Professional conduct

BMIS – L1 – SA – Q13.3 – Professional ethics in accounting and business

Identifies unethical conduct in presenting misleading financial reports.

Question

The finance director of a large public company, Zenith Corp, presents a financial report to the board of directors, with a view to the company issuing a statement about its financial prospects to the stock market. The director knows that the information in the report is incorrect and materially misleading. The finance director is acting unethically by failing to comply with the principle of:

A professional competence

B integrity

C technical standards

D professional behaviour

Answer

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Tags: Dishonesty, Ethics, Financial Reporting, Integrity, Professional conduct
Level: Level 1

Topic: Professional ethics in accounting and business

BMIS – L1 – SA – Q13.2 – Professional ethics in accounting and business

Defines the principle of objectivity for accountants.

Question

Which of the following fundamental principles of ethical conduct for accountants means that an accountant should be independent, free from bias and from undue influence by other people?

A Confidentiality

B Objectivity

C Integrity

D Professional behaviour

Answer

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Tags: Bias, Ethics, Independence, Objectivity, Professional conduct
Level: Level 1

Topic: Professional ethics in accounting and business

SCS – L3 – Q39 – Ethics and social responsibility

Identify ethical principles breached in a scenario involving a takeover and confidentiality request.

Question

(a) You have been recently employed as a Finance Manager of a large manufacturing company. At its first management meeting, the Director of Finance presented information on management’s intention to takeover one of the company’s key suppliers. An old school friend of yours works as an accountant for the targeted company. The Finance Director knows and has asked you to try and find out anything that might help the takeover, but it must remain confidential.

Required:
Identify and explain THREE fundamental ethical principles that could be breached in the above scenario. (b) Corporate social responsibility (CSR) requires that organizations give back to the society by way of investing part of their profits in socio-economic activities of their host communities. Companies adopt different strategies to realizing their CSR obligations to the host communities.

Required:
Identify and explain FOUR strategies for managing Corporate Social Responsibility in organizations.

Answer

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Tags: Conflict of Interest, Corporate Social Responsibility, Ethics, Manufacturing, Professional conduct
Level: Level 3

Topic: Ethics and social responsibility

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

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

Question

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.

Answer

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Tags: Ethics, Financial Reporting, Financial Statements, ICAG, Integrity, Intimidation Threat, Objectivity, Professional Competence, Professional conduct, Self-Interest Threat
Level: Level 2

Topic: Professional and Ethical Issues in Financial Reporting

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.

Question

(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.

Answer

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Tags: Confidentiality, Ethics, Internal Audit, Professional conduct, Public Sector Accounting
Level: Level 2

Topic: Public expenditure and financial accountability framework

FA – L1 – Q63 – Correction of Errors

Prepare journal entries to correct errors in B.B. Ventures' trial balance, including unposted returns, sales errors, and inventory issues.

Question

The trial balance prepared by B.B. Ventures showed a difference of GH₵47,060, which was put on the credit side of a suspense account. An investigation disclosed that:
(i) The total of purchase return day book amounting to GH₵16,160 had not been posted to the ledger.
(iii) The sales account had been added short by GH₵10,000.
(iv) An asset bought four years ago for GH₵7,000 and depreciated to GH₵1,200 had been sold for GH₵1,500 at the beginning of the year. The receipt of cash has been posted in the bank book but corresponding entries have not been recorded.
(v) A credit sale of GH₵1,470 had been credited to the customer’s account as GH₵1,740. An irrecoverable debt of GH₵1,560 has to be written off. Allowance for receivables is to be maintained at 10% of receivables. Receivables appearing in the trial balance are GH₵23,390, and the allowance for receivables account shows a credit balance of GH₵2,320.
(vi) A sub-total of GH₵29,830 on the list of closing inventory had been carried over as GH₵29,380, and another sheet had been overcast by GH₵1,000.

Required:
(a) Prepare journal entries to correct the above errors. (Narrations are not required)

(b) Explain why it is important that the accountant of B.B. Ventures behaves in an ethical manner when preparing financial statements.

Answer

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Tags: Error Correction, Ethics, Financial accounting, Financial Reporting, Professional conduct, Trial Balance
Level: Level 1

Topic: Correction of Errors

AAA – L3 – Q20 – Professional responsibility and liability

Discuss ethical and professional issues for MM & Co regarding client Pen Co's tax fraud investigation and Scot family's transactions.

Question

You are senior manager in MM & Co, a firm of Chartered Accountants. Recently, you have been assigned specific responsibility for undertaking annual reviews of existing clients. The following situations have arisen in connection with two clients.

(i) MM & Co was appointed auditor of Pen Co last year, and has recently issued an unmodified opinion on the financial statements for the year ended 31 March 2013. To your surprise, the tax authorities have just launched an investigation into the affairs of Pen Co on suspicion of under-declaring revenue. (7 marks)

(ii) Your firm has provided financial advice to the Scot family for many years and this has sometimes involved your firm carrying out transactions on their behalf. The eldest son, Gino, is to take up a position as a senior government official in a foreign country next month. (3 marks)

Required:
Identify and comment on the ethical and other professional issues raised by each of these matters and state what action, if any, MM & Co should now take.

Answer

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Tags: Audit firm responsibilities, Client Acceptance, Confidentiality, Ethics, Money laundering, Politically exposed persons, Professional conduct
Level: Level 3

Topic: Professional responsibility and liability

AAA – L3 – Q14 – Rules of Professional Conduct

Identify and evaluate threats to the Code of Ethics for accountants in BKG Financial Ltd case.

Question

Dabidaba & Co., an audit and assurance firm, has been engaged as auditors for the BKG Financial Ltd, a public limited liability company for some time now. BKG Financial has sixty branches throughout the country and branches in Benin, Mali, and Senegal. The Bank is one of the banks in the country which can boast of large landed properties. Dabidaba & 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. Dabidaba & Co. sees BKG Financial Ltd. as a very important client whose works are always executed with dispatch.

Required:
(i) Identify and evaluate the significance of any threats to the Code of Ethics for Professional Accountants raised in the case. (ii) Recommend safeguards to eliminate the threats (mentioned in (i) above) or reduce them to an acceptable level, if these are possible.

Answer

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Tags: Auditor Independence, Ethics, Non-Audit Services, Professional conduct
Level: Level 3

Topic: Rules of Professional Conduct

AAA – L3 – Q9 – Rules of professional conduct

Explain the importance of ethical principles, demonstrate independence, and outline when confidential client information can be disclosed.

Question

ICAG has adopted IESBA’s ethical guidance, the International Code of Ethics for Professional Accountants. These rules are applicable to all members and students. If these rules are not complied with disciplinary action may result which could lead to reprimand, fine or exclusion.

Required
(a) Explain why you think fundamental principles of ethics are so fundamental to auditing.
(b) Explain how a member can demonstrate that they are truly independent in carrying out the work they perform, and why it is important that they should do so.
(c) Set out the circumstances in which it is permissible to disclose confidential client information.

Answer

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Tags: Auditor Independence, Client information disclosure, Confidentiality, Disciplinary action, Ethics, IESBA Code, Independence, Professional conduct
Level: Level 3

Topic: Rules of Professional Conduct

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BMIS – L1 – SA – Q13.3 – Professional ethics in accounting and business

Identifies unethical conduct in presenting misleading financial reports.

BMIS – L1 – SA – Q13.2 – Professional ethics in accounting and business

Defines the principle of objectivity for accountants.

SCS – L3 – Q39 – Ethics and social responsibility

Identify ethical principles breached in a scenario involving a takeover and confidentiality request.

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

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

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.

FA – L1 – Q63 – Correction of Errors

Prepare journal entries to correct errors in B.B. Ventures' trial balance, including unposted returns, sales errors, and inventory issues.

AAA – L3 – Q20 – Professional responsibility and liability

Discuss ethical and professional issues for MM & Co regarding client Pen Co's tax fraud investigation and Scot family's transactions.

AAA – L3 – Q14 – Rules of Professional Conduct

Identify and evaluate threats to the Code of Ethics for accountants in BKG Financial Ltd case.

AAA – L3 – Q9 – Rules of professional conduct

Explain the importance of ethical principles, demonstrate independence, and outline when confidential client information can be disclosed.

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BMIS – L1 – SA – Q13.3 – Professional ethics in accounting and business

Identifies unethical conduct in presenting misleading financial reports.

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BMIS – L1 – SA – Q13.2 – Professional ethics in accounting and business

Defines the principle of objectivity for accountants.

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SCS – L3 – Q39 – Ethics and social responsibility

Identify ethical principles breached in a scenario involving a takeover and confidentiality request.

You're reporting an error for "SCS – L3 – Q39 – Ethics and social responsibility"

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

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

You're reporting an error for "FR – L2 – Q9 – Professional and Ethical Issues in Financial Reporting"

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.

You're reporting an error for "PSAF – L2 – Q5.2- Ethical Principles in Public Sector Accounting"

FA – L1 – Q63 – Correction of Errors

Prepare journal entries to correct errors in B.B. Ventures' trial balance, including unposted returns, sales errors, and inventory issues.

You're reporting an error for "FA – L1 – Q63 – Correction of Errors"

AAA – L3 – Q20 – Professional responsibility and liability

Discuss ethical and professional issues for MM & Co regarding client Pen Co's tax fraud investigation and Scot family's transactions.

You're reporting an error for "AAA – L3 – Q20 – Professional responsibility and liability"

AAA – L3 – Q14 – Rules of Professional Conduct

Identify and evaluate threats to the Code of Ethics for accountants in BKG Financial Ltd case.

You're reporting an error for "AAA – L3 – Q14 – Rules of Professional Conduct"

AAA – L3 – Q9 – Rules of professional conduct

Explain the importance of ethical principles, demonstrate independence, and outline when confidential client information can be disclosed.

You're reporting an error for "AAA – L3 – Q9 – Rules of professional conduct"

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