Question Tag: Professional Standards

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  • 10 Marks

AA – April 2022 – L2 – Q5a – Professional and Ethical Considerations

Identifies, evaluates, and addresses ethical threats faced by an audit firm in its engagement with a new client.

External Auditors. This happens to be the first client of Agassi. The books of account for Sampras were incomplete, and Agassi agreed to prepare the financial statements for the year-end 31 December 2021.

The Accountant of Sampras doubles as the Sales Manager, and Agassi agreed to second one of its staff to assist the Accountant in Sampras. The business relationship between Agassi and Sampras has started on a good note, and they intend to continue into the foreseeable future. The Managing Director of Sampras worked as a Partner of one of the Big 4 audit firms.

Required:
Identify, evaluate, and address threats faced by Agassi. (10 marks)

Ethical threats faced by Agassi:

  1. Self-Interest Threat:
    • Issue: Sampras is Agassi’s first client, and the firm may overly rely on this engagement for revenue, creating a risk that Agassi might compromise its independence to retain the client.
    • Solution: Agassi should actively seek additional clients to reduce dependence on Sampras, ensuring that future audits are performed without bias.
  2. Self-Review Threat:
    • Issue: Agassi is preparing the financial statements of Sampras, which they are also auditing. This creates a self-review threat where Agassi might be less critical of its own work.
    • Solution: Agassi should consider whether it can assign separate teams for accounting and auditing to ensure that the individuals auditing the financial statements are not the same as those preparing them.
  3. Familiarity Threat:
    • Issue: Agassi and Sampras intend to maintain a long-term business relationship, which may lead to a reduced level of professional skepticism and objectivity.
    • Solution: Agassi should rotate its audit staff regularly to maintain objectivity, and consider limiting the term of engagement to prevent excessive familiarity.
  4. Advocacy Threat:
    • Issue: By seconding staff to Sampras, Agassi may be seen as advocating for the company, especially if the staff become involved in management decisions.
    • Solution: Agassi should ensure that the seconded staff are not involved in any decision-making processes and maintain strict guidelines to avoid any advocacy role.
  5. Intimidation Threat:
    • Issue: The Managing Director of Sampras, having worked as a partner in a Big 4 firm, may intimidate Agassi’s auditors due to his expertise and seniority.
    • Solution: Agassi should assign experienced and confident auditors to the engagement and establish clear communication protocols to mitigate the intimidation threat.
  • 10 Marks

AA – April 2022 – L2 – Q2b – Institutional Regulation and Standard-Setting

Identifies the functions of ICAG and discusses the effects of its dual role in promoting the study of accountancy and regulating the profession.

b) The function of the Institute of Chartered Accountants, Ghana (ICAG) has become a subject of discussion in recent times after the passage of the Institute of Chartered Accountants, Ghana Act, 2020 (Act 1058). The thrust of the matter is the dual role of the Institute – to promote the study of accountancy and regulate the accountancy profession and practice in the country.

i) Identify FOUR (4) functions of ICAG. (4 marks)
ii) Discuss the effects of the dual role exercised by ICAG. (6 marks)

i) Functions of ICAG:

  1. Ensuring that audits are performed only by ‘fit and proper persons’ who act with professional integrity by offering high standard examinations.
  2. Requiring that members carry out their audit work in accordance with appropriate technical standards, setting standards for members.
  3. Ensuring auditors remain technically competent and up to date with modern practices through offering training and continuous education programs.
  4. Maintaining a list for members and investigating complaints about members, sanctioning them when necessary.

ii) Discussion of the dual role exercised by ICAG:

  • The self-regulation aspect has sparked debate, with concerns that the institute cannot effectively sanction its members, suggesting that this function be handed to a neutral body.
  • In other jurisdictions, governments appoint bodies to deal with complaints against professional members, as it is believed that small professional communities may not rigorously discipline their members.
  • Proponents argue that if professional bodies can maintain ethical standards, they can sanction members appropriately. However, this would require strong internal structures, including sufficient funding for regulation.
  • 2 Marks

AAA – Nov 2020 – L3 – Q2c – The Audit Approach

Discuss two problems in implementing quality control procedures in a small firm of Chartered Accountants and recommend solutions.

Discuss TWO (2) problems that you may face in implementing quality control procedures in a small firm of Chartered Accountants and recommend how these problems may be overcome. (2 marks)

  • Lack of sufficient technical training and proficiency: Small firms may not have the resources to ensure all staff members have the appropriate level of technical knowledge. Solution: Ensure that the firm invests in continuous professional development and training programs to enhance the technical skills of the team.
  • Inadequate supervision and review: Due to limited resources, small firms may struggle with proper supervision of audit work. Solution: Implement a structured review process and ensure that all work is reviewed by a senior member before finalization.

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