Financial Audit Challenges and NPAs

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Questions and Answers

What must a professional accountant avoid to maintain the integrity of the profession?

Offering services without verifying client needs

Advertising solely based on their qualifications

Participating in activities that may impair their objectivity (correct)

Engaging in any employment that promotes their services

Which behavior is considered a violation of professional conduct for an accountant?

Being truthful in all advertisements

Providing honest assessments of their qualifications

Making exaggerated claims about their experience (correct)

Adhering strictly to advertisement guidelines

How should a professional accountant approach advertising their services?

Only advertise if they have overwhelming evidence

Use comparative advertising to highlight advantages

Ensure all claims are true and valid according to guidelines (correct)

Promote their services aggressively regardless of guidelines

What action should an accountant take if unsure about the propriety of their advertisement?

Consult the Ethical Standards Board of ICAI Signup and view all the answers

Which of the following actions would NOT be considered professional misconduct?

Making claims that are true to the best knowledge Signup and view all the answers

What does the requirement for honesty in accounting entail?

Being truthful without exaggeration Signup and view all the answers

Which fundamental principle is essential for maintaining a good reputation in the accounting profession?

Integrity Signup and view all the answers

What is the potential consequence of an accountant disparaging the work of others?

It is viewed as a professional misconduct Signup and view all the answers

What is a major ethical failing of the Chartered Accountant in this scenario?

He is selectively overlooking certain matters for personal benefit. Signup and view all the answers

Why did the Chartered Accountant leave certain accounts out of his reporting?

The owners assured him they would use his services in the future. Signup and view all the answers

What does the term 'NPA' refer to in this context?

Non-Performing Assets Signup and view all the answers

What is expected from professionals in the field of Chartered Accountancy regarding ethical conduct?

Acceptance of responsibility to act in public interest. Signup and view all the answers

What behavior did the owners of the firms exhibit toward the Chartered Accountant?

They attempted to soothe his ego to gain favor. Signup and view all the answers

What is an intrinsic aspect of ethics as per the content?

Ethics should come from an individual's state of mind and moral principles. Signup and view all the answers

What happens to the accounts of the firms whose owners did not meet the Chartered Accountant?

They were reported as NPAs. Signup and view all the answers

How should Chartered Accountants ideally act based on the principles of professional ethics?

They should uphold morals and ethics above personal temptations. Signup and view all the answers

What is one potential issue a Chartered Accountant faces regarding professional conduct in auditing firms?

Ignoring minor irregularities can lead to major consequences. Signup and view all the answers

Under the Chartered Accountants Act, what is essential for maintaining the integrity of a branch audit?

Careful assessment of the financial statements submitted. Signup and view all the answers

Which type of misconduct is related to failing to follow established procedures and regulations?

Frivolous procedural irregularities. Signup and view all the answers

What does the term 'KYC norms' refer to in the context of accounting?

Know Your Customer requirements. Signup and view all the answers

What responsibility does a Chartered Accountant have when encountering discrepancies in audit reports?

Addressing the discrepancies promptly and ethically. Signup and view all the answers

In what way can professional ethics guide Chartered Accountants in practice?

By ensuring adherence to established guidelines and principles. Signup and view all the answers

What is a consequence of failing to accurately ascertain drawing power in audits?

Possible auditing failures and liability. Signup and view all the answers

What should be the primary concern of a Chartered Accountant when potential errors are identified in financial statements?

Reporting these issues to regulatory authorities without delay. Signup and view all the answers

Study Notes

Professional Ethics and Responsibilities of Chartered Accountants

Accounts of several firms are operating satisfactorily, but are reported as NPAs due to ongoing audit issues.
AGM experiences regular distress over delayed audit completion and reporting by the Chartered Accountant (CA).
Three out of seven firm owners meet the CA, promising future services, while others do not, leading to negative reporting.
CA's conduct raises ethical concerns, prioritizing personal benefits over professional responsibilities.

Ethical Standards

Chartered Accountants must act in public interest, reflecting integrity and objectivity in their practices.
Ethics is intrinsic, requiring accountants to rise above personal gain and adhere to moral principles.
Professionals should not engage in activities that compromise their reputation or the integrity of the profession.

Misconduct Guidelines

Professional accountants must avoid exaggerated claims of qualifications and experience.
Disparagement of peers or unsubstantiated comparisons to others' work is unethical.
Advertising must align with the guidelines issued by the Institute, ensuring truthful and responsible communication.

Responsibility in Advertising

Advertising content must be truthful and consistent with the ethical standards established by the Institute.
Accountants are encouraged to consult the Ethical Standards Board when unsure about advertising appropriateness.

Overview of Codes and Regulations

The Chartered Accountants Act, 1949 establishes the framework for professional behavior and misconduct categories.
Membership guidelines dictate the expected conduct and responsibilities for accountants in practice and in service.

Case Context

CA R, a prominent practitioner, conducts audits for a public sector bank with significant advances.
Discrepancies in stock statements noticed during the audit could be overlooked but are raised by CA R, along with minor procedural irregularities discovered by staff.

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Description

Explore the various challenges faced during financial audits, specifically regarding Non-Performing Assets (NPAs) in firms. This quiz delves into the complexities of managing accounts and the communication hurdles that arise between branch management and auditors.