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CA Final · Financial Reporting · Professional and Ethical Duty of a Chartered Accountant

CA Sanjay Kulkarni, managing partner of Kulkarni & Associates, wants to strengthen the ethical culture of his firm. He considers four initiatives: (i) performance evaluation and reward criteria that reward ethical behaviour, (ii) a whistle-blowing policy that protects those who report suspected unethical behaviour, (iii) a policy of keeping client dealings ethical but allowing shortcuts with suppliers, and (iv) ethics training programs. Which combination is consistent with the Code of Ethics (13th edition) on promoting an ethical culture?

Initiatives (i), (ii) and (iv) are consistent with the Code: reward criteria, whistle-blower protection and ethics training all promote an ethical culture. Initiative (iii) is not, because the Code says an ethical culture requires the organisation to adhere to ethical values in its dealings with third parties, including suppliers.

  1. A(i), (ii), (iii) and (iv)
  2. B(i), (ii) and (iii) only
  3. C(ii) and (iii) only
  4. D(i), (ii) and (iv) onlyCorrect

Explanation

The Code lists ethics education and training, evaluation and reward criteria promoting an ethical culture, and ethics and whistle-blowing policies as examples. It also says an ethical culture is most effective when the organisation adheres to ethical values in dealings with third parties, which would include suppliers. So initiative (iii) is inconsistent, leaving (i), (ii) and (iv).

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