Menu
- 5 Marks
Question
Question:
Michael Onipa, a Chartered Accountant, is under pressure from his employees to under declare sales for the year ended 2021 to save the company from paying the due tax for the year. He has evaluated the threat to his professional obligations to comply with the fundamental principles of good ethical behavior, as significant. He has therefore considered safeguards to eliminate or reduce the threat to an acceptable level.
Required:
Discuss TWO (2) safeguards Michael Onipa could consider to either eliminate or reduce the threats to an acceptable level.
(5 marks)
Answer
-
1. Self-Interest Threats:
- Safeguards: Consultation with superiors within the employing organization, for example, the audit committee or other body responsible for governance, or with ICAG.
- Safeguards: Mr. Onipa should refuse to remain associated with information that may be misleading. If the pressure is persistent, he should consider informing appropriate authorities in line with the guidance in the code of ethics. He may also wish to seek legal advice or resign.
- Safeguards: Consultation with the audit committee, if they have one, the board, or with ICAG. He may also wish to seek legal advice or resign.
Self-interest threats may occur as a result of Mr. Onipa’s financial interest. This might be his only source of employment, and he might have concerns about employment security. Such financial interests might cause Mr. Onipa to be reluctant to take actions that would be against his own financial interests.
2. Advocacy Threats:
Mr. Onipa as an employee is expected to promote the employer’s position by providing financial information as long as information provided is neither false nor misleading. Any false or misleading information might create an advocacy threat.
3. Intimidation Threats:
Intimidation threats occur when Mr. Onipa entertains fears that there is aggressive and dominating pressure from his employer to act unethically. There might be threats of dismissal or replacement over a disagreement about the application of an accounting principle or the way in which financial information is to be reported.
(Total: 5 marks)
- Topic: Professional and Ethical Issues in Financial Reporting
- Series: APR 2022
- Uploader: Cheoli