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ACCA Strategic Professional · Strategic Business Reporting (International) · Professional and ethical behaviour in corporate reporting

Delta plc's finance team member Omar holds shares in a supplier, Kestrel Ltd, which is being assessed for a contract. Omar prepares the related-party disclosure note and also approves the evaluation of Kestrel's bid. Omar has not told anyone about his shareholding. Which analysis is most appropriate?

Omar faces both self-interest and self-review threats. His shareholding gives a financial interest in the supplier, and he would review matters linked to his own decisions. He should disclose the interest, withdraw from the bid evaluation and have the disclosure note independently reviewed, rather than rely on the holding being small.

  1. AOnly a self-interest threat exists, and no action is needed because the holding is small
  2. BSelf-interest and self-review threats exist; Omar should disclose the interest, withdraw from the bid evaluation, and have the note independently reviewedCorrect
  3. COnly a familiarity threat exists, resolved by rotating Omar to another supplier
  4. DNo threat exists because related-party disclosures are required only for key management personnel

Explanation

Omar's shareholding creates a financial self-interest threat. Approving the bid and then preparing the disclosure about it adds a self-review element. Appropriate responses are disclosure, withdrawal from the decision and independent review. Size alone does not remove the threat unless it is clearly insignificant, and concealment aggravates it.

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