Chapter 4: Code of ethics and conduct

Question 1

Five fundamental principles contained within ACCA’s Code of Ethics and Conduct

Answer 1

1. Professional competence and due care: continuously developing, maintaining expertise and keeping skepticism.
2. Integrity: being honest and straight forward.
3. Professional behaviour: work on the basis of law, standards and code of ethics.
4. Objective: no bias and conflicts.
5. Confidentiality: not disclosing client information to the third parties unless there is legislation requirement or permission of client.

Question 2

Five ethical threats to independence and objectivity

Answer 2

1. Self-interest
2. Self-review
3. Familiarity
4. Intimidation
5. Advocacy

Question 3

Which of the following is the best definition of acting in the public interest?

A. Showing concern for the collective well-being of the stakeholders served by the organisation
B. Complying with all laws and voluntary codes to which the organisation is committed
C. Maximising the welfare of all stakeholders at all times
D. Placing a greater emphasis on external, rather than internal, stakeholders’ needs

Answer 3

A
=> for the collective well-being of the stakeholders

Compliance with all laws and voluntary codes is certainly important in serving the public interest, but this is a very narrow interpretation. An organisation may be fully compliant with all such laws and codes but could still be regarded as failing to serve the public interest.
Organisations cannot maximise the welfare of all stakeholders simultaneously. Stakeholders’ claims are diverse and often conflicting. For example, an organisation committed to reducing operating costs (and thereby increase shareholder value) may decide to make certain positions redundant, to the disadvantage of those who lose their jobs. Likewise, placing greater emphasis on external rather than internal stakeholder needs may not always serve the public interest.

Question 4

Which TWO of the following are purposes of the ACCA Code of Ethics and Conduct?

1. To enable the development of high moral standards
2. To indicate a minimum level of acceptable conduct
3. To ensure that all accountants abide by relevant laws
4. To enforce accounting standards and regulations

Answer 4

1-2

Question 5

Which of the following is a purpose of internal control?

1. To provide reasonable assurance that the company can achieve its objectives
2. To ensure that all operational accounting data is totally accurate
3. To eliminate all risks arising from fraud and other criminal acts
4. To validate the financial statements of the company as a true and fair view

Answer 5

1

Question 6

The accounting books and records of a company contain many forms of documentation.

Which TWO of the following are used to make the initial records of transactions?

1. Purchase day book
2. The journal
3. Non-current asset register
4. General ledger

Answer 6

Purchase day book , The journal
—> Transactions are initially recorded in books of prime (i.e. original) entry. These are the sales, purchases, cash received, cash payments, petty cash day books and the journal.

Question 7

Which of the following is a deficiency in internal control over a payroll cycle?
Select one:
A. An analytical review is performed on weekly payroll transactions to identify exceptions
B. Hourly production workers send their weekly time cards directly to the payroll department for processing
C. Employee pay rates and deductions are reviewed by the payroll department before the gross and net pay is calculated
D. The treasurer reviews and approves the weekly payroll before employee payments are made

Answer 7

B

each timecard first needs being approved by a supervisor or manager

Question 8

Classify each of the following controls as either an application control or a general control.

1. A two-month pilot operation of the new system
2. Investigation by management of items showing negative quantities on monthly reports
3. Read-only access for sales staff who check whether items are available for sale
4. Segregation of duties between the software programmers and accounts staff who will input data

Answer 8

1. Gen
2. App
3. App
4. Gen

An application control is specific – e.g. to sales, purchases or payroll.
A general control applies generally – i.e. to all applications.