ExpertEasy2 marksMultiple Choice
ACCA · Question 04 · Audit Framework and Regulation
SECTION A - CASE 1: NEUROCLOUD ANALYTICS CO
NeuroCloud Analytics Co is a fast-growing tech startup providing AI-driven data analytics to the healthcare sector. You are an audit manager at Turing & Co, planning the audit for the year ended 31 December 20X5. NeuroCloud is not a public interest entity (PIE).
During the planning phase, you note the following:
- The projected audit fee from NeuroCloud represents 18% of Turing & Co's total fee income for the year.
- NeuroCloud has requested Turing & Co to design and implement a new IT system for their financial reporting.
- NeuroCloud's CEO also acts as the Chairman of the Board.
- An audit junior overheard confidential discussions about a revolutionary unreleased AI model and subsequently purchased shares in NeuroCloud.
Question:
The audit junior's action of purchasing shares based on unreleased information breaches which fundamental ethical principles?
SECTION A - CASE 1: NEUROCLOUD ANALYTICS CO
NeuroCloud Analytics Co is a fast-growing tech startup providing AI-driven data analytics to the healthcare sector. You are an audit manager at Turing & Co, planning the audit for the year ended 31 December 20X5. NeuroCloud is not a public interest entity (PIE).
During the planning phase, you note the following:
- The projected audit fee from NeuroCloud represents 18% of Turing & Co's total fee income for the year.
- NeuroCloud has requested Turing & Co to design and implement a new IT system for their financial reporting.
- NeuroCloud's CEO also acts as the Chairman of the Board.
- An audit junior overheard confidential discussions about a revolutionary unreleased AI model and subsequently purchased shares in NeuroCloud.
Question:
The audit junior's action of purchasing shares based on unreleased information breaches which fundamental ethical principles?
Answer options:
A.
Integrity and Objectivity
B.
Confidentiality and Professional Behavior
C.
Professional Competence and Due Care
D.
Objectivity and Professional Competence
How to approach this question
Map the action to the five fundamental principles. Using client data for personal gain = Confidentiality breach. Breaking the law (insider trading) = Professional Behavior breach.
Full Answer
B.Confidentiality and Professional Behavior✓ Correct
The fundamental principle of Confidentiality prohibits using confidential information acquired as a result of professional relationships for the personal advantage of the accountant or third parties. Professional Behavior requires accountants to comply with relevant laws (insider trading is illegal) and avoid actions that discredit the profession.
Common mistakes
Selecting Integrity and Objectivity as a default answer without analyzing the specific nature of the breach.
Practice the full ACCA AA — Audit and Assurance Practice Exam 5
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