Professional Ethics

AAA – L3 – SA – Q4.4 – Practice management

What is the definition of low-balling in the context of auditing?

Question

What is low-balling?

A Giving an unqualified audit opinion to preserve retention as the auditor

B Ignoring requests from the secondary auditor

C Ignoring reporting by exception

D Attempting to win the audit by submitting an unrealistically low fee

Answer

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Tags: Audit Appointment, Audit fees, Client acquisition, Low-balling, Professional Ethics
Level: Level 3

Topic: Practice management

AAA – L3 – SA – Q4.3 – Professional responsibility and liability

Who is primarily responsible for detecting fraud in a company?

Question

Who has the main responsibility for detecting fraud in a company?

A Senior management

B The external auditors

C The police authorities

D The internal auditors

Answer

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Tags: Auditors, External Audit, Fraud Detection, Internal Audit, Management, Professional Ethics, Responsibility
Level: Level 3

Topic: Professional responsibility and liability

AAA – L3 – SA – Q3.2 – Conflict of Interest

Incorrect statement about conflict of interest.

Question

Which of the following statements is INCORRECT?

A A conflict of interest between two clients may be resolved for the auditor by segregating certain responsibilities and duties.

B In taking on a new client, an audit firm shall consider the potential conflict of interests with providing service to an existing client.

C In a takeover bid, an audit firm can act as the sole adviser to both companies involved in the bid.

D If a potential conflict of interest exists between a potential new client and an existing client, the audit firm may need to either decline the engagement with the new client or withdraw from the engagement from the existing client.

Answer

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Tags: Client Engagements, Conflict of Interest, ICAG, Professional Ethics
Level: Level 3

Topic: Rules of Professional Conduct

AAA – L3 – SA – Q2.4 – ICAG Advertising Rules

Incorrect statement about ICAG advertising rules.

Question

Which of the following is NOT true about ICAG members advertising their services?

A They must not be misleading

B Advertisements require prior approval by ICAG

C Discounts should not be mentioned

D They must not make comparisons with competitors

Answer

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Tags: Advertising, ICAG Regulations, IESBA Code, Professional Ethics
Level: Level 3

Topic: Rules of Professional Conduct

AAA – L3 – SA – Q2.2 – Confidential Information Disclosure

Permissible disclosure of client confidential information.

Question

In which of the following circumstances would it be permissible for an auditor to disclose confidential information about a client?

A To assist the firm with the audit of another client in the same industry

B To inform shareholders when disclosure is in the public interest

C To protect the interests of the shareholders

D To defend the firm against an official accusation of professional negligence.

Answer

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Tags: Confidentiality, Disclosure, ICAG, Professional Ethics
Level: Level 3

Topic: Rules of Professional Conduct

AA – L2 – SA – Q4.3 – Audit Threats

Threat created by client pressure on audit opinion.

Question

Jade Ltd, an audit client of Keats & Co, is unhappy with the conduct of the audit and has threatened to replace Keats & Co if the firm does not issue the opinion that Jade Ltd wants. Which of the following threats is created by this situation?

A Familiarity

B Advocacy

C Management

D Intimidation

Answer

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Tags: Audit Threats, Auditor Independence, ICAG, Intimidation, Professional Ethics
Level: Level 2

Topic: Professional and Ethical Considerations

AA – L2 – SA – Q3.3 – IESBA Ethical Principles

Non-fundamental principle in IESBA Code of Ethics.

Question

Which of the following is not one of the stated fundamental principles of the IESBA International Code of Ethics for Professional Accountants?

A Professional care

B Confidentiality

C Integrity

D Objectivity

Answer

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Tags: Ethical Principles, ICAG, IESBA, Professional Ethics
Level: Level 2

Topic: Professional and Ethical Considerations

AA – L2 – SA – Q1.3 – Professional Ethics Guidance

True/false on ICAG ethical guidance and rules-based codes.

Question

For each of the following statements, in relation to guidance on professional ethics, select whether they are true or false.

Ethical guidance from ICAG is in the form of rules rather than principles
A True
B False
Rules-based codes offer a more straightforward ethical framework as they cover specific situations
C True
D False
A rules-based ethical framework can more effectively accommodate a fast-changing environment
E True
F False

Answer

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Tags: Ethical Framework, ICAG, Principles-Based, Professional Ethics, Rules-Based
Level: Level 2

Topic: Professional and Ethical Issues in Financial Reporting

AAA – L3 – Q68 – Non-audit Services

Discuss how non-audit services by audit firms may compromise audit integrity and its impact on management, considering client size and listed status.

Question

The current practice of many audit firms offering substantial non-audit services to their audit clients compromises the integrity of the auditing profession and is not in the interests of management.

Required

Discuss the above, indicating whether factors such as client size and listed status would make any difference to your opinion.

Answer

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Tags: Audit Independence, Client Relationships, Corporate Governance, Non-Audit Services, Professional Ethics
Level: Level 3

Topic: Current Issues

AAA – L3 – Q19 – Professional Responsibility and Liability

Evaluate factors in deciding whether to contest or settle a negligence claim by Adom Bank against KT Ampofo & Co. for audit errors.

Question

Adom Bank Limited gave a loan to Kintampo Limited on 15 October 2015 and a review of the first six months of operation in May 2016 of the new shops revealed that the company was not doing well and could not pay the first instalment for the loan from Adom Bank Limited. Further investigation revealed that the audited financial statements signed by KT Ampofo & Co. which showed a profit of GH¢20.2M should have been of a loss of GH¢4.3M.
Adom Bank Limited has indicated its intention to sue your firm for negligence on the basis that it placed reliance on the financial statements audited by your firm.
Required:
Comment on the matters that you should consider in deciding whether your firm will contest the matter in court or seek an out of court settlement with the bank.

Answer

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Tags: Audit Standards, Auditor Liability, Duty of care, Financial Loss, Litigation, Negligence, Out-of-Court Settlement, Professional Ethics
Level: Level 3

Topic: Professional responsibility and liability

Tag (SQ): Professional Ethics

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AAA – L3 – SA – Q4.4 – Practice management

What is the definition of low-balling in the context of auditing?

AAA – L3 – SA – Q4.3 – Professional responsibility and liability

Who is primarily responsible for detecting fraud in a company?

AAA – L3 – SA – Q3.2 – Conflict of Interest

Incorrect statement about conflict of interest.

AAA – L3 – SA – Q2.4 – ICAG Advertising Rules

Incorrect statement about ICAG advertising rules.

AAA – L3 – SA – Q2.2 – Confidential Information Disclosure

Permissible disclosure of client confidential information.

AA – L2 – SA – Q4.3 – Audit Threats

Threat created by client pressure on audit opinion.

AA – L2 – SA – Q3.3 – IESBA Ethical Principles

Non-fundamental principle in IESBA Code of Ethics.

AA – L2 – SA – Q1.3 – Professional Ethics Guidance

True/false on ICAG ethical guidance and rules-based codes.

AAA – L3 – Q68 – Non-audit Services

Discuss how non-audit services by audit firms may compromise audit integrity and its impact on management, considering client size and listed status.

AAA – L3 – Q19 – Professional Responsibility and Liability

Evaluate factors in deciding whether to contest or settle a negligence claim by Adom Bank against KT Ampofo & Co. for audit errors.

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AAA – L3 – SA – Q4.4 – Practice management

What is the definition of low-balling in the context of auditing?

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AAA – L3 – SA – Q4.3 – Professional responsibility and liability

Who is primarily responsible for detecting fraud in a company?

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AAA – L3 – SA – Q3.2 – Conflict of Interest

Incorrect statement about conflict of interest.

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AAA – L3 – SA – Q2.4 – ICAG Advertising Rules

Incorrect statement about ICAG advertising rules.

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AAA – L3 – SA – Q2.2 – Confidential Information Disclosure

Permissible disclosure of client confidential information.

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AA – L2 – SA – Q4.3 – Audit Threats

Threat created by client pressure on audit opinion.

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AA – L2 – SA – Q3.3 – IESBA Ethical Principles

Non-fundamental principle in IESBA Code of Ethics.

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AA – L2 – SA – Q1.3 – Professional Ethics Guidance

True/false on ICAG ethical guidance and rules-based codes.

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AAA – L3 – Q68 – Non-audit Services

Discuss how non-audit services by audit firms may compromise audit integrity and its impact on management, considering client size and listed status.

You're reporting an error for "AAA – L3 – Q68 – Non-audit Services"

AAA – L3 – Q19 – Professional Responsibility and Liability

Evaluate factors in deciding whether to contest or settle a negligence claim by Adom Bank against KT Ampofo & Co. for audit errors.

You're reporting an error for "AAA – L3 – Q19 – Professional Responsibility and Liability"

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