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:
Self-interest and advocacy threats only
Self-interest and self-review threats only
Advocacy and self-review threats only
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
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.
Lucy works for a firm of chartered accountants called Tick and Co.
A colleague, Keith, is leaving and wants to make a good impression at the new firm he is going to work at called Bash and Co. by bringing in new business.
He asked Lucy to copy the Tick and Co. client list to which she has access so that he can target some likely clients when he is working at Bash and Co.
Which fundamental professional principle in the ICAEW Code of Ethics is Keith proposing to breach?
Select ONE answer:
Integrity
Objectivity
Professional competence
Confidentiality
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 4
Not correct
Not correct
Not correct
Correct == > The main breach of the ICAEW Code of Ethics that Keith is proposing is in relation to confidentiality, including improper disclosure and improper use of information.
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:
Statement 1. True and Statement 2. False and Statement 3. False
Statement 1. False and Statement 2. True and Statement 3. False
Statement 1. True and Statement 2. False and Statement 3. True
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:
You must be logged in to post a comment.