation, macroeconomic policy approaches, operations research techniques, and safeguards in accounting.

You're reporting an error for "BMF – Nov 2023 – L1 – SB – Q6 – Basics of Business Finance and Financial Markets"

BMF – May 2023 – L1 – SB – Q4c – The Role of Professional Accountants in Business and Society

Identify safeguards against ethical threats in the accounting profession.

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FR – April 2022 – L2 – Q5c – Professional and Ethical Issues in Financial Reporting

Discuss safeguards for mitigating threats to ethical behavior in the context of tax compliance.

You're reporting an error for "FR – April 2022 – L2 – Q5c – Professional and Ethical Issues in Financial Reporting"

AA – July 2023 – L2 – Q2b – Professional and Ethical Considerations

Safeguards to be applied by an auditor in various relationships with clients.

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

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

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

Identification of major threats to compliance with professional ethics.

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AA – Aug 2022 – L2 – Q2a – Professional and Ethical Considerations

Discusses the threats to auditor independence and objectivity when transferring clients and possible safeguards.

You're reporting an error for "AA – Aug 2022 – L2 – Q2a – Professional and Ethical Considerations"

AA – Nov 2021 – L2 – Q3c – Professional and Ethical Considerations

Discusses threats to audit independence due to personal relationships and financial incentives during audit engagements and suggests safeguards.

You're reporting an error for "AA – Nov 2021 – L2 – Q3c – Professional and Ethical Considerations"

AA – Nov 2021 – L2 – Q3b – Professional and Ethical Considerations

Discusses the threats and safeguards related to a former Finance Director reviewing audit work for their former company.

You're reporting an error for "AA – Nov 2021 – L2 – Q3b – Professional and Ethical Considerations"

AA – Nov 2018 – L2 – Q3d – Professional and Ethical Considerations

Explains safeguards to manage conflicts of interest when auditing competitors.

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CSEG – May 2017 – L2 – Q3b – Business ethics

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

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CSEG – Nov 2017 – L2 – Q2b – Business ethics

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

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AAA – May 2016 – L3 – Q1b – Professional responsibility and liability | Rules of professional conduct

Identify and evaluate ethical threats in an audit engagement and recommend safeguards to mitigate these threats.

You're reporting an error for "AAA – May 2016 – L3 – Q1b – Professional responsibility and liability | Rules of professional conduct"

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

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

You're reporting an error for "AAA – May 2019 – L3 – Q2b Practice Management, Rules of Professional Conduct"

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