IFA Ethics, Law & Professional Responsibilities 2

Question 1

An IFA member discovers that a client's bookkeeper has been making unauthorized transfers to a personal account. What is the member's primary obligation?

Accepted Answer

Inform the client immediately and consider money-laundering reporting obligations

Answer

The member must alert the client and evaluate whether suspicious activity reporting is required under anti-money-laundering legislation.

Question 2

Under the IFA Code of Ethics, what does the 'safeguards' approach primarily aim to do?

Accepted Answer

Reduce threats to an acceptable level

Answer

Safeguards are controls designed to reduce identified threats to an acceptable level, not necessarily eliminate them entirely.

Question 3

Which legal concept holds that an accountant can be liable to third parties who foreseeably rely on negligently prepared financial statements?

Accepted Answer

The Caparo three-stage test

Answer

The Caparo Industries v Dickman (1990) case established a three-stage test—foreseeability, proximity, and fairness—for third-party negligence claims against auditors.

Question 4

A member prepares tax returns for a client who later asks the member to represent them in a tax dispute involving those same returns. Which threat arises?

Accepted Answer

Advocacy threat combined with self-review threat

Answer

Representing a client in a dispute about work the member prepared creates both an advocacy threat (championing the client's position) and a self-review threat (reviewing own prior work).

Question 5

Under UK data protection law, which principle requires that personal data not be kept longer than necessary for its purpose?

Accepted Answer

Storage limitation

Answer

The storage limitation principle under UK GDPR requires personal data to be deleted or anonymised once it is no longer needed for its original purpose.

(IFA) Institute of Financial Accountants Certification Practice Test

(IFA) Institute of Financial Accountants Certification Practice Test

IFA Ethics, Law & Professional Responsibilities 2