Part A: Fundamental Ethical And Professional Principles

Question 1

The financial statements must meet these criteria

Answer 1

Technical compliance - GAAP used

Economic substance of the event that has occurred must be represented

Full disclosure and transparency

Question 2

Framework for ethical decision making

Answer 2

1) understand the real issue
2) any ethical threats?
3) are the ethical threats significant?
4) can safeguards reduce these threats to an acceptable level?
5) can you look at yourself in the mirror afterwards?

Question 3

Possible ethical threats

Answer 3

Advocacy
Self-interest
Self-review
Intimidation 
Familiarity

Question 4

A party is said to be related to an entity if any of the following 3 situations occur

Answer 4

1) controls/ is controlled by the entity
2) is under common control with entity
3) has significant influence over the entity

Question 5

Types of related party

Answer 5

Subsidiaries

Associates

Joint ventures

Key management

Close family member of the above

A post-employment benefit plan for the benefit of the employees

Question 6

These are not necessarily related parties (but might seem like one)

Answer 6

Two entities with a director in common

Two JVs

Providers of finance

A big customer, supplier etc

Question 7

Key management personnel compensation should be broken down by

Answer 7

Short term employee benefits

Post employment benefits

Other long term benefits

Termination benefits

Share based payments