ACCA Strategic Professional · Strategic Business Reporting (International) · Professional and ethical behaviour in corporate reporting
A listed entity's integrated report highlights only favourable environmental metrics and omits a regulator's fine that is material to stakeholders' decisions. Which assessment is most appropriate from the perspective of the public interest in corporate reporting?
The reporting is inappropriate. Leaving out a material regulatory fine while stressing good news makes the report biased and incomplete, so it is not a faithful representation. Stakeholders rely on balanced information, so voluntary status does not excuse omission, and the dividend is irrelevant to materiality.
- AAcceptable, because integrated reports are voluntary and need not be balanced
- BAcceptable, because only the financial statements must be faithful
- CInappropriate, because omitting material adverse information undermines faithful representation and the balance expected by stakeholdersCorrect
- DInappropriate only if the fine exceeds the entity's annual dividend
Explanation
Information that could influence stakeholder decisions must be complete, neutral and free from error to be faithfully represented. Selective disclosure of positives is bias, whether or not the report is voluntary. Materiality depends on influence on decisions, not on comparison with the dividend.
Did you get it right without looking?
One question tells you little. A timed set on Professional and ethical behaviour in corporate reporting shows your real accuracy, how long you take and where you lose marks.
More Professional and ethical behaviour in corporate reporting questions
- Which of the following is a safeguard created by the profession, legislation or regulation, as opposed to a safeguard within the work enviro…
- Kiran, a finance manager at Dalton Group, discovers that the CFO has overstated revenue by recognising sales before control passed to custom…
- Mateo, an accountant at Corvex Ltd, discovers the CFO has overstated revenue by recognising sales before control transferred. He raised it w…
- Kestrel Co's finance director asks the financial controller to defer recognising a $2m impairment of goodwill until next year because the cu…
- Kestrel Co's finance director is asked by the chief executive to delay recognising a known inventory write-down until after the year end so …
- Priya, a professional accountant in business, is asked by the finance director to delay recognising a known impairment so that a loan covena…