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  • 20 Marks

FR – L2 – Q9 – Professional and Ethical Issues in Financial Reporting

Identify ethical issues in two cases involving financial reporting decisions by ICAG accountants

TWO CASES

Case 1
Kofi Mensah has been on a two-year study sabbatical in Canada and this is his first job on returning to work. Kofi Mensah qualified as an ICAG chartered accountant just before his sabbatical. He worked in a medium-sized practice with wide experience of clients in the mining, manufacturing, and agricultural sectors.
Volta Assurance Limited is a subsidiary of a listed group involved in financial services. The financial controller of Volta Assurance Limited has been on long-term sick leave. Kofi Mensah has been offered an appointment as temporary financial controller three months before the 31 December 20X9 year-end.
Kofi Mensah would be responsible for preparing the financial statements for the year ended 31 December 20X9. Key areas of the financial statements include lessor accounting, financial instruments, and insurance contracts.
During his interview for the post, the group finance director told Kofi Mensah that the group is looking for a strong financial position and performance from the subsidiary and that if Kofi Mensah helps deliver it, he is sure to obtain a permanent post in the group.

Case 2
Kwame Osei is an ICAG Chartered Accountant and works as a financial accountant working for Kumasi Builders plc.
Kumasi Builders plc is about to finalise its financial statements for the year ended 31 December 20X9 and will release its results in two days’ time.
One of Kwame Osei’s tasks during the frantic year-end work was to perform an impairment review on certain assets owned by the company. There were indications of impairment, but Kwame Osei’s calculation of recoverable amount showed that no assets were impaired.
Kwame Osei has just read an article on spreadsheet error. This led him to review the spreadsheets that he built to perform the recoverable amount calculations, and he has found an error in the logic. This error, if corrected, would have led to the company recognising a material impairment loss.
The loss, if recognised, would lead to the profit figure falling below the level at which Kwame Osei’s bonus is triggered. He is also concerned that his mistake will compromise his future promotion prospects.

Required
Identify and explain the ethical issues arising in the above cases.

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  • 20 Marks

SCS – L3 – Q24 – Ethics and social responsibility

Discuss limits of CSR, safeguards for litigation threats to accountants, and strategic importance of HRM in employee development.

(a) Corporate Social Responsibility represents a company’s voluntary commitment to address the ethical, social and environmental factors associated with its operations. Despite its potential for furthering social needs, there are cogent arguments against Corporate Social Responsibility and may come under severe pressure in terms of its financing.

Required:

Discuss FOUR limits of Corporate Social Responsibility.

(b) 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 client 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.

(c) Human Resource Management play an essential role in employee development activities. Employee development activities refer to initiatives taken by organization and employees to enhance their skills with time and keep themselves acquainted with the latest developments.

Required:

Explain TWO strategic importance of Human Resource Management and employee development.

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  • 20 Marks

SCS – L3 – Q23 – Conflicts of interest and ethical conflict resolution

Discuss three justifications for separating the roles of board chairman and CEO at Kabwe Pharmaceuticals Ltd.

Susan Kabwe completed a first degree in pharmacy programme abroad and returned to her native country Gambia with the hope of starting a pharmaceutical company. Gambia has been experiencing high graduate unemployment and Susan was very determined not to join the teaming unemployed youth in the country. Susan put together an excellent business plan and approached four other childhood friends who have also completed university to start Kabwe Pharmaceuticals Ltd for manufacturing of basic and essential drugs locally. After many months of hard work, the company finally commenced operations two years ago.

Susan Kabwe plays a dual role of the chief executive officer (CEO) and chairman of the Board of Directors, and the four other friends are all executive directors of the company. The board of the company is currently composed of five executive directors and two non-executive directors. The two non-executive directors are close friends of the executive directors without relevant work experience since they remained unemployed 3 years after completing university. There have been several board meetings held without the non-executive directors. This situation is largely due to a belief by the executive directors that non-executive directors are really not needed since they do not play any important role on the board. Susan and other executive directors participated in a seminar on corporate governance where the facilitator made the following statements on best practices of corporate governance:

“The roles of board chairman and chief executive officer should be held by two different individuals”

“The board chairman performs critical functions to ensure that the board functions effectively”

“The board should be composed of at least one-third of non-executive directors”

After the seminar the executive directors disagreed with some of the facilitator’s assertions. They claimed the statements are idealistic and not pragmatic. Susan Kabwe has approached you as a corporate governance expert to help provide clarity to the statements by the facilitator.

Required:

Discuss THREE justifications why the roles of the board chairman and chief executive officer should not be held by Susan Kabwe.

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  • 20 Marks

SCS – L3 – Q17 – Professional practice and codes of ethics

Identify three situations at NTM conflicting with IFAC's Code of Ethics.

At its recent Annual General Meeting, management of NTM was highly criticized for two major scandals that occurred in the organization during the year. In one case, newspapers reported that the management of the company connived with officials at the port to undervalue imports in order to pay lower taxes. In the other case, it was reported that the accountant leaked information to his friend who was bidding for a contract in the company. The Board Chairman, who is also the Chief Executive Officer of the company apologized for these incidents but did not disclose that the company had been sued in respect of the first case. He went on to promise the shareholders that the fortunes of the company would change dramatically by the end of the new year as the company was going to start exporting its products to Europe within the next few weeks.

Required:
(a) Identify and explain THREE situations that are in conflict with the International Federation of Accountants (IFAC)’s Code of Ethics.

(b) Explain FOUR disadvantages of the CEO acting also as the Chairman of the Board.

(c) Identify FOUR principal duties of a Board of Directors.

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  • 20 Marks

SCS – L3 – Q12- Ethics and social responsibility

Make a case for CSR to help Petrostar Ltd. formulate an appropriate CSR strategy.

You have recently been appointed head of corporate affairs of PetroStar Ltd., a reputable company that operates in the upstream sector of the petroleum industry in West Africa. In a recent management meeting, a disagreement arose among executives regarding the nature of the company’s philosophy and strategy towards social responsibility. In order to resolve the disagreement, you have been asked by the company’s board of directors to submit a position paper that will enable it to formulate an appropriate corporate social responsibility strategy for the company.

Required:
(a) In a brief report to the board, make a clear case for Corporate Social Responsibility (CSR) to help your company’s board formulate an appropriate CSR strategy.

 (b) Explain TWO strategies your company could adopt for managing its social responsibility.

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

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  • 20 Marks

SCS – L3 – Q6- Professional practice and codes of ethics

Outline five personal or professional qualities expected of an accountant in strategic management.

(a) The personal qualities as well as the professional qualities of an accountant can influence his/her role in the strategic management process. Outline FIVE (5) personal or professional qualities expected of an accountant.

(b) Ghana’s corporate governance environment has been influenced by the principles of governance published by the Organisation for Economic Cooperation and Development (OECD). These principles deal mainly with performance problems that result from the separation of ownership and management of a company. Explain FIVE (5) principles of corporate governance.

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  • 20 Marks

SCS – L3 – Q2- Ethics and social responsibility

Explain four ethical problems managers face in dealing with stakeholders.

2 Ethics and the environment

(a) Managers have a duty to aim for profit. At the same time, modern ethical standards impose a duty to guard, preserve and enhance the value of an enterprise for the good of all touched by it, including the general public.

Explain FOUR (4) ethical problems managers face in dealing with stakeholders.

(b) Business activities, in general, were formerly regarded as a problem for the environmental movement, but the two are now increasingly complementary. There has been an increase in the use of a green approach to market products.

Explain in FOUR (4) ways how physical environmental conditions are important for strategic planning.

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  • 20 Marks

PSAF – L2 – Q5.3 – Public Expenditure and Financial Accountability

Discuss how professional skepticism and judgement assist in evaluating a hospital's operations for resource misuse and poor procurement.

You have been appointed as an independent assessor to evaluate the operations of a major regional hospital, which has recently been in the news for significant misuse of resources and poor procurement practices.

Required:
Discuss how professional skepticism and judgement assist in the assignment in the hospital.

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  • 20 Marks

PSAF – L2 – Q5.2- Ethical Principles in Public Sector Accounting

Discuss breach of confidentiality by an audit officer sharing audit evidence on a messaging group.

(A) You are a Junior Internal Audit Officer of a regulated entity, and you have conducted an internal audit of some sensitive operations of the entity. The audit covers allowances and bonuses paid or due for payment to the Council Chairperson and other members of the board of governors, including the Managing Director. The transactions and events indicate profligacy and corruption, given the current financial difficulties the entity faces. You took a snapshot of the audit evidence with your phone camera and posted it on your private messaging group to support a claim of corruption you made. This has attracted a lot of traffic to your post, and one of the group members, who is a journalist, decided to spark a bigger debate on the matter in the mainstream media. Your post went viral within 24 hours.

Required:
Discuss the specific ethical principle(s) of professional accountants that has been breached and suggest a safeguard for this scenario.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            (B)

In early December 2022, your District Council received an unplanned visit from top political figures who claimed to be on a political campaign and decided to pay a “courtesy call” on the District Administrator and the Council. The District Administrator quickly asked that a financial package (brown envelope) be prepared for them. The amount was significant but unbudgeted. The visitors left the Council with high commendation from the District Administrator. Thereafter, he asked the Finance Manager to process the necessary documentation to support the brown envelope transactions. The Finance Manager expressed some misgivings about the transactions but advised the accountant to record the brown envelope transaction as “goods and services” under “travel and transport,” which he did without objection.

Required:
Discuss the specific ethical principle(s) of professional accountants that has been breached and suggest a safeguard for this scenario.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             (C)

 A Finance Manager of a regulated entity has been at his post for the last two years, and it has become an open secret in the entity that he does not know his job. Since his assumption, the entity has not been able to submit the required quarterly and annual public accounts to the Controller and National Auditor. Auditors have raised many audit observations indicting the entity for poor accounting practices. The financial records are in shambles, the financial statements are in disarray, and the cash management is unfortunate. He secured the job based on his political activism rather than accounting professionalism.

Required:
Discuss the specific ethical principle(s) of professional accountants that has been breached and suggest a safeguard for this scenario.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            (D)

The Finance Manager was touted as the smartest accounting person in Zamara by the Managing Director of the entity. He claims that he always covers for him and delivers him from the corrupt league of public officers. He brags: “This Finance Manager, I have yet to meet his kind of accountant. He understands the language; just discuss it with him, and it is done. Whatever you want. The guy is the smartest of the smart. Even the National Auditor himself can audit him and the report will be clean. I just love this guy because he knows how to cook the books well.”

Required:
Discuss the specific ethical principle(s) of professional accountants that has been breached and suggest a safeguard for this scenario.

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  • 20 Marks

PSAF – L2 – Q5.1 – Public expenditure and financial accountability framework

Discuss four unethical problems in public financial management in Unity with examples.

(A) Ethics in public administration has become a serious concern in recent times as the public sector has turned into a fertile space for unethical activities and behaviours. Many believe that ethics should be managed in the public sector to reduce corruption and other unethical behaviours.

(ii) Explain ethics management in the public sector and its approaches.

(B) In dealing with ethical issues, professional skepticism and judgment are required of professional accountants in the public sector.

Required:

Explain professional skepticism and judgment and illustrate how they apply to the public sector.

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