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ACCA Strategic Professional · Strategic Business Leader · Professionalism, ethical codes and the public interest

Ngozi, an accountant in business, is preparing a profit forecast for Delta Foods' board. Her brother has just been appointed the main supplier under a large new contract, and her forecast assumes favourable pricing for that contract. Which description of the main threat and a suitable safeguard is most appropriate?

The threat is self-interest or familiarity, because her brother benefits from the pricing assumed. A suitable safeguard is to disclose the relationship to a senior person and have the assumptions independently reviewed, which reduces the threat to an acceptable level without drastic action.

  1. ASelf-interest or familiarity threat; disclose the relationship to a senior person and have the pricing assumptions independently reviewedCorrect
  2. BSelf-review threat; ask her brother to approve the forecast
  3. CAdvocacy threat; stop work on all forecasts permanently
  4. DIntimidation threat; resign from the company

Explanation

The family relationship may bias her judgement in favour of the supplier, a familiarity or self-interest threat. Disclosure to management and independent review of the assumptions reduces the threat to an acceptable level. Asking her brother to approve is absurd, and resignation is excessive as a first step.

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