ACCA P1 Governance, Risk and Ethics - 2010 - Study text - Emile Woolf Publishing
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ACCA
P1 Study Text
Professional Accountant
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ACCA
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ACCA
Paper
P1
Professional Accountant
Publishing
Publishing
Welcome to Emile Woolf‘s study text for
Paper P1 Professional Accountant which is:
Written by tutors
Comprehensive but concise
In simple English
Used around the world by Emile Woolf Colleges including
China, Russia and the UK
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Acknowledgements
Thesyllabus
andstudyguidearereproducedbykindpermissionoftheAssociationof
CharteredCertifiedAccountants.
TheUKCombinedCodeonCorporateGovernanceis©FinancialReportingCouncil(FRC).
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Paper P1
ProfessionalAccountant
c
Contents
Page
Syllabus and study guide 1
Chapter 1: The scope of governance 15
Chapter 2: Agency relationships and theories 33
Chapter 3: The board of directors 49
Chapter 4: Board committees 79
Chapter 5: Directors’ remuneration 101
Chapter 6: Different approaches to corporate governance 119
Chapter 7: Governance: reporting and disclosure 139
Chapter 8: Internal control systems 161
Chapter 9: Internal control, audit and compliance 175
Chapter 10: Identifying and assessing risk 201
Chapter 11: Controlling risk 225
Chapter 12: Ethical theories 237
Chapter 13: Ethics and social responsibility 257
Chapter 14: Professional practice and codes of ethics 269
Chapter 15: Conflicts of interest and ethical conflict resolution 289
Chapter 16: Social and environmental issues in ethics and business 307
Practice questions 329
Answers to practice questions 345
Appendix: The UK Combined Code on Corporate Governance 395
Index 417
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© EWP Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides 1
Paper P1
ProfessionalAccountant
S
Syllabus and study guide
The syllabus for Professional Accountant (P1) has been called the ‘gateway syllabus’
for the professional level of the ACCA examinations.
It is concerned with the cultural environment within which the professional
accountant works. Without getting into the detail of financial methods and
techniques, or strategic decision-making, it looks at the ‘proper way’ to run a
business entity or not-for-profit entity. There are several aspects to this.
Corporate governance. This is the way that companies are governed, mainly by
their directors. Similar concepts apply to non-corporate entities. There is ‘good’
and ‘bad’ corporate governance, and the professional accountant needs to
understand the issues involved.
Internal control and risk management. Well-managed entities should have a
culture of risk awareness. Business is not just about making profits: it is also
concerned with risk management and control. The general concepts of risk
management apply to much of the work of the professional accountant – in
financial reporting, auditing, financial management and performance
management.
Professional ethics. Accountancy is a profession, and accountants are required
to apply professional values and ethical standards to the work that they do.
Business ethics. Accountants should also understand the nature of ethics in
business. There are differing views about how business entities should ‘behave’.
For example, to what extent should companies be responsible for the general
well-being of society and for the protection of the environment?
Paper P1: Professional accountant
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Aim
Toapplyrelevantknowledge,skillsandexerciseprofessionaljudgementincarrying
out the role of the accountant relating to governance, internal control, compliance
and the management of risk within an organisation, in the context of an overall
ethicalframework.
Main capabilities
Onsuccessfulcompletionofthispaper,candidatesshouldbeableto:
A Define governance and explain its function in the effective management and
controloforganisationsandoftheresourcesforwhichtheyareaccountable
B Evaluate the professional accountant’s role in internal control, review and
compliance
C Explaintherole
oftheaccountantinidentifyingandassessingrisk
D Explain and evaluate the role of the accountant in controlling and mitigating
risk
E Demonstrate theapplication ofprofessional values and judgementthrough an
ethical framework that is in the best interests of society and the profession, in
compliancewithrelevant
professionalcodes,lawsandregulations.
Rationale
The syllabus for Paper P1, Professional Accountant, acts as the gateway syllabus into
the professional level. It sets the other Essentials and Options papers into a wider
professional, organisational, and societal context.
The syllabus assumes essential technical skills and knowledge acquired at the
Fundamentals level where the core technical capabilities will have been acquired,
and where ethics, corporate governance, internal audit, control, and risk will have
been introduced in a subject-specific context.
The PA syllabus begins by examining the whole area of governance within
organisations in the broad context of the agency relationship. This aspect of the
syllabus focuses on the respective roles and responsibilities of directors and officers
to organisational stakeholders and of accounting and auditing as support and
control functions.
The syllabus then explores internal review, control, and feedback to implement and
support effective governance, including compliance issues related to decision-
making and decision-support functions. The syllabus also examines the whole area
of identifying, assessing, and controlling risk as a key aspect of responsible
management.
Finally, the syllabus covers personal and professional ethics, ethical frameworks –
and professional values – as applied in the context of the accountant’s duties and as
a guide to appropriate professional behaviour and conduct in a variety of situations.
Syllabus and study guide
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Syllabus
A Governance and responsibility
1 Thescopeofgovernance
2 Agencyrelationshipsandtheories
3 Theboardofdirectors
4 Boardcommittees
5 Directors’remuneration
6 Differentapproachestocorporategovernance
7 Corporategovernanceandcorporatesocialresponsibility
8 Governance:reportinganddisclosure
B Internal control and review
1 Managementcontrolsystemsincorporategovernance
2 Internalcontrol,auditandcomplianceincorporategovernance
3 Internalcontrolandreporting
4 Managementinformationinauditandinternalcontrol
C Identifying and assessing risk
1 Riskandtheriskmanagementprocess
2 Categoriesofrisk
3 Identification,assessmentandmeasurementofrisk
D Controlling risk
1 Targetingandmonitoringrisk
2 Methodsofcontrollingandreducingrisk
3 Riskavoidance,retentionandmodelling
E Professional values and ethics
1 Ethicaltheories
2 Differentapproachestoethicsandsocialresponsibility
3 Professionsandthepublicinterest
4 Professionalpracticeandcodesofethics
5 Conflictsofinterestandtheconsequencesofunethicalbehaviour
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6 Ethicalcharacteristicsofprofessionalism
7 Socialandenvironmentalissuesintheconductofbusinessandofethical
behaviour
Approach to examining the syllabus
The syllabus will be assessed by a three-hour paper-based examination. The
examination paper will be structured in two sections. Section A will be based on a
case study style question comprising a compulsory 50 mark question, with
requirements based on several parts with all parts relating to the same case
information. The case study will usually assess a range of subject areas across the
syllabus and will require the candidate to demonstrate high level capabilities to
evaluate, relate and apply the information in the case study to several of the
requirements.
Section B comprises three questions of 25 marks each, of which candidates must
answer two. These questions will be more likely to assess a range of discrete subject
areas from the main syllabus section headings, but may require application,
evaluation and the synthesis of information contained within short scenarios in
which some requirements may need to be contextualised.
Number of marks
Section A Compulsory case study 50
Section B Choice of 2 from 3 questions, 25 marks each 50
100
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