Which of the following are true about “Ethics”?
(i) Ethical behavior is more than obeying laws, rules, and regulations.
(ii) Ethics is about doing ‘the right thing’.
(iii) The accountancy profession is committed to acting ethically and in the public interest.

ICAP code of ethics is applicable to:
(i) Members: Accountants in practice
(ii) Student members
(iii) Members: Accountants in business

Ibrahim is a member of ICAP working as a unit accountant. He is a member of a bonus scheme under
which, staff receives a bonus of 10% of their annual salary if profit for the year exceeds a trigger
level. Ibrahim has been reviewing working papers prepared to support this year’s financial
statements. He has found a logic error in a spreadsheet used as a measurement tool for provisions.
Correction of this error would lead to an increase in provisions. This would decrease profit below
the trigger level for the bonus.
Which threat to fundamental principle Ibrahim is facing?

Ibrahim is a member of ICAP working as a unit accountant. He is a member of a bonus scheme under
which, staff receives a bonus of 10% of their annual salary if profit for the year exceeds a trigger
level. Ibrahim has been reviewing working papers prepared to support this year’s financial
statements. He has found a logic error in a spreadsheet used as a measurement tool for provisions.
Correction of this error would lead to an increase in provisions. This would decrease profit below
the trigger level for the bonus.
Which fundamental principle is mainly affected in the above situation?

Fortune Limited (FL) is quoted on the stock exchange, with revenue of over Rs. 5 billion per Annum. During the year ended 30 June 2015, FL incurred a loss of Rs.26 million. The Chief Executive is of the view that a declaration of loss may result in the bankers’ refusal to renew the credit facility. Therefore, he wants to incorporate certain adjustments in the books of account that will result in a net profit of Rs.100 million. However, the Chief Financial Officer (CFO), who is a chartered accountant, is of the view that all possible adjustments allow able under the applicable accounting regulations have already been considered and incorporated. Identify TWO categories of threats to the fundamental principles of objectivity or professional competence and due care

Zia is a Chartered Accountant and works as a financial controller in Unique Engineering Limited
(UEL). UEL is currently considering the acquisition of Top Storage Limited (TSL) and Zia is a
member of the team which is currently negotiating the acquisition with the management of
TSL. After becoming aware of the prospective acquisition, Zia purchased 1,000,000 shares of TSL
in the name of his wife and son.
Which of the following fundamental principles of the ICAP code of ethics, Zia has breached?

Zia is a Chartered Accountant and works as a financial controller in Unique Engineering Limited
(UEL). UEL is currently considering the acquisition of Top Storage Limited (TSL) and Zia is a
member of the team which is currently negotiating the acquisition with the management of
TSL. After becoming aware of the prospective acquisition, Zia purchased 1,000,000 shares of TSL
in the name of his wife and son.
Which potential threat is involved in the above circumstances?

Atif is a chartered accountant and has been working as Manager – Accounts in an unlisted public
company MNZ Limited.
While preparing the financial statements for the year ended 31 December 2016, the CFO of MNZ who
is also a chartered accountant informed Atif that the directors are considering having the company
listed on Pakistan Stock Exchange.
Consequently, CFO wants to show higher profit and has asked Atif to identify areas where book
adjustments can be made. He has also informed that if MNZ is able to list the shares at a price of
Rs. 35 or more, all managerial staff would be given an additional bonus this year.
Which fundamental principles of the ICAP code of ethics have been breached by CFO?

Atif is a chartered accountant and has been working as Manager – Accounts in an unlisted public
company MNZ Limited.
While preparing the financial statements for the year ended 31 December 2016, the CFO of MNZ who
is also a chartered accountant informed Atif that the directors are considering having the company
listed on Pakistan Stock Exchange.
Consequently, CFO wants to show higher profit and has asked Atif to identify areas where book
adjustments can be made. He has also informed that if MNZ is able to list the shares at a price of
Rs. 35 or more, all managerial staff would be given an additional bonus this year.
Which threat to fundamental principles is being faced by Atif?

Integrity means:

Objectivity means:

Professional competence and due care means:

Professional behaviour means:

Which of the following are correct responses, where it is not possible to reduce the threats to an
acceptable level:

(i) The member must refuse to remain associated with information that may be
misleading
(ii) The member must report the matter to the audit committee or other governance authority
within organization.
(iii) The member may seek legal advice if it seems necessary to report the matter to legal
authorities.

Naveed is a chartered accountant, recently employed by KK Limited as deputy to the finance
director, Harris (also a chartered accountant). KK Limited is listed on the Pakistan stock exchange.
On Naveed’s first day on the job, he met with Harris who said ‘Look, keep it to yourself but I am
having a second interview next week for a new job. The first thing that I need you to do is to review
the financial statements before the auditors arrive. I passed exams a few years ago and I am not up
to date on all of the little technicalities in IFRS. You should know these better than me and you will
know more about what the auditors might focus on. Also, keep in mind that you and I would be
entitled to a bonus if the profits are 10% higher than last year, so I hope you understand that you do
not want to find any irregularity in the financial statements. Do well at this and your chances of
promotion are quite high.”
Which of the following fundamental principles, Harris is failing to comply with?

Members should be straightforward and honest in all professional and business relationships.
Name the fundamental principle indicated by the above statement.

Members should not allow bias, conflicts of interest, or undue influence of others to override their
professional or business judgments.
Name the fundamental principle indicated by the above statement.

Members should behave with courtesy and consideration towards all with whom they come into contact in a professional capacity.
Name the fundamental principle indicated by the above statement.

A threat to fundamental principles occurs when a previous judgment needs to be re-evaluated by
members responsible for that judgment.
Name the type of threat.

A threat to fundamental principles occurs when, because of a close relationship, members become
too sympathetic to the interests of others.
Name the type of threat.

You are working in the finance department of Kamyaab Motors Limited (KML), a listed company. The draft results of KML for the year are encouraging and are likely to increase KML’s share price upon public announcement. Your best friend is heavily in debt and has recently asked for your assistance. He has helped you on numerous occasions in the past. In the context of ICAP’s Code of Ethics, you should: