AAT LEVEL 3 DIPLOMA IN ACCOUNTING

Revision lesson:Professional Ethics

By Per Ranum SimonsenFCMA, HD(R), MBA

Overview of exam format Time available: 2.30 hours plus 15 minutes reading time The assessment consists of nine tasks – Q 1-4 are

individual questions and 5-9 based on a project scenario

Methodology: Down load assessment book from AAT Save book to main computer drive as instructed

by invigilator When finished – upload assessment book to AAT

Revision questions – Set 1 1) Can anyone call themselves

accountants? – or is it a protective title?

2) What are the objectives of the accountancy profession?

3) Is the ethical code for accountants voluntary?

4) Does HMRC oversee the accounting profession?

Revision questions – set 2 1) State why accountants must have up to date

technical knowledge and give examples of these areas

2) What does diligence mean - from an ethical perspective?

3) Scenario: A client has had accountancy work undertaken by an trainee accountant, and the client suffered a loss due to this. Which legal actions can the client take?

4) Which circumstances could threaten an accountant’s ability to act with sufficient expertise?

Revision questions – Set 3 1) A client forwards money to his

accountant for payment of Tax. Which bank account should the accountant use?

2) For which purpose can an accountant use client monies?

3) When must client monies be repaid to the client?

4) If a client ask an accountant to hold monies on its behalf, which response should the accountant give?

Revision questions – Set 4 1) Why should an accountancy practice

register with the Information Commissioner’s Office?

2) When can an accountancy practice disclose confidential information about one of it’s clients?

Revision questions – Set 5 Scenario: Advertisement for our

accountancy practise: We are all fully qualified accountants, at 8 hours notice we can provide any service you require – and we are better than KPMG!

1) Threats to fundamental principles? 2) Will any of these be breached? 3) Is this advert ethically correct? 4) How will you (as the trainee accountant)

apply the conceptual framework to this?

Revision questions – Set 6 Hattrick Ltd makes designer hats. They have a

rules based statutory code of practice for this production industry and also has its own principles based code of conduct. One of its customers, WideEye is suing Hattrick Ltd for supplying faulty and badly fitting hats.

1) Does Hattrick Ltd need to comply with both codes? 2) Will Hattrick Ltd’s codes of conduct benefit its

customers? – and how? 3) Which of the codes involves a conceptual framework? 4) What is the operational risk for Hattrick Ltd due to

WideEye’s action?

Revision questions – Set 7 Roger, the senior accountant in our practise has

accepted a role as FD for Hotshot Ltd – one of his long time clients. He starts in 6 months time.

1) How do the fundamental principle of objectivity affect this situation?

2) Which treat does Roger face to his objectivity within the next 6 months?

3) Does Roger face any conflict of interests? – if so, which? 4) Considering the ethical code for professional

accountants, how should Roger resolve this ethical conflict?

5) Which alternative safeguards could Roger attempt to reduce the conflict?

Revision questions – Set 8 Knock Ltd’s MD John (client of the practise) told

you, that they had received £500K from one of his friends, paid into a deposit account in Knock Ltd’s name at the UK branch of an overseas bank.

John want to pay this amount into our client account, and then after one week transfer this amount into Knock Ltd’s business bank account

You are not told anything else, but you did learn that the friend of John had just been released from prison.

You are a fully qualified accountant in our firm.

Revision questions – Set 8continued

1) Do you think John is involved in money laundering? – and why (or why not)?

2) Which type of report should you make and who should receive it

3) Which information should you include in this report as a minimum?

4) Do you breach your duty of confidentiality to your client, Knock Ltd by making this report? – and why (or why not)?

Revision questions – Set 9 Howitzer Ltd – a client of our practise, used to

make very large yearly profits, but recently Howitzer Ltd has seen a rapid decline financially. Some of its polices (which have appeared in the news) contributed to this:

Purchasing policy: All based on price, resulting in quality and delivery issues

Salary policy: Everyone is paid the minimum salary, resulting in high staff turnover and low morale.

Production policy: Non compliance with pollution stipulations resulting in regulatory fines

Revision questions – Set 9continued

1) How will you define sustainability? 2) Do you – as a professional accountant –

have a duty to uphold the values of sustainability?

3) Which type of operational risk do Howitzer Ltd face from the news reports?

4) Explain for each of Howitzer Ltd’s policies what the effect is on sustainability (economic and/or environmental)

One last thing!