Skip to content

ACCA Strategic Professional · Advanced Performance Management · Performance and reward

Marlow Telecom pays its sales director a bonus on revenue recognised in the year. In December the director asks the finance team to record contracts as complete although services start in February. Which statement best describes the ethical position of a management accountant asked to comply?

The accountant should refuse. Recording revenue before the service starts to inflate a bonus is deliberate misstatement, breaching integrity and professional behaviour. The matter should be documented and escalated through internal channels such as the audit committee. Board approval of the bonus scheme or later reversal of the timing difference does not justify it.

  1. ACompliance is acceptable if the board approves the bonus scheme
  2. BCompliance would breach the fundamental principles of integrity and professional behaviour, so the accountant should refuse and escalate through internal channelsCorrect
  3. CThe accountant should comply but disclose the issue in the next annual report
  4. DCompliance is acceptable because revenue timing differences reverse the following year

Explanation

Deliberately misstating revenue to inflate a bonus breaches integrity and professional behaviour. The accountant should decline, document the matter and follow internal escalation, such as to the audit committee. Board approval of a bonus scheme does not authorise misreporting, and later reversal does not make it acceptable.

Did you get it right without looking?

One question tells you little. A timed set on Performance and reward shows your real accuracy, how long you take and where you lose marks.

Practise Performance and rewardFree diagnostic mock

More Performance and reward questions