Topic: Professional responsibility and liability

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  • 10 Marks

AAA – Nov 2024 – L3 – Q1a – Ethical Issues in Audit Engagements

Ethical issues and professional conduct in an audit engagement involving conflict of interest.

You are the Audit Partner of a mid-sized audit firm, Amoah Sonko and Associates. One of your major clients, Kudi LTD (Kudi), has approached you for a significant audit engagement. Kudi has been experiencing rapid growth and plans to get listed on the Ghana Alternative Market within the next year. During preliminary discussions, the Managing Director of Kudi, a friend, promised you a bonus if the audit report is completed quickly and is favourable, highlighting the company’s strengths.

In the course of the audit of Kudi, you came across a series of unusual financial transactions. These included large intercompany loans with its sister companies, other significant related-party transactions with the directors, and an unusually high volume of sales recorded a few days before the end of the financial year. Upon further investigation, your team found discrepancies in inventory records and evidence of potential non-compliance with revenue recognition standards. The Finance Manager insists these transactions are legitimate and necessary for the company’s rapid growth.

Additionally, you noticed that Kudi was involved in a high-profile legal battle with a major competitor, which was not fully disclosed in the financial statements. The lawyer for Kudi insists that you omit this information from the audit report, arguing it would damage the company’s reputation and its plans to get listed on the Ghana Alternative Market.

Required:
i) Identify TWO potential ethical issues in the scenario and explain the potential impact on your professional conduct.                      ii) Identify the steps you should take to address the conflict of interest presented by the Managing Director’s offer. 
iii) Discuss the potential sanctions for accepting the Managing Director’s offer and providing a favourable audit report without proper verification. 
iv) Evaluate the impact of the undisclosed legal battle on Kudi LTD’s financial statements and the upcoming initial public offer.

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  • 10 Marks

AAA – July 2023 – L3 – Q4a – The meaning of audit and assurance | Professional responsibility and liability

Discuss issues to consider in professional skepticism assessment and circumstances that can hinder professional skepticism during a performance audit.

Audit engagement rests on mutual understanding and respect between the auditor and the auditee. The Auditor, while not viewing the auditee as dishonest, must also have at the back of his mind that to err is human and must therefore not accept evidence from the auditee without further cross-checking the facts. The attitude should be that the auditor must have an enquiring mind. This is known as professional skepticism; while trusting, he must verify.

Required:

i) What FOUR (4) issues should be considered in Professional Skepticism assessment during performance audit? (5 marks)

ii) State FIVE (5) circumstances that can hinder Professional Skepticism at the engagement level. (5 marks)

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  • 10 Marks

AAA – July 2023 – L3 – Q1b – Rules of professional conduct | Professional responsibility and liability | Reporting

Assess ethical and professional implications in scenarios involving audit team members and client requests.

You are the Audit Manager at Ndaa & Associates whose client portfolio includes ABC Credit Plc, a listed financial institution offering loans and credit facilities to both commercial and retail customers. You have received an email from the Audit Supervisor who is currently supervising interim testing on systems and controls in relation to the audit of ABC Credit Plc for the year ending 31 October 2022. The email gives the following details for your consideration:

  1. One of the audit team members, Obiba JK, has provisionally agreed to apply for a loan from ABC Credit Plc to finance the purchase of a domestic residence. The loan will be secured on a property, and the client’s business manager has promised Obiba JK that he will ensure that she gets ‘the very best deal which the bank can offer.’ (5 marks)
  2. The payroll manager at ABC Credit Plc has asked the audit supervisor if it would be possible for Ndaa & Associates to provide a member of staff on secondment to work in the payroll department. The payroll manager has struggled to recruit a new supervisor for the organisation’s main payroll system and wants to assign a qualified member of the audit firm’s staff for an initial period of six months. (5 marks)

Required:
Assess the ethical and professional implications of the issues raised in respect of the audit of ABC Credit Plc and recommend actions to be taken in each case by the audit firm.

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  • 10 Marks

AAA – Dec 2023 – L3 – Q1a – The Meaning of Audit and Assurance | Professional Responsibility and Liability

Explain the concept of professional skepticism and identify areas where it is important in auditing complex, subjective, or judgmental issues.

“Professional Skepticism is an essential concept in auditing practice and theory. It has been identified in almost all existing auditing standards. However, the way it should be characterised is still unclear” according to Maciej Ciolek (2017).

Required:

i) Explain the term Professional Skepticism within the context of the auditing profession. (2.5 marks)

ii) Discuss THREE (3) areas of audit that are complex, subjective or highly judgmental where Professional Skepticism may be important. (7.5 marks)

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  • 10 Marks

AAA – Nov 2020 – L3 – Q5a – The Regulatory Environment | Professional Responsibility and Liability

Identify and discuss the roles of three regulatory authorities in Ghana that may impact the conduct of an audit.

In the audit of financial statements, auditors consider the regulatory requirements. These cover professional standards promulgated by the International Federation of Accountants (IFAC) in the form of International Standards on Auditing (ISAs), International Standards on Quality Control (ISQC) as well as the International Ethics Standards Board for Accountants (IESBA). The other consideration involves legal requirements.

Required:
Identify THREE (3) regulatory authorities in Ghana whose requirements may be taken into account in the conduct of an audit and discuss their roles. (10 marks)

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  • 10 Marks

AAA – Nov 2020 – L3 – Q1b – The audit approach | Practice management | Professional responsibility and liability

Evaluate five risk considerations and issues before accepting an engagement from Phobia Foods Ltd, focusing on financial position, client expectations, and fee structure.

You have been recently promoted as the Ethics Partner in Famous Chartered Accountants, a licensed audit firm. At your first visit to the Managing Partner, he informs you of an appointment by Phobia Foods Ltd (PFL), and gives you a file to go through. You open the file and find a copy of an e-mail from the Managing Director of PFL, extracts which read as follows:

From: Managing Director, Phobia Foods Ltd.
To: Managing Partner, Famous Chartered Accountants
Subject: Evaluation of Business Expansion Plan and Associated Items

Congratulations on your offer of appointment as auditor cum advisor of our company. As discussed in our earlier meeting, Phobia Foods Ltd (PFL) would like to open three more outlets, two in Sunyani and one in Sogakope. The necessary financing will be obtained through a new bank loan and the rescheduling of the payments of the existing loan, which is technically in default.

Your appointment and fees
Your audit fee will be GH¢16,000 for the year ended 30 June 2018.Your fee for evaluation of our expansion plan and advisory services in relation to obtaining a bank loan will be GH¢9,000. For advisory services and business efficiency and strategic decisions, your fee will be GH¢3,400 per month for the next two years.

Shareholders and key management issues
Five founding directors, each with equal shares, incorporated PFL which commenced trading in 2009. I still maintain my original 20% holding.

Audit and accounts 2016-2018
Ofosu-Mensah & Associates., a firm of licensed auditors audited the accounts for the years ended 30 June 2016 to 30 June 2018 inclusive. The audit of PFL for the year ended 30 June 2018 was signed off on 16 November 2018 with an unqualified opinion, notwithstanding that qualified opinions had been published on the previous two years’ accounts. The shareholders of PFL approved your firm’s appointment at the annual general meeting held on 15 April 2019 for the year ended 30 June 2019.

The funds raised by the new bank loan will be used for expansion of the business. Your firm is also expected to advise the company on the application for the new bank loan and the rescheduling of repayments of the existing loan in default.

Yours sincerely,
Managing Director.

Required:

Evaluate FIVE (5) risk considerations and issues for Famous Chartered Accountants that should be identified prior to accepting this engagement. (10 marks)

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  • 10 Marks

AAA – Nov 2020 – L3 – Q1a – Rules of professional conduct | Professional responsibility and liability

Evaluate ethical issues in providing audit and advisory services, and assess auditor liability to a bank if the audit is negligently performed.

You are an audit manager with AA & Co. Chartered Accountants and Business Consultants. You have been assigned to the audit of Western Decors Ltd (WD), a long-established firm of event planning service in the city where your practice is located. The audit of the financial statements for the year ended 31 March 2019 is due to commence shortly. The audit firm is aware that the client has received a loan from the bank in April 2018 and that the bank will rely on the audited financial statements as part of the terms and conditions in the loan agreement.

The partner in charge of AA & Co. has just visited the client and made the following notes during his trip:

  • The firm has a number of individual and corporate clients outside Accra and has invested heavily in recording and broadcasting equipment to allow some events to be broadcasted over the internet. This facility is now available at all events conducted in WD’s premises and is proving to be very popular. To date, no specific extra charge has been levied for this service but the Chief Executive Officer (CEO) of WD has asked us to prepare a report for him advising on whether it would be practical to charge separately for it; and, if so, the level at which the charge should be set.
  • Unfortunately, WD’s main supplier of chairs went into liquidation during the year. The Partner said that they were fortunate to be able to find an alternative supplier with whom they entered into a three-year contract for the supply of chairs. At the time of signing the contract, WD considered the contract to be on very favourable terms. However, the supplier is based in Nigeria and the contract was denominated in Naira. Movements in the exchange rate now make the contract look far less attractive and the CEO has requested that we examine the contract to see if there is any way he can legally set it aside.

Required:

i) Critically evaluate any possible ethical issues arising from the client’s requests. (4 marks)

ii) Discuss whether the auditors may be liable to the bank in case the audit was negligently done. (6 marks)

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  • 10 Marks

AAA – May 2021 – L3 – Q5a – Current issues | Professional responsibility and liability

Assess the global threat of money laundering and discuss Ghana’s efforts to combat money laundering.

a) Money laundering has become a significant threat to the world’s political and economic order. World leaders are collaborating and cooperating in fighting money laundering. However, criminals are maliciously clever and, in some cases, ahead of law enforcement agencies. Every human being has to contribute to the fight against money laundering.

Required:

i) Assess why money laundering poses a big threat to the world’s political and economic order. (5 marks)

ii) Discuss FIVE (5) ways in which Ghana is contributing towards fighting money laundering globally. (5 marks)

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  • 10 Marks

AAA – May 2021 – L3 – Q1a – Rules of professional conduct | Professional responsibility and liability

Discuss the impact of independence issues on the public perception of a multinational accounting firm based on a real-life scenario involving a conflict of interest.

Fundamental principles require that a member of a professional accountancy body behave with integrity in all professional, business, and financial relationships and strive for objectivity in all professional and business judgments. Objectivity can only be assured if the member is and is seen to be independent. Conflicts of interest have an essential bearing on independence and the public’s perception of the accounting profession’s integrity, objectivity, and independence.

The following scenario is a press report on a multinational firm of accountants:

The regulatory body directed a partner in a firm that he must resign because he was in breach of the regulatory body’s independence rules. His brother-in-law was the Financial Controller of an audit client. He was informed that the alternative was for him to move his home and place of work at least 400 miles from the client’s office, even though he was not the reporting partner. This made his job untenable. The accounting firm saw the regulatory body as ‘taking its rules to absurd lengths’. Shortly after this comment, the multinational firm announced proposals to split the firm into the following areas: audit, tax and business advisory services; management consultancy; and investment advisory services.

Required:

In relation to integrity, objectivity and independence, discuss the impact the above events may have on the public perception of the multinational firm of accountants. (10 marks)

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  • 4 Marks

AAA – May 2017 – L3 – Q4b – Internal audit and outsourcing | Professional responsibility and liability

Assess the importance of recommendations by the IIA to ensure the independence of internal auditors within an organization.

The Institute of Internal Auditors (IIA) defines Internal Auditing as:

“An independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.”

Required:

Assess the importance of THREE recommendations the IIA has made to ensure that internal auditors remain independent even though they are employees of the company. (4 marks)

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  • 10 Marks

AAA – Nov 2019 – L3 – Q1a – Rules of professional conduct, Professional responsibility and liability

Discusses the importance of integrity in professional relationships and evaluates the ethical and professional behavior issues in audit practice.

a) Asumasi Opoku has recently been appointed as a partner of Offei-Ansah & Co, a firm of Chartered Accountants. He has been a close friend of the Engagement Partner (EP), the firm’s managing partner for many years. Asumasi was previously the training manager in the firm and he has now been asked to act as training partner. This is the first time Offei-Ansah & Co have designated a particular partner as having responsibility for training.

One of the audit trainees, Ellen Danso, noted that she was disturbed by something that had happened on an audit of a company called Bremang Ltd, a medium-sized family-run business and longstanding client of Offei-Ansah & Co.

Ellen was auditing purchases of non-current assets when she noticed a transaction that she thought might be suspicious. There was a charge of GH¢125,000 (an individually material amount) for a Power Plant for an address in a rural area (no electricity) with no obvious link to the company. When she asked Bremang’s financial controller about the matter, she was told it referred to the installation of such a plant in a house owned by the Chief Executive Officer (CEO). This was to facilitate excellent communications and interaction with the CEO especially during the last quarter of the year when he liked to reside there with his family. She further explained that part of the cost was attributed to having to pay for a personal broadband connection since the house was in an isolated area where normal broadband connections were unavailable.

The financial controller appeared surprised and even irritated by the queries about the matter and said that auditors had not previously been concerned about the company being charged for non-current assets and operational expenses at properties owned by the CEO.

The engagement partner on the assignment happened to be the managing partner. Ellen told him what she had found and the Engagement Partner simply said that the charge could probably be ignored. He did, however, say that he would include a reference to the matter in the written representations letter required by ISA 580: Written Representations adding with a smile that “paper never refused ink”. About two months later, Ellen looked at the completed files and the letter of representation in which there was no reference to the matter.

When Asumasi Opoku heard about Ellen’s concerns, he realised that there was an ethical issue. At the very least the transaction should have been disclosed as a related party transaction under IAS 24: Related Party Disclosures but the situation was made more complicated by the fact that the Engagement Partner was (for all practical purposes) still Asumasi’s boss in Offei-Ansah & Co.

Required:

i) Explain TWO (2) reasons why integrity in professional relationships such as those described in the above scenario is vital. (2 marks)

ii) Evaluate FOUR (4) ethical and professional behavior issues relating to the stance of the Engagement Partner. (8 marks)

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  • 12 Marks

AAA – Nov 2017 – L3 – Q5a – Practice Management, Professional Responsibility and Liability

Identify the causes of failure in a microfinance company and recommend actions to prevent recurrence.

You are an Audit Manager in the firm Taiplan Chartered Accountants, a firm in public practice registered with the Institute of Chartered Accountants (Ghana) (ICAG). Bank of Ghana (BOG) has appointed your firm to investigate reasons for the failure of DC Microfinance Limited (DCM) and your investigation has revealed the following as some of the reasons for the failure:

i) The board of directors of the company is made up only of Mr. and Mrs. David Commodore;

ii) The failure of the Bank of Ghana to examine or detect the non-submission of the fidelity returns submitted to it by the company and monitor the company adequately;

iii) The auditors have been the auditors of the company since its incorporation over ten years ago;

iv) The failure of the auditors of the company to spot and question some dubious accounting treatments adopted by the company. This is partly due to the fact that the consulting arm of the audit firm has been performing all the consultancy work needed by the company since its incorporation and particularly at the time of its application for the microfinance operating permit from BOG.

Required:
For points (i) to (iv) above, state for each point, and show what would contribute to the failure of the company and make ONE recommendation to ensure that this would not re-occur in DCM or any other microfinance company in Ghana. (12 marks)

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  • 10 Marks

AAA – Nov 2016 – L3 – Q1b – Professional responsibility and liability | The regulatory environment

Discuss the responsibilities of management and the auditor to ensure adherence to laws and regulations.

b) Wassaman Company is a private company established in the Wassa District in the Western Region to produce plastic bags to supply to sachet water producers. The company has 10 outlets within the district through which distribution is made to water producers. Employees of the company have been complaining about management’s reluctance to provide the health and safety needs of the company. The chief of the area has also shown his dissatisfaction about the extent of compliance with environmental laws and regulations by the company.

Required:

Discuss the responsibilities of management and the auditor to ensure adherence to laws and regulations. (10 marks)

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  • 10 Marks

AAA – Nov 2017 – L3 – Q3b – The Audit Approach, Professional Responsibility and Liability

Discuss the concept of professional skepticism and its importance, and assess areas where high levels of skepticism are needed in an audit.

You are the audit manager in charge of the audit of Vulnerable Company Limited, which has been making losses in its operations owing to many factors including competition, impairment of some of its non-current assets, and losses incurred on derivatives in its hedging activities as well as problems of complying with many laws and regulations governing its operations.

During your briefing meeting with the Engagement Partner, he drew your attention to the Question and Answer paper on Professional Skepticism issued by the International Auditing and Assurance Standards Board (IAASB) and requested you to discuss its contents with the audit team before commencement of the field work.

Required:

i) Discuss the concept of Professional Skepticism and its importance in audit. (4 marks)

ii) Assess and evaluate the areas in an audit of your client where the audit team members need to exercise a high level of professional skepticism.

(6 marks)

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  • 10 Marks

AAA – Nov 2017 – L3 – Q3a – Current Issues, Professional Responsibility and Liability

Evaluate potential money laundering issues in an audit client and discuss the need for ethical guidance for accountants on money laundering.

Sampa Sawmill Ltd. is a company located in the Eastern Region of Ghana, involved in the exportation of wood products to overseas countries. Sampa Sawmill Ltd. is of late being accused of involvement in money laundering. Sampa had been an audit client of Tetteh and Associates, a firm of Chartered Accountants for the past three years.

Required:

i) As an Audit Manager of Tetteh and Associates in charge of Sampa Sawmill Ltd., evaluate the issues you will consider to prove or disprove the allegation. (5 marks)

ii) Discuss the need for ethical guidance for professional accountants on money laundering.

(5 marks)

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  • 10 Marks

AAA – Nov 2016 – L3 – Q1a – Rules of professional conduct | Professional responsibility and liability

Discuss ethical and professional issues raised concerning auditors holding shares, fund management by a company with ties to the audit firm, and an audit team member’s spouse inheriting shares in an audit client.

a) i) Sampson Quaye & Co. has been auditors for Stawac plantations Ltd (a company engaged in rubber production) for the past 10 years. Sampson Quaye & Co owns 1% of the shares in Stawac Plantation Ltd., since it is required by the policy of Stawac Plantation Ltd. for their auditors to do so.

ii) United Funds Ltd. are the fund managers of Sampson Quaye & Co.’s Provident Fund Scheme. United Funds Ltd. owns shares in Standard Group, a company listed on the Ghana Stock Exchange with many subsidiaries. Sampson Quaye & Co has been invited by Akroma Ltd., a Subsidiary of Standard Group to tender for its audit.

iii) Nenebi is the audit senior of Sampson Quaye & Co. responsible for the audit of Minimade Ltd. a company listed on the Ghana Stock Exchange. Two weeks into the audit of the accounts of Minimade Ltd for the year ended 31 December 2014, Narteykie, the wife of Nenebi, inherited 2000 equity shares owned by her late father in Minimade Ltd.

Required: Comment on the ethical and other professional issues raised by the above matters. (10 marks)

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  • 10 Marks

AAA – Nov 2017 – L3 – Q2a – Rules of Professional Conduct, Professional Responsibility and Liability

Discuss ethical issues and recommended actions related to long-term audit engagements and conflicts of interest in two separate cases.

You are the Ethics partner of the firm Minnow Associates and the following issues have been brought to your attention for a number of clients for the audit for the year ended 29 February 2016. Each case is separate:

i) Forest Hotel Limited
This has been an audit client of your firm for over fifteen years. The partners and audit teams have been rotated every four to five years. A review of the audit file shows that the company acquired a number of flat screen televisions for a refurbished section of the hotel. These flat screen televisions were imported from China in the names of the children of the directors to avoid paying import duties. The audit engagement partner did not make any comment on this, though an audit note from the Audit Manager had requested direction from the engagement partner on what needed to be done on the issue.

Further investigation revealed that the Procurement Advisory Section of your firm had handled the importation and clearing of the TVs for the client.

ii) Kwahu Microfinance Limited (KML)
Kwahu Microfinance is a first-time audit client. The audit was acquired through a bidding process supervised by Bank of Ghana (BOG) as the previous auditors had not performed to the satisfaction of the regulator.

The Engagement partner has reported that the time and cost budgets have all been substantially exceeded due to unforeseen difficulties associated with getting reliable information for agreeing the opening balances. The current year’s information and its audit, however, did not seem to pose any problems.

However, a business controlled by the husband of the Audit Manager has been found to have taken a huge loan from KML just before the start of the bidding process for the audit. The engagement partner reported that this loan has been written off by the company in the year without any payments being made. The Audit Manager says she is unaware of the loan write-off because she’s not a director of her husband’s company. She was, however, aware of the loan when she was asked to become the manager on the audit. The Financial Manager of Kwahu Microfinance Limited believes that this is not an audit matter.

Required:
For each issue above, discuss the ethical issues raised and recommend the relevant actions to be taken by your firm.

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  • 10 Marks

AAA – March 2023 – L3 – Q1b – Professional responsibility and liability, The audit approach

Discuss the ethical issues and other matters to consider before accepting Kita Ltd as a client.

You are a Senior manager in Bintu & Associates, a firm of Chartered Accountants which offers a range of assurance services. You are responsible for the audit of Mmatan Ltd, a company which provides approximately 10% of your firm’s practice income each year. The Finance Director of Mmatan Ltd has recently contacted you to provide information about another company, Kita Ltd, which is looking to appoint a provider of assurance services.

An extract from an email received from the Finance Director of Mmatan Ltd to you is stated below:

“One of my friends, Mr. Preprah, is the Managing Director of Kita Ltd, a small company which is seeking to expand in the next few years. I know that Mr. Preprah has approached the company’s bankers for GH¢6 million to finance the expansion. To support this loan application, Mr. Preprah will need to present its audited Financial Statements, hence the need for an Auditor immediately. Mr. Preprah is also in need of a firm to provide tax planning advice and also to prepare both the company’s and his personal tax computations for submission to the tax authorities. In this regard, I have asked Mr. Preprah to contact you, and I hope that Bintu & Associates will be able to provide these services to Kita Ltd for a low fee. If the fee you suggest is too high, and unacceptable to Mr. Preprah, then I will recommend that Mr. Preprah approaches Kwateng & Associates instead. Should the arrangement with Kita Ltd not go through, then Mmatan Ltd would also advise itself.”

Kwateng & Associates is a firm of Chartered Accountants which has an office in the same town as Bintu & Associates. The company is owner-managed, with Mr. Preprah’s family owning 90% of the share capital. Mr. Preprah is a director and majority shareholder of three other companies. An article in a newspaper from several years ago about Mr. Preprah indicated that one of his companies was once fined for a breach of employment law and that he had used money from one of the company’s pension funds to set up a business abroad, appointing his son as the Managing Director of that business.

Required:
Discuss the ethical issues and other matters which should be considered in relation to Bintu & Associates’s potential acceptance of Kita Ltd as its client. (10 marks)

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  • 10 Marks

AAA – March 2023 – L3 – Q1a – Professional responsibility and liability

Discuss four strategies to mitigate or prevent conflict of interest in the workplace.

A conflict of interest is a situation in which a person or organization is involved in multiple interests, financial or otherwise, and serving one interest could involve working against another. However, due to the difficulty involved in identifying a conflict of interest situation, you could engage in a conflict without realizing it.

Required:
Discuss FOUR (4) strategies you would recommend to Management to help mitigate or prevent a conflict-of-interest situation at the workplace. (10 marks)

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  • 10 Marks

AAA – Mar 2024 – L3 – Q1a – Rules of professional conduct, Professional responsibility and liability, The audit approach

Evaluation of ethical threats impacting audit independence and advice on mitigating actions.

You are an audit manager of Afari & Partners and have been assigned to the audit of Jericho Plant Company Ltd (Jericho Plant), which has been an audit client for 6 years and specialises in manufacturing fertilizers in Ghana.

The company was introduced to the firm by Mr. Lartey 6 years ago when he was a Commissioner at the Ghana Revenue Authority (GRA). Mr. Lartey is not a member of the Institute of Chartered Accountants, Ghana. However, since his retirement from GRA, last year, he joined the firm as a tax partner to provide tax consultancy services. He has good relations with the client as his daughter is married to the son of the CEO for Jericho Plant.

Mr. Andani, who has been the audit engagement partner for Jericho Plant for the past 6 years, has recently been rotated off the audit engagement. The current audit partner, Mr. Nti, has suggested that in order to maintain a close relationship with Jericho Plant, Mr. Lartey should undertake the role of an engagement quality reviewer this year. In addition, Jericho Plant has requested that Mr. Andani assist them by attending their audit committee meetings, as a non-executive director has recently left the company.

Jericho Plant has also asked Mr. Lartey and the other partners at Afari & Partners to help them in recruiting a new non-executive director.

Fees paid by Jericho Plant form 35% of the firm’s total fee income (both audit and non-audit fees) and the partners have anticipated that the fees for this year would be greater than last year. Since joining as a tax partner, Mr. Lartey has been aggressive in generating revenue for the tax department and does not keep records of his work. He argues that the most important issue is for the firm to generate revenue, which he does. Some of the clients have complained about the cash collected by Mr. Lartey as part of his consultancy services.

The audit manager for Jericho Plant last year has just announced that he is leaving Afari & Partners to join Jericho Plant as the financial controller.

Required:

Using the information above

i) Evaluate FOUR (4) ethical threats which may affect the independence of Afari & Partners. (6 marks)

ii) For each threat, advise on how it might be mitigated to an acceptable level. (4 marks)

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