Financial Audit Challenges and NPAs
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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?

    <p>Consult the Ethical Standards Board of ICAI</p> Signup and view all the answers

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

    <p>Making claims that are true to the best knowledge</p> Signup and view all the answers

    What does the requirement for honesty in accounting entail?

    <p>Being truthful without exaggeration</p> Signup and view all the answers

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

    <p>Integrity</p> Signup and view all the answers

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

    <p>It is viewed as a professional misconduct</p> Signup and view all the answers

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

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

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

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

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

    <p>Non-Performing Assets</p> Signup and view all the answers

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

    <p>Acceptance of responsibility to act in public interest.</p> Signup and view all the answers

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

    <p>They attempted to soothe his ego to gain favor.</p> Signup and view all the answers

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

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

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

    <p>They were reported as NPAs.</p> Signup and view all the answers

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

    <p>They should uphold morals and ethics above personal temptations.</p> Signup and view all the answers

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

    <p>Ignoring minor irregularities can lead to major consequences.</p> Signup and view all the answers

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

    <p>Careful assessment of the financial statements submitted.</p> Signup and view all the answers

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

    <p>Frivolous procedural irregularities.</p> Signup and view all the answers

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

    <p>Know Your Customer requirements.</p> Signup and view all the answers

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

    <p>Addressing the discrepancies promptly and ethically.</p> Signup and view all the answers

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

    <p>By ensuring adherence to established guidelines and principles.</p> Signup and view all the answers

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

    <p>Possible auditing failures and liability.</p> Signup and view all the answers

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

    <p>Reporting these issues to regulatory authorities without delay.</p> 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.

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