CPA Ethics and Governance MC

Which of the following descriptions of the accounting profession aligns with the market control view of the profession?

The accounting profession primarily exists to serve the public interest

LawGin, a dedicated and professional accountant, is committed to upholding the highest standards of the accounting profession. As part of this commitment, LawGin understands the importance of adhering to the service ideal. Which of the following best represents the core presentation of service ideal?

LawGin must make sure that his service is for the best interests of the accounting profession as a whole

Why is accounting classified as a profession rather than simply an occupation?

Accountants must comply with laws and regulations

Which of the following statements accurately describes the regulatory power of CPA Australia in the co-regulation of accounting profession?

CPA Australia’s has authority to discipline its members even member’s misconduct does not breach the law

Which of the following statements correctly describes the role and composition of the Accounting Professional & Ethical Standards Board (APESB)?

The APESB is a professional body responsible for reviewing and monitoring professional and ethical standards within the accounting profession

Which of the following scenarios would NOT typically initiate a complaint process under the Constitution of CPA Australia?

A CPA Australia member fails to observe a proper standard of professional care in engagement

A client of LawGin CPA recently received an invoice for services rendered. Upon reviewing the charges, the client feels that the fees are excessively high and is considering how to address this concern. As a client of a CPA firm, what is the most appropriate course of action for her to take in this situation?

Report the issue to the Australian Securities and Investments Commission (ASIC)

Which of the following statements is correct regarding small to medium practices accounting firm and their service provision?

Small to medium practices should diversify their services, moving from an overwhelming dominance of compliance advice to the provision of profit-oriented business advice

Which type of public practice is characterised by providing services such as financial statement attestation, assessing procedures and controls related to privacy, confidentiality, performance measurements, system reliability, information security and outsourced process controls?

Management control

Which of the following statements best describes why the creditability of accounting profession is under challenge?

Incorrect capitalisation of expenditure and related party transactions are typical examples of financial accounting distortion

In the aftermath of various corporate scandals, the accounting profession has experienced increased scrutiny and regulation. Which accounting profession has been most affected?

Financial statement auditors

Which of the following measures was NOT implemented in response to the need to prevent corporate failures and restore credibility in the financial reporting and auditing professions?

The Financial Reporting Council (FRC) was established to oversee the effectiveness of financial reporting

Which of the following actions by LawGin, an accountant in business, would be considered creative accounting?

Using a new accounting standard in a creative way to report cryptocurrency holdings

In the diverse world of accounting, professionals like LawGin can take on various roles within society. Each role comes with its set of responsibilities, environments, and challenges. Considering these different roles, LawGin is reflecting on the nature of accounting work in various settings. Which of the following statements correctly captures the distinctions and similarities in the roles of accountants in different sectors?

The tasks and responsibilities of accountants working for large firms are quite different from those working in small firms

Sean Ma is considering starting a business and is evaluating the benefits of registering as a company. Which of the following is NOT a valid reason for him to want to register his business as a company?

Sean wants to maintain personal control of all business operations and profits

LawGin is the director of LH Ltd, and he holds various responsibilities to the company and its shareholders. Where does this responsibility come from?

Duty of care and diligence as defined by the Tort Law

Van De Byo is a director of Victoria Entertainment Plaza Pty Ltd. A new business opportunity arises where Victoria Entertainment Plaza can partner with Waterside Ltd. to develop a new line of eco-friendly technologies. Van De Byo owns a significant portion of shares in Waterside Ltd. and decides not to disclose to the board of directors at Victoria Entertainment Plaza. He does no expect or receive any potential gain from this partnership. Which of the following directors’ duties has Van De Byo breached according to Australian corporate law?

Duty to avoid conflict of interest

Sean Ma, a director at Global Solutions Inc., decides to delegate substantially all his decision-making responsibilities, to the CEO, Van De Byo. Which of the following director’s duties has Sean breached according to Australian corporate law?

Duty to act in good faith in the best interests of the company

According the UK Financial Reporting Council (FRC), which of the following directors would be considered independent?

Sarah, who is a significant shareholder in the company and has a role as a non-executive director

Sarah, the CEO of a successful tech company, plans to retire in two years. She begins to make decisions that will boost the company’s profits in the current year. Her bonuses and rewards are tied to the company’s annual profits. Which type of residual loss does Sarah’s action represent according to agency theory?

Risk Avoidance

The board of directors, recognising the lack of sufficient accounting skills among its members, decides to delegate the duty of ensuring the fair presentation of the financial statements to the CFO, LawGin, who is also a board member. Which of the following statements is correct regarding this situation?

Delegating the duty of ensuring the fair presentation of financial statements to a board member is appropriate as long as the board approves the delegation and keeps constant monitoring

LawGin, the CEO of LH Ltd, implements a policy requiring all management travel to be coordinated through the corporate travel management centre, with all fights booked in economic class. This decision aims to control and standardize travel expenses within the company. What type of agency cost does this policy primarily address?

Residual loss

Director LawGin has been recently appointed as the CEO of LH Limited. Which of the following statements is NOT correct regarding this role in corporate governance?

As a board member, LawGin has both performance and conformance responsibilities

Which of the following statements correctly describes the goal of corporate governance in relation to agency theory?

To declare and discharge the obligations of directors as stewards

Which of the following is generally outside the scope of shareholder power?

Appointing auditors to ensure the accuracy of financial statements

LawGin Ltd, a company listed in the ASX 300 Index, is facing challenges in evaluating the performance of the overall board and allocating strategic tasks to the appropriate directors. Based on the information above, which committee should LawGin Ltd consult to address this issue?

Nomination committee

LawGin is an external auditor of LH Ltd. Which of the following statements regarding LawGin’s role is correct?

Once LawGin ends the audit engagement with LH Ltd, he could serve as an independent director of this company

LawGin is an internal auditor of LH Ltd. Which of the following statements regarding LawGin’s role is correct?

LawGin is responsible for the operation of the audit committee

Which of the following statements regarding the relationship-based corporate governance systems in Asia is correct?

The boards of directors of companies in Asia are usually diverse and dominated by majority shareholders

According to the OECD Principles of Corporate Governance, which of the following is a key element for establishing an effective corporate governance framework?

Balancing the transparency and confidentiality in company’s public disclosure

LawGin Ltd, a company listed on the ASX, is looking to establish an audit committee and has several potential members. Lee is the CEO, Mark is the board chair, Clara is an independent non-executive director, Aiden is an independent non-executive director, and Olivia is a non-independent non-executive director. Considering the ASX corporate governance principles, which of the following combinations would be appropriate for the formation of the audit committee?

The audit committee comprises of Lee, Mark and Clara

Based on the description of corporate governance in the not-for-profit (NFP) sector, which of the following statement is correct

Management in NFP often has a strong control over volunteers working around them

In which of the following countries are you most likely to find that a majority of board members in a company are appointed from the senior management positions?

Japan

LawGin Ltd is a publicly listed chemical company headquartered in France. Which of the following is least likely to be a major corporate-governance concern for the firm?

Weak discipline from the securities market

According to the OECD Principles of Corporate Governance, the recommendation that governments should establish governance frameworks for board functions that are consistent with existing laws and regulations fall under which principles?

Ensuring the Basis for an Effective Corporate Governance Framework

Making employees redundant from an unprofitable division of the business often involved in which kind of ethical dilemma?

Individual vs Group

Which of the following statements is correct regarding professional ethics?

Professional ethics stipulates what constitutes appropriate behaviour in a business context

Which of the following statements correctly describes the principles of deontological theory?

Deontological theory argues that the morality of an action should be based on whether that action itself is right or wrong under a series of rules, rather than based on the consequences of the action

Which of the following statements correctly describes the principles of telogical theories?

Teleological theories determine the ethical correctness of an action based on the benefits and costs of outcomes

LawGin, the lead auditor on an engagement, uncovers a material error that overstates profit in the draft financial statements. Guided by the principle of justice theory, which course of action should LawGin pursue?

Require management to correct the error so that every stakeholder is treated equitably and no group gains an unfair advantage

Which of the following statements correctly explains the equality principle in justice theory?

The equality principle asserts that everyone should receive the exact same share of resources

Which of the following statements correctly describes virtue ethics?

Virtue ethics emphasizes personal attributes and the developments

LawGin was approached by a client to evaluate the appropriateness of the accounting treatment of a financial instrument. However, because LawGin was not able to access information recorded in prior systems that the client changed two years ago. LawGin highlighted this limitation in his opinion letter. Which fundamental principle requires LawGin to disclose this limitation?

Professional Competence and Due Care

Which of the following statements regarding APES 110 Code of Ethics for Professional Accountants is correct?

APES 110 is designed to ensure accountants’ behaviours aligns with public interests

LawGin is an accountant working for a large audit firm. His brother recently started a business and has approached LawGin to audit the business’s financial statements. LawGin knows that his firm is the best in town and wants to help his brother’s business succeed. In the above scenario, which one of the fundamental principles of APES 110 is under potential threat?

Objectivity

LawGin is a professional accountant who has been recently hired by a large company as an in-house auditor. During his first few weeks, he identifies irregularities in the financial statements that he believes may be deliberate. When he brings these concerns to his immediate superior, she dismisses them, insisting that the company has always used these accounting methods. In the above scenario, what is the appropriate action for LawGin to take if he follows the conceptual framework approach in accordance with APES 110?

Raise this issue with more senior accounting managers and evaluate their response

LawGin, a professional accountant, provides financial advice to his clients in a private practice. One of his clients is a large investment fund company. Recently, the fund company offered him a substantial commission for every client he refers to them for investment. In addition to this, the company also offers LawGin a new laptop and a stapler as a token of their appreciation. What is the appropriate action for LawGin to take in the above scenario?

Decline all the offers as they pose significant threats to his objectivity

You are the engagement partner at LawGin Accounting. Heliansheng Ltd has asked you to become its external auditor. You discover that the CFO of Heliansheng, Mr Da D, belongs to the same fishing club as you, and the two of you regularly fish together. Under the APES 110 Code of Ethics for Professional Accountants, what is the appropriate step?

Identify and evaluate whether the relationship creates a significant threat to compliance with the fundamental principles

Which of the following statements regarding the influence of organisational factors on ethical decision making is correct?

Top-tier management is considered the most influential factor in determining the culture that influences accountants’ behaviour

Which of the following scenarios best describes a company with low power distance but high uncertainty avoidance, according to Hofstede’s cultural dimensions?

Company B, where decision-making includes inputs from employees at all levels, and they prefer decisions to be backed by substantial data and minimal ambiguity

In which of the following scenarios could LawGin employ ethical relativism as a justification for his actions?

He engages in practises that are considered unacceptable in Australia but are common and culturally accepted in the local context of his work overseas

Which of the following statements correctly describes the American Accounting Association (AAA) model?

The AAA model is a general decision-making model that emphasises a systematic approach applicable to any situation with ethical implications

Which of the following statements regarding the limitation of traditional financial reporting in addressing corporate social responsibility is correct?

Traditional financial reporting, with its focus on shareholder primacy, does not inherently address important questions about an organization’s social and environmental performance

Based on the information provided, which of the following is a reason why disclosure of corporate social responsibility (CSR) helps reduce the cost of capital?

CSR reporting signals the quality of the company by showcasing its commitment to social and environmental value-creation activities

Based on the information provided, which of the following is considered a positive screening model?

LawGin only invests in the best-in-class companies delivering superior environmental performance

Which of the following statements aligns with Milton Friedman’s view of corporate social responsibility?

The primary role of business is to increase its profits as long as it operates within legal boundaries

Which of the following is a vlid reason for a company to produce a CSR report according to the managerial branch of stakeholder theory?

To gain support and approval from powerful stakeholders

The discounting method is believed to be a common deficiency when reporting which areas of performance?

Environmental

The management of LawGin adopts a shareholder primacy perspective. Which of the following is least likely to happens?

It may provide additional information to discharge its social accountability

In recent years, LawGinTech Inc., a tech company focusing on electronic products, faced criticism for its carbon footprint due to its manufacturing process. Instead of significantly altering its manufacturing operations, the company limited a campaign promoting the importance of long-lasting products in reducing overall carbon footprints. They highlighted that while the initial manufacturing might be carbon intensive, the products’ durability ensures they don’t need frequent replacements, ultimately resulting in a net positive for the environment. Which of the following options is correct in describing the method LawGinTech Inc. used to acquire legitimacy?

They changed the perceptions of their behavior without any tangible change in performance

Which of the following is least likely to be addressed in a company’s CSR reporting?

Commitment to protecting the rights of minority shareholders

Which of the following laws and regulation does NOT mandate a section relating to CSR disclosure in the annual report of a company?

ASX corporate governance recommendation

Which of the following issues does environmental management accounting seek to solve?

The problem of accummulating environmental costs in overhead accounts

Which of the following options is regarded as a Scope 3 emission?

Consumer’s use of the company’s product producing emission

Which organization is primarily known for establishing principles and goals for business regarding environmental, social and governance?

United Nations Global Compact (UNGC)

Which ISO standard provides guidelines for the monetary valuation of environmental impacts and related environmental aspects?

ISO 14008

Which of the following is NOT a driving force for LawGin Ltd to adopt non-mandatory reporting guidance?

To comply with the industrial norms as non-mandatory reporting becomes increasingly prevalent

Which of the following statements about cap-and-trade Emissions Trading Schemes (ETS) is NOT correct?

ETS allows nations to trade of allowance for greenhouse gas emissions if any surplus left

LawGin has a plant to produce paint for houses. A batch of paint is ruined due to improper hazardous waste segregation. It cost the plant $500,000 to rework and safely treat the waste. What is this kind of environmental cost?

Internal failure

Which of the following is not traditionally recognised as being attributes of a profession?

Extensive preparatory education

Which of the following features is not in line with the concept of ‘service ideal’?

The pursuit of excellence in accounting practice by the individual professional accountant

Which one of the following describes the way that accounting interacts with society and organisations?

Accounting responds to the needs of society through creative accounting

Which one of the following best describes professional judgment?

Problem-solving and the ability to apply the right technical solution despite pressure or social ideals

Which one of the following is a likely implication for the accounting profession following the collapse of large companies such as Enron, HIH Insurance and Lehman Brothers?

A tendency for the community to have more faith in the accounting profession

What is the responsibility of members of the accounting profession when it comes to following the philosophy of service ideal?

Members are not required to consider the public interests

Which of the following statements incorrectly describes a profession?

Professions exist mainly to serve society

Which organization issues accounting standards in Australia?

The Australian Accounting Standards Board (AASB)

Which of the following statements aligns with the market control view of a profession?

Professionals are controlled by the government to protect the public interest

How to distinguish a profession from a non-professional occupation?

A profession usually has a higher requirements on the standards of work

Which of the following option is not in line with the traditional attributes of a profession?

Professional judgment to diagnose and solve complex, unstructured values-based problems

Why co-regulation is important for accounting?

To provide a balance of self-regulation and government oversight

John and his supervisor Elizabeth work as auditors for a hedge fund. When they finalise their annual audit the valuation of the company is far higher than John expected, and he suspects Elizabeth has inflated the valuation to please management and ensure their bonuses. What is the first thing John should do according to CPA’s member disciplinary process?

Nothing, his responsibility is to the company

Which of the following options does not describe the multi-dimensional role of the professional accountant in a mid-sized business in terms of generating value?

Managing costs through rigorous budgeting and forecasting

The Professional Accountants in Business (PAIB) Committee of IFAC has identified a multi-dimensional role for accountants in generating value for business, which does not include:

Upholding integrity

Which of the following statements relating to the role of skills in accountants’ career is correct?

Leadership skills are more important than interpersonal skills in later career stage

Comparing the job of a professional accountant employed in a large business and a small business, what is the likely difference?

The type of services provided

Which of the following tasks involves the use of soft skills?

Preparing a tax return

John is a newly qualified accountant and has been offered two job opportunities: one with a large accounting firm and one with a small company. He is trying to decide which job would be the best fit for him. Which of the following is a correct relating to the work of an accountant in a large accounting firm and an accountant in a small company?

He could be responsible for more detailed work in small company than in large firms

Which of the following best describes a key characteristic of a proprietary company?

It can issue shares to the public on a large scale

Which of the following descriptions regarding the characteristics of different types of business is correct?

The shareholders in a listed company will be unlimitedly liable for the company’s debt

Which of the following is a part of a director’s duty to avoid conflicts of interest?

Disclosing confidential information to someone who are unlikely to damage the company’s interest

Which of the following criteria must a director meet to invoke the business judgment rule as a defence in a lawsuit?

The judgment was made in the best interest of the director

Which of the following best describes the duty of a nominee director?

To act in the best interests of the company

Which of the following option is correct regarding director’s duty to retain discretionary powers?

Unless obtaining express authority from the corporation’s constitution, the board must not delegate their discretion to act as directors to others

According to the UK Corporate Governance code, which of the following director may be considered as independent?

A director who is also a member of the company’s pension scheme

Stakeholder theory is best described as being based on the presumption that the corporation has direct concerns about

Dealing its relationships with a wide range of groups that affect and/or are affected by the corporation

Which of the following can be considered opportunistic residual loss behaviour by an agent?

Pay auditor fees for making sure the financial statements are true and fair

Which of the following options regarding to the board’s obligation is correct

The board is an agent of CEO and should be responsible for the company’s effectiveness

Which of the following options correctly describe the role of an external auditor

External auditor is primarily liable for financial misstatement

Which of the following options correctly describes the board function in terms of outwards and future focus?

Establishing and monitoring policies