Which of the following best describes the underlying purpose of the CFA Institute Code of Ethics and Standards of Professional Conduct? Select one: a. To set CFA charterholders apart from other investment management professionals and raise the bar for their performance b. To ensure that investment professionals comply with the rules and regulations of the industry c. To help investment professionals uphold the highest standard of conduct to generate investor trust d. To provide the public with a set of rules and regulations to which they can legally assume every investment industry professional will uphold e. All of the above You are a financial analyst of a major investment advisory firm and have been told by the investor relations representative for Great Pharma, a major pharmaceutical company, that they are in the final stages of getting full FDA approval of their COVID-19 vaccine. This information was also announced by Great Pharma at the recent analyst conference briefing. You use this information along with other public information you obtained from the company in a research report that supports a "Strong Buy" recommendation for Great Pharma shares. Which of the following statements is CORRECT: Select one: a. You violated the Code and Standards because you have a material misrepresentation in your report. b. Your actions did not violate the Code and Standards because you used all public information. c. You violated the Code and Standards because you used material nonpublic information. d. You violated the Code and Standards because you failed to separate opinion from fact.
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The best answer is: c. To help investment professionals uphold the highest standard of conduct to generate investor trust Show more…
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(a) Explain why each of the following actions appears to be in conflict with fundamental ethical principles (i) An advertisement for a firm of accountants states that their audit services are cheaper and more comprehensive than a rival firm; (ii) An accountant prepares a set of accounts prior to undertaking the audit of those accounts; (iii) A director discusses an impending share issue with colleagues at a golf club dinner; (iv) The finance director attempts to complete the company's taxation computation following the acquisition of some foreign subsidiaries; (v) A financial accountant confirms that a report on his company is correct, even though the report omits to mention some important liabilities. (10 marks) (b) Explain your response to the following ethical threats (i) Your employer asks you to suggest to a junior manager that they will receive a large bonus for working overtime on a project to hide liabilities from the financial statements. (ii) In selecting employees for a new division, you are advised to unfairly discriminate against one section of the workforce. (iii) You have been asked to prepare the management accounts for a subsidiary located in South America in accordance with specific requirements of that jurisdiction. In response to your comment that you do not understand the accounting requirements of that jurisdiction, your supervisor states 'no problem', no one will notice a few thousand dollars' error anyway'.
Supreeta N.
Explain the case of Enron in the context of Ethical Relativism - Albert Carr Theory and a minimum of TWO (2) philosophers and/or proponents against Albert Carr (20m). How do I extend my answer? Ethical relativism states that morality is relative to one's cultural norms, i.e., whether something is right or wrong depends on the rules followed in that particular culture. Albert Carr wrote an article where he mentions that bluffing in business may be ethical since the people involved are not committing any crime but are just implying to do so, which doesn't amount to committing. Even considering this, the situation for this company cannot be justified. They have lied outright and have amassed millions from their lies. Proponents against Albert Carr: i) He considers that business is a game, but in most situations, we can see that business is not a game, and so the game analogy that Carr uses to justify bluffing will not hold. ii) Carr had assumed that deception is inherent in negotiation, but when properly understood, it is obvious that bluffing ceases to be of any importance. c) Illustrate TWO corporate scandals and/or case studies that highlight the importance of making moral judgments and ethical decisions. Two corporate scandals: i) Foxconn suicides - In 2010, there were 14 confirmed suicides at Foxconn, a Chinese company that manufactures electronics. It was later revealed that the employees are subjected to harsh working conditions with a meager cafeteria allowance. Despite protests, the management has refused to take these concerns into consideration and has preferred ignoring employee well-being for their own economic profits. ii) Libor scandal - An investigation conducted by the US Commodity Futures Trading Commission revealed a scheme where several large banks have manipulated interest rates by rigging the Libor, which is the average interest rate calculated based on estimates submitted by a panel of large banks. This led to massive fines from the banks and arrests of several bankers. This again shows the need for just administration.
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21. Which of the following is not a consideration when the auditor is attempting to assess the inherent risk? A. Nature of the client's business. B. Existence of related parties. C. Frequency and intensity of top management review. D. Susceptibility to defalcation. 22. Inherent risk is reduced when the likelihood of defalcations is low. This would be true for an account such as: A. Property, plant and equipment. B. Held for trading securities. C. Cash. D. Accounts receivable. 23. Which of the following is an incorrect statement? A. Detection risk is a function of the effectiveness of an auditing procedure and its application. B. Detection risk arises partly from uncertainties that exist when the auditor does not examine 100 percent of the population. C. Detection risk arises partly because of other uncertainties that exist even if the auditor were to examine 100 percent of the population. D. Detection risk exists independently of the audit of the financial statements. 24. Which of the following pertains to detection risk? A. An entity's asset custodian and record-keeping function for cash are handled by one process owner. B. An entity operates in a highly complex business environment. C. An auditor uses substantive analytical procedures instead of tests of balances. D. None of the above. 25. Which of the following statements is correct concerning an auditor's assessment of control risk? A. Assessing control risk may be performed concurrently during an audit with obtaining an understanding of the entity's internal control. B. Evidence about the operation of internal control in prior audits may not be considered during the current year's assessment of control risk. C. The basis for an auditor's conclusions about the assessed level of control risk need not be documented unless control risk is assessed at the maximum level. D. The lower the assessed level of control risk, the less assurance the evidence must provide that the control procedures are operating effectively.
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