Month: March 2025

Ted is the audit manager in the audit firm Bash and Co.

Cannock Stores Ltd has been an audit client for ten years and Ted has been the audit manager for the past two years.

Ted has also just acquired about 10% of Cannock Stores Ltd’s share capital as an inheritance on the death of a very distant relative.

Cannock Stores Ltd is attempting to obtain a listing on the London Stock Exchange and, as the company’s auditor.

The management of Cannock Stores Ltd would like Ted and the audit partner Keith to attend an evening dinner and drinks reception in an expensive London hotel, where they will present their listing arrangements to banks and existing major shareholders.

Which threats apply in relation to this situation?

Select ONE answer:

1. Self-interest and advocacy threats only
2. Self-interest and self-review threats only
3. Advocacy and self-review threats only
4. Self-interest, advocacy and self-review threats

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct == > There is a self-interest threat and an advocacy threat to Bash & Co. Attending the social event may be inappropriate as Bash & Co as auditor may be seen as supporting Cannock Stores Ltd in this venture – the advocacy threat. Then, Ted owning shares in the company may create a self-interest threat – he may be more interested in the value of the shares than providing a ‘correct’ opinion on the financial statements.
2. Not correct
3. Not correct
4. Not correct

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The five threats to fundamental professional principles are?

Select ONE answer:

1. Self-interest, self-review, encroachment, familiarity and intimidation
2. Self-interest, self-review, advocacy, familiarity and intimidation
3. Self-interest, self-review, advocacy, familiarity and intimacy
4. Self-promotion, self-review, advocacy, familiarity and intimidation

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct == > Encroachment, intimacy and self-promotion are incorrect.
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Ted is a senior partner of a firm of chartered accountants called Tick and Co that is going from the UK to the Bahamas for two weeks, all expenses paid courtesy of the chairman of a client company.

The following statements concerning this situation have been made.

Statement 1 Receiving a benefit in the form of goods, services or hospitality from a client is permissible provided all such receipts are declared, including their origin and value.

Statement 2 Hospitality from clients should not be accepted because to accept such gifts threatens objectivity.

Statement 3 Although accepting most benefits such as gifts is prohibited, it is perfectly in order to accept this type of hospitality from a client.

Identify whether the statements are true or false.

Select ONE answer:

1. Statement 1. True and Statement 2. False and Statement 3. False
2. Statement 1. False and Statement 2. True and Statement 3. False
3. Statement 1. True and Statement 2. False and Statement 3. True
4. Statement 1. False and Statement 2. True and Statement 3. True

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct == > False True False.
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.