AAT Level 2 - Certificate in Accounting / Level 3 - Diploma in Accounting Professional Ethics Mock Exam Question Paper Time allowed 2.5 hours Instructions: Pease attempt this exam under test condtions and attach the front sheet complete with your name and adress to your script. The completed package should be sent to BPP Marking Department ‘Take a few moments to review the notes on the inside ofthis page ted, ‘Get into good exam habits now! before attempting this exam, [ARPETH Mock Exam 2044 Questions 3 wk ®@| Information This assessments in one section. ‘Attempt and aim fo and complete EVERY task Each tasks independent. You will not need to refer lo your answers to previous tasks, Complete all9 tasks l «anh 4 ‘AAPETH Mock Exam 2014 QuestionsTask 1 (5 marks) @ Members ofthe AAT are expected to comply withthe AAT's Code of Professional Ethics. Non-compliance can resutin severe disciplinary penalies by the AAT however isthe Code enforceable bylaw? A~Yes B-No (b) Whats the role ofthe International Federation of Accountants (IFAC)? ‘A~ Represent the views of UK accountancy bodies only B- To represent global accountancy bodies and help maintain high standards of accountancy C To regulate the global auditing profession © ‘The Financial Reporting Council (FRC) is responsible for: ‘A~ Regulating the UK accounting profession B — Overseeing the banking industry C—Settng global accounting standards @ ‘The Consultative Committee of Accountancy Bodies (CCAB) is @ body that: ‘A~ Oversees the Financial Reporting Council (FRO) 8B —Issues UK accounting standards (C~ Represents the views ofthe Chartered accountancy bodies @ In the UK itis a requirement to be 2 member of a professional accountancy body to offer services to the public? A-Yes B-No PI ‘AAPETH Mock Exam 2014 Questions: 5 =Task 2 (8 Marks) fa) Complete the following sentence by selecting the appropriate option. ‘When publishing documents generally, a member may find it advantageous to include inthe document a clause Such a clause can not however be relied upon in all circumstances. Pickist: claiming ability, cisclaimingliabity {b) A colleague tes the meeting that one ofthe i's cents wishes to update its own Ethical Guidelines to take acount of recent amendments to ant-comuptin legisaton, ‘Your mentor has been impressed by your contribution to the meeting and asks you to prepare a briefing document on the subject forthe client. This isnot an area in which you have detailed knowledge, although you are aware that its relevant for al publc-body clients. {i) Complete the following sentence by selecting the appropriate option, In accordance with the fundamental principle of , you must tll the parner honesty tha this task is outside the boundaries of your curent professional expertise, and that you will need to obtain information and help in order to complete it competent. Pict: confidentiality / objectivity / professional competence and due care (i) Complete the folowing sentence by selecting the appropriate option. You may also need to consider if the information given inthe briefing paper turning out tobe incorrect or incomplete (although given in good faith). Some form of disclaimer may be attached, stating thatthe (Information is given for his user and purpose ony, and should not be relied on by tid partis or for other purposes; (i) Firm takes no financial responsibilty forthe information. Because this matter is relevant for all publc-body clients, however, you should also recognise that represents a leaming gap, which you should take nto account as part of your duty to develop your professional and technical competence through Pickis: continuing professional development / duty of care /letter of engagement /abilty () Complete the folowing sentence by selecting the aporopriate option, ‘The AAT's CPD cycle comprises of four steps: assess, plan, acon and A= communicate B-organise C-explain D-evaluate onc Boe 6 AAPETH Mock Exam 2014 Questions@ To comply with CPD requirements members ofthe AT must keep adequate CPD records Is ths statement True of False? A-Tue B-False Task 3 (3 Marks) (@ ‘Anew client nas given their accountant £10,000 to be transfered to one o the cent’ overseas supplies. After reviewing the supporting documentation reatng tothe transaction the accountant discovers tht the money is ‘connected with @ money laundering operation. ‘The accountant very foolishly chooses not to report this transaction, Under the Fraud Act 2008 which is the most key offence thatthe accountant has committed? ‘A Fraud by false representation B —Fravd by fang to dlscose information C- Fraud by abuse of position (o) ‘Amember in practice is holding a substantial sum of money on behalf ofa client, While the clients on holiday the member sees an adverisement for a sports car he would like to buy and as he doesn't have money to hand Uses the client's funds only unti ne can arrange a bank loan, Under the Fraud Act which isthe most likely offence thatthe member has committed? ‘A~Fraud by abuse of position 8 -Fraud by false representation (C-No offence committed asthe member intended to retum the money to the client () From the tit below select three safeguards that should be used when handling cent money. ‘A Funds kept ina separate account 'B- Funds must be deposited in String C-Funds only used for purpose intended D— Balance on any one lent account must not exceed £50,000 E~ Members to be ready to account for monies at all ies AAPETH Mock Exam 2014 Questions 7Task 4 (10 marks) (@ ‘Answer the following question by selecting the appropriate options. “Theresa legal obigaton to maintain the confidential of information wher information fs given or obtained in ‘roumstances giving ise oa breach of duty. Which THREE ofthe following are correct unde the principle of confidentiality? The need to comply with te principle continues even aftr the end of relationship between ‘a member and a client or employe. You may use any information you have acquired as the contrac is no longer in place ‘You may use any prior experience gained from client or employee retationships You must not use or disclose any confidential information acquired or received as a result of professional or business relationship. (b) Safety guards (1) ‘colleague describes the situation at her previous employer, where industial machinery was routinely used witout safety quards, and where accident and injury records were falsified to avoid investgaton This had gone on for years. Complete the following sentence by dragging the relevant items to each box. tftis found thatthe firm's action is legal, al staf members who are aware ofthe fact have th right ‘and duty to report the matter. While this creates a potential UK law supports internal disclosure, and Jor reporting to an appropriate regulator, where rules are being infinged Drag items confict of loyalty duty heath and safety Pubic Interest Disclosure Act (1998) _| right whistleblowers per 8 ‘AAPETH Mock Exam 2014 QuestionsSafety guards (2) (c) Answer the following question by selecting the appropriate option. Based on the information in Safety guards (1), in the fist instance who should the matter be reported to? SE Shareholders of the company Board of Directors of the company Health and Safety officer ofthe company The Police Safety guards (3) (4) Complete the following paragraph by selecting the correct principal from thelist: ‘further eicl issue arises from the colleague's disclosure o illegal behaviour by her former employer. Her duty of_____did not cease when she let that employer, She may need to take independent legal advice about the next steps to take Pickist confidentiality, due care, integrity, objectivity, professional behaviour © ‘You have been employed by Co and Co plc fr a number of years. Over te last year, your line manager has deleraely covered up evidence of reud and other ilegal acs. Asa result ofthe action of your ine manager, you have fet increasing treats to your ably to act with an appropriate degre of due care and professional competence. In accordance with the ethical guidelines you have attempted to reduce he treat. Unfortunatly you donot fee the treats sufcienty reduoed and want to take futher acton You now wish io make a protected disclosure to the board of Co and Co, Answer the following question by selecting the appropriate option. What is your pasion 2s a whiste-iower? This is nota qualifying disclosure so you are not protected ‘You wil not be protected unless you disclose to a legal adviser ‘You willbe protected providing you are acting in good faith (f) Complete the following sentence by selecting the appropriate option. is where an accountant informs someone else that an authorised or protected disclosure has been made and this is likely to prejudice eny investigation Pickiist Informing / Reporting | Tipping off ‘AAPETH Mock Exam 2014 Questions 9Task 5 (6 marks) @ Complete the following sentence by selecting the appropriate option. Cent Xis an aut clint ofthe practice Alice works in. Ace was seconded to ClentX to help with the preparation o he statutory accounts a ther rancil yea end. Her manager is currently off sick and she has teen asked to stand in for him in the shor term to work onthe auc of X ‘This presents the treat of Pickist familaty / intimidation / self interest! self review ) ‘Answer the following question by selecting the appropriate option ‘Which of the following are examples of situations where your ‘independence in appearance” may be threatened? (0) Where theres a personal nancial gain in the outcome (i) Where your fim has a nancial gain in the outcome (li) Reviewing or reporting on workin which you (or your fm) was involved (hv) Being threatened or bulied None of he above (and (i) only Alf th [end qi onty (c) Using the drag options match the threat with the action in the table below, May oocur as 2 result ofthe financial or other interests of a member or ofa clase or personal elation ofthe member May oocur when a previous judgment needs tobe re-evaluated by the member responsible for the judgement May occur when a member promotes a positon or opinion to the Poin that subsequent objectivity may be compromised | May occur because of a close relationship, a member becomes 100 sympathetic to the interest ofthat party When a member may be deterred from acting objectively by threats, whether actual or perceived Drag tems. advocacy familiarity intimidaton seltinterest self review PQ 10 AAPETH Mock Exam 2014 Questions(a) osie works inthe finance department of large manufacturing company. She is being put under pressure to make false staements and to intentonaly misled te intemal audit team. Josie is concerned that she i in a ‘oserlose situation and that she wil lose her job either way. ‘Answer the following question by selecting the appropriate option. Josie's situation represents the threat of: Solt.nterest Intimidation Advocacy With al threats, one of the fist actions is o attempt to puta safeguard in place to eliminate of reduce this threat Task 6 (11 marks) (a) Complete the following sentence by selecting the appropriate option. ‘When a client offers a gift tothe lien the member must consider potential criminal offences under the Pictst: Bribery Act, Data Protection Act, Public Interest Disclosure Act (b) () Answer the following question by selecting the appropriate option. You are acting as an agent fora cient A a property developer. A third party approaches you with the offer of a Gift which might be seen to infuence your actions in relation tothe principas business. ‘The actions of the thd party are Unethical egal [| (i) Complete the following sentence by selecting the appropriate option ‘The Money Laundering Regulations 2007 require you to conduct to gather information about a prospective customer, Picklist @ review / due care / due diligence BPP ‘AAPETH Mock Exam 2014 Questions "1 “es(ii) Answer the following question by selecting the appropriate option. Nr F has decided to change his professional adviser, He is interested in your services and tls you that his current advisers never avaiable at the time he wants to talk. He presents you wih a completed porto of his financial particulars and all seems tobe in order. You explain o Mr F that you have a professional duty to communicate with hs curent adviser. At this point Mr F asks defensively to speak to your manager immediately. ‘Your manager speaks privately to Mr F and immediately assures you that he! be a great client to have and asks you to set up the engagement as soon as possible. ‘What action should you now take? ss we ‘Accept the assurances and draw up a letter of engagement ‘Speak directly to your manager and decline to act for Mr F ( Complete the following sentence by selecting the appropriate option. (Operational risk is defined as “the risk of loss resuling from inadequate or failed intemal processes, people and systems oF fom, s Picklst: cultural values / extemal events / goverment legislation (d) ‘colleague at the ethics meeting raises the issue of workplace heath and safety atthe fm sel. t appears some fre doors in the offices are kept locked; they ae only unlocked on the morning of scheduled fire drs. Stat who have voiced concerns about this have simply been tld that itis a security precaution. Respond to the following statomont by selecting the appropriate option, The locking of re doors is potential breach of UK law on heath and safety at work. The precise regulations in regard to fire prevention and safely should be checked True False (e) ‘Atlunch time, you go fora farewell drink with colleague who is leaving the fm to set up as a selt-employed ‘ocountant. He shows you the draft advertisement he is planning to use, in which his main selling points are the lowest fee rates inthe area’ and the offer of a fee inital consultation for prospective cients, He intends to advertise himself as a ‘property fnance specialist, having personal experience of the buy-toent housing market and its taxation aspects. I thought doer a commission to local conveyancers and estate agents to introduce their cients to me, oo,’ he enthuses. ° ‘Your conversation was on an informal basi; however you have a duty to uphold the principles of the AAT Code of Professional Ethics. ee 2 ‘AAPETH Mock Exam 2014 QuestionsRespond to the following statement by selecting the appropriate option ‘The claim that he is offering the lowest fees inthe areas wil not be allowed as its misleading and makes comparisons with competitors. True False ci} Respond to the following statement by selecting the appropriate option, Offering commission fo local estate agents is no ethical Ea True Fase Task 7 (8 marks) (@) You have been asked to take on a shoe shop client. They have previously dealt with another branch of your firm for many years. ‘The owners have a number of outlets in other regions and are now looking to launch one in your town centre. AS ithappens, you already have a client who sells shoes in the town, Atthe top of the fle, you find an urgent fax from a ending institution, asking for financial information about your proposed new client. Respond to the following statement by selecting the appropriate option. A potential confit of interest exists inthis situation, Tre False ‘AAPETH Mock Exam 2014 Questions 8(b) Respond tothe following statement by selecting the appropriate option. ‘Your duty of confidentiality to your proposed new client prevents you from responding tothe fax rom the lending instittion True False © Jom is an AAT member working in practice. He has suspicions that one of his cents, Frodo Ltd is involved in funding terrorist activities. Jon wants to inform the correct peogle of his suspicions to ensure the correct action is taken Answer the following question by selecting the appropriate option, Who do you advise Jon to disclose his suspicions to? ‘The Board of Frodo Lid The Police The National Crime Agency (NCA) @) Freddie is a member of the AT and has worked forthe same frm of accountants for 10 years. He has built up @ ood client base and is well respected amongst the local business community. Feeling the need to move on and progress his career he applied fora post with a much arg rm of accountants inthe nearby city centre, Freddie has been invited to an interview. When discussing the role he offered to bring his current client contacts. ‘with him and would also let some of the major clients know he was making the move. ‘You are the Head of HR at tis interview. ‘Answer the following question by selecting the appropriate option, To actin an ethical manner what action should you take in decing whether to invite Fredaie back fora second interview? es __ Ofer Freddie the job. Bringing his cient lst wll be great boost to their current local cient base, Due to a lack of ntegity, do not offer a second interview. This shows a fundamental breach of both integrity and confidentiality. Report Freddie to the AAT. hit 4 AAPETH Mock Exam 2014 Questions(e) ‘The principle of professional behaviour imposes an obligation on members to comply with relevant laws and Feguations and avoid any action that might bring disrepute to the profession.” Inmarketing and promoting services, members must be honest and truthful ane qualified vith the AAT last year and hes recently started her own business. She previously worked fora smal frm of accountants, carrying out general book Keeping services. She now works ftom home. She has decided to increase her marketing efforts by advertising in the local papers. ‘Answer the following question by selecting the appropriate option, Her advert includes the following statements, Which of the statements might bring the profession in to disrepute? "Accountancy Services ata price you can afford’ "Expertise in both personal and business tax” "Free inital consultation” Task 8 (7 marks) fa) ‘A syndicate of property developers have recently engaged you to prepare profit projections fra local development project. These projections wil be used to advertise the project to potential investors. Development applications have been posted a the local Town Planning office. Your fm is delighted to have been engaged by the syndicate as ithas not previously been a client. Several members have recently hinted tha they may be looking to change accountants forthe bulk oftheir financial reporting and tax work ‘Among the cost estimates provided by the syndicate you finda large miscellaneous expenses’ item, When you «query ths item, you ae tld that his is merely a contingency sum, fo cover unforeseen costs when dealing wit the Town Planning ofce Something about the way this is said makes you wonder whether tis is the case. (i) Complete the following sentence by selecting the appropriate option. Itmay be perceives that there is pressure to compromise your, {infatng the prot projections), sven the prospect of winning substantial future work for the firm, i this project goes wel. (i) Complete the following sentence by selecting the appropriate option, ‘There may be a serious issue with regards to the “miscelaneous expenses" item. You have grounds for suspicion that the syncicate may be planning to ofer some inducement othe authorities to push trough the application. This would be ilegal under ant-coruption legislation and you would have a o appropriate authorities, {ili Complete the following sentence by selecting the appropriate option, regulations may also apply, so you will have tobe careful about querying the matter futher for tear of, Pickiist duty of care / duty to report independerice /integity ‘money laundering /Upping off ‘AAPETH Mock Exam 2014 Questions 18(b) ‘Answer the following question by selecting TWO appropriate options. To which ofthe folowing disclosures does the Pubic Interest Disclosure Act extend? ES Professional negligence Endangerment of an individual's health and safety Environmental damage (o) Wizard Ltd refusing to make a disclosure ofa known taxation error. The company has had notice and has been given ime to reflect. You are now obliged to take action ‘Answer the following question by selecting the appropriate option. Who do you report the clients refusal to take action to? ‘The National Crime Agency (NCA) HM Revenue and Customs ‘The Money Leundering Reporting Officer (MLRO) @ Josie works inthe finance department of a large manufacturing company. She is being put under pressure ‘make fase statements and to intentonally mislead the intemal audit team, Josie is concemed that she is in @ lose-ose situation and that she wil lose her job ether way. ‘Answer the following question by selecting the appropriate option, In Jsie's case what safeguard can be implemented immediately? Resignation from the company Obtain advice from the AAT Confront the source of pressure teswane BBE 16 AAPETH Mock Exam 2014 QuestionsTask 9 (4 marks) @ From the options below identity the two Key aspects of sustainably stated in the UN Brundtland Report ‘A= meet the needs ofthe present generation Buse resources when needed C- plan efficiently forthe short term give the ability to future generations to meet their own needs ® Ideity tree examples of good sustinbity practice ‘A—use ‘green’ suppliers: 8 -use conference cals instead of traveling to meetings C-use of drains to dispose of chemical waste ‘D-using oil and gas when other renewable energy sources are available supporting a cycle to work scheme © ently the thre categories that are associated wih the “Triple Bottom Line" approach to sustainability. Financial B- Computing C~ Environmental D-Heaith E Social F Travel G-Creatvily @ ‘The professional accountant has wich one ofthe folowing fundamental responsibiles when taking into account sustainability factors? ‘A= Increase fee income B—Cut overhead costs C~Act in the public interest BPP ‘AAPETH Mock Exam 2014 Questions 7 eead ©) 18 AAPETH Mock Exam 2014 Questions