26. A member of ICAB is asked by a client to advise on a transaction that benefits the client but would mislead lenders about the client's solvency. Which characteristic of a profession explains why the member must decline?

A) A profession is defined by loyalty to the client above every other duty
B) A profession accepts a duty to act in the public interest, which can override the wishes of an individual client
C) A profession is defined by the right to charge the highest fees, which allows a member to refuse work at any time without explanation
D) A profession is defined by freedom from all regulation, which means the member alone decides what is acceptable in each engagement

Correct: B complex Public interest

Professions are characterised by specialist knowledge, a code of ethics and a duty to the public interest. Misleading lenders harms third parties, so the duty to the public overrides client instructions.

27. A critic says that a professional body which both promotes its members and disciplines them has a built-in conflict. Which response best supports the case for keeping self-regulation, with independent oversight added?

A) Independent regulators have no technical expertise, so their involvement would reduce the quality of standards and disciplinary decisions
B) Members have the technical expertise to set practical standards, and independent oversight such as the Financial Reporting Council helps maintain public confidence
C) Members are always more objective than outsiders, so no independent body can add anything to the quality of discipline in the profession
D) Self-regulation costs the state nothing, so the quality of standards is not important if the profession bears the whole cost of regulation

Correct: B complex Self-regulation

Expertise, flexibility and cost are the usual arguments for self-regulation. Independent oversight counters the perceived conflict of interest and supports confidence.

28. Under the Financial Reporting Act 2015, a company that is a public interest entity changes its auditor. Which role of the Financial Reporting Council is most directly relevant to the auditor's eligibility?

A) Granting registration to the company as a legal entity before it begins trading
B) Enlisting and regulating auditors of public interest entities and monitoring audit quality
C) Fixing the audit fee that the company will pay to the incoming auditor each year, as part of its responsibility for the commercial affairs of every registered company
D) Preparing the annual financial statements of the entity on the directors' behalf

Correct: B complex Financial Reporting Council

The FRC oversees public interest entities, sets and adopts standards, monitors audit and reporting quality, enlists and regulates auditors, and enforces discipline. Company registration is the RJSC's role, and directors prepare the statements.

29. A person who is not a member of ICAB describes himself on a business card as a 'Chartered Accountant' and prepares accounts for small businesses. Which statement is most accurate?

A) Anyone may use the title 'Chartered Accountant' provided they have a degree in accounting and file annual returns with the NBR, with no requirement for membership of any professional body to be shown to clients
B) No title connected to accounting is restricted in Bangladesh because the Bangladesh Chartered Accountants Order 1973 deals only with audits
C) The title is restricted, but the restriction applies only to people who also hold a certificate of practice to carry out audits
D) The title 'Chartered Accountant' is restricted to ICAB members, though the general term 'accountant' is not legally restricted in the same way

Correct: D complex Use of titles

There is no general legal bar on calling oneself an 'accountant', but 'Chartered Accountant' and 'Cost and Management Accountant' are restricted through ICAB and ICMAB. Statutory audit separately requires a certificate of practice.

30. An ICAB member in practice suspects that a client's cash deposits come from criminal activity. Under Bangladesh's AML framework, which course of action is most appropriate?

A) Report the matter to the Registrar of Joint Stock Companies, who is responsible for investigating all money laundering offences, on the basis that company registration includes the powers to receive reports of suspicious transactions
B) Tell the client of the suspicion immediately so that the client can explain the deposits and avoid an unnecessary report
C) Continue the engagement and take no action, because accountants have no obligations under the Money Laundering Prevention Act 2012
D) Follow the firm's procedures and report the suspicion through the proper channel to the Bangladesh Financial Intelligence Unit without tipping off the client

Correct: D complex Anti-money laundering

BFIU, within Bangladesh Bank, receives suspicious transaction reports under the Money Laundering Prevention Act 2012. Tipping off may prejudice an investigation and is itself an offence.

31. Shareholders of a collapsed company claim the auditors should have detected the fraud and 'guaranteed' the accounts. The auditors say they only gave reasonable assurance. Which term describes this difference in views?

A) The materiality gap between the amount a user thinks is significant and the amount set by management
B) The reporting gap between the date of the audit report and the date of the annual general meeting
C) The independence gap between the auditors' fee and the cost of the audit work performed, which arises whenever an audit fee is lower than the cost of providing the service
D) The expectation gap between what users believe an audit provides and what an audit is designed to deliver

Correct: D complex Expectation gap

The expectation gap is the difference between what the public expects of auditors and what auditors actually do under standards. Reasonable assurance is not a guarantee.

32. Which TWO statements about ICAB and IFAC are correct? (Select TWO.)

Multiple response
A) IFAC has only a few member organisations, all in Asia
B) ICAB's Code of Ethics is largely based on IFAC's Code
C) ICAB regulates company registration for all limited companies
D) IFAC is a government agency of Bangladesh that issues audit certificates
E) ICAB was established under the Bangladesh Chartered Accountants Order 1973

Correct: B, E difficult Professional bodies

ICAB was established by the 1973 Order and its Code is largely based on IFAC's. IFAC is an international body with more than 175 members, and registration is the RJSC's function.

33. Which THREE are valid reasons for regulating a profession? (Select THREE.)

Multiple response
A) To protect the public from incompetent or unethical practice
B) To prevent any new entrant from joining the profession
C) To ensure that members have the necessary competence
D) To maintain confidence in the quality of professional services
E) To guarantee that all clients pay the same fees

Correct: A, C, D difficult Objectives of regulation

Regulation protects the public, maintains confidence and ensures competence. It should not restrict entry or set uniform fees.

34. Which TWO activities normally require specific authorisation in Bangladesh? (Select TWO.)

Multiple response
A) Reading a published annual report
B) Signing a compliance certificate for a listed company as a practising professional
C) Writing a personal budget for a relative
D) Conducting a statutory audit of a company

Correct: B, D difficult Regulated practice

Statutory audit and the compliance certificate for corporate governance are regulated activities. Personal budgeting and reading reports are not.

35. Which TWO statements about public interest entities are correct? (Select TWO.)

Multiple response
A) They are free of any disclosure requirements
B) Their audit quality is of wider concern because many stakeholders rely on them
C) They are limited to government departments only
D) They never include banks and listed companies
E) They are subject to the oversight of the Financial Reporting Council

Correct: B, E difficult Public interest entities

PIEs include listed companies and banks, attract more oversight and affect many stakeholders.

36. Consider the regulation of the accountancy profession. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. Disciplinary procedures can lead to sanctions on members.   Yes

2. The public interest is relevant to the regulation of a profession.   Yes

3. The same body must always set standards and discipline members.   No

4. Regulation is unnecessary if members are competent.   No

5. A code of ethics sets standards of behaviour for members.   Yes

Correct: Y, Y, N, N, Y difficult Professional regulation

(1) Yes. (2) Yes. (3) No: functions can be separated. (4) No: assurance for the public still requires regulation. (5) Yes.

37. Consider accountants working in business. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. Preparing financial information requires honesty and care.   Yes

2. An accountant in business owes duties only to his employer.   No

3. Professional accountants in business are still bound by the fundamental principles.   Yes

4. Pressure from superiors can create ethical threats.   Yes

5. A member may ignore the code in his private life.   No

Correct: Y, N, Y, Y, N difficult Accountants in business

(1) Yes. (2) No: duties are also owed to the public interest. (3) Yes. (4) Yes. (5) No: behaviour that discredits the profession is relevant.

38. Consider regulators in Bangladesh. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. The NBR regulates the securities market.   No

2. RJSC oversees auditor discipline.   No

3. BFIU receives suspicious transaction reports.   Yes

4. Bangladesh Bank regulates banks.   Yes

5. BSEC regulates the securities market.   Yes

Correct: N, N, Y, Y, Y difficult Regulators

(1) No: the NBR administers tax; BSEC regulates securities. (2) No: RJSC registers companies; FRC and ICAB are involved in auditors. (3) Yes. (4) Yes. (5) Yes.

39. Consider independence of oversight. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. Oversight bodies may monitor audit quality.   Yes

2. Independent oversight can enhance public trust.   Yes

3. An oversight body should have no powers of enforcement.   No

4. Professional bodies may provide guidance to members.   Yes

5. Regulation removes all risk of misconduct.   No

Correct: Y, Y, N, Y, N difficult Ethics of regulation

(1) Yes. (2) Yes. (3) No: enforcement powers support effectiveness. (4) Yes. (5) No: misconduct can still occur.

40. Consider audit. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. Reasonable assurance is the same as absolute assurance.   No

2. An audit provides reasonable assurance.   Yes

3. Auditors are responsible for detecting every fraud.   No

4. Audit reports are addressed to shareholders of companies.   Yes

5. Auditors may have to be independent of the client.   Yes

Correct: N, Y, N, Y, Y difficult Audit assurance

(1) No. (2) Yes. (3) No: they are not guarantors. (4) Yes. (5) Yes.

41. A client deposits small sums of cash in many bank accounts, wires the money through several shell companies abroad, and then buys real estate with the funds. Which stages of money laundering do these steps represent, in order?

A) Layering, integration and placement, because moving funds abroad is always the first step in laundering criminal proceeds
B) Integration, placement and layering, because buying property is always the first step in introducing funds into the financial system
C) Placement, integration and layering, because the transfer through companies abroad is the final stage of the cycle of laundering
D) Placement, layering and integration

Correct: D complex Money laundering stages

Placing cash into the financial system is placement; moving it through complex transactions to obscure origin is layering; using it to acquire assets so it appears legitimate is integration.

42. A bank is onboarding the spouse of a senior government minister. Which approach is most consistent with an AML framework applying a risk-based approach?

A) Open the account at once and make a report to the regulator, because all such relationships must be reported without any assessment
B) Apply the usual due diligence only, because a family relationship with a minister does not alter the risk of money laundering
C) Apply enhanced due diligence, including establishing the source of wealth and obtaining senior management approval
D) Decline to open the account in every case, because anyone connected to a public official presents a risk that cannot be managed

Correct: C complex Politically exposed persons

Higher-risk customers such as politically exposed persons require enhanced measures under a risk-based approach, not automatic refusal or normal procedures.

43. A firm of accountants is offered a large consulting fee by a company that is also an audit client and wants the firm to design the very systems it will later audit. The firm says that the profession's own code is sufficient safeguard and that no outside oversight is needed. Which argument best supports independent oversight?

A) Independent oversight is needed because accountants lack the technical ability to prepare any set of financial statements, so that a regulator must prepare the financial statements in place of the members of the profession
B) Independent oversight is needed because professional codes cannot be enforced against members of a profession in any circumstances
C) Independent oversight is unnecessary because market competition between firms always ensures that audit quality is maintained
D) Independent oversight protects the public interest where a self-regulating body may have conflicts between member interests and public confidence

Correct: D complex Regulation scenario

Oversight bodies such as the FRC address concerns of self-regulation by monitoring quality and enforcing discipline.

44. An audit firm applies to audit a bank. Which statement best reflects the role of the Financial Reporting Council under the Financial Reporting Act 2015?

A) The FRC appoints the auditor for every private company and fixes the audit fee each year
B) The FRC supervises banks' liquidity and imposes capital requirements as a banking regulator,
C) The FRC enlists and regulates auditors of public interest entities and monitors audit quality and discipline
D) The FRC registers all companies in Bangladesh and maintains the register of members for each

Correct: C difficult FRC enlistment

The FRC oversees public interest entities, sets and adopts standards, monitors quality and enforces discipline. Bank liquidity is Bangladesh Bank's role.

45. Shareholders sue auditors after a fraud of Tk 90m at a subsidiary that was concealed by collusion between three senior managers. The audit was performed in accordance with standards. Which defence is strongest?

A) The auditor is responsible for preventing all fraud, but the shareholders' claim fails
B) The auditor is responsible only for the accuracy of the company's tax returns and not for financial statements
C) An audit gives reasonable, not absolute, assurance
D) The auditor has no responsibility to consider fraud in any circumstances,

Correct: C complex Reasonable assurance

Auditors must plan to detect material misstatement including fraud, but inherent limitations such as collusion mean assurance is not absolute.

46. A person who holds only a diploma in accounting advertises 'Chartered Accountant — audit services for companies'. Which regulatory problems arise?

A) Misuse of a restricted title, and statutory audit work requires a certificate of practice and regulatory approval
B) Only the audit work is a problem, because the title 'Chartered Accountant' is available to anyone who applies
C) No problem arises, because the title and audit work are both unrestricted for anyone with a diploma
D) Only a tax problem arises, because the National Board of Revenue is the sole authority for titles and audits,

Correct: A difficult Professional titles

Chartered Accountant is restricted through ICAB, and statutory audit requires a certificate of practice and regulatory approval.

47. A bank reviews its AML controls. Which THREE are normal components? (Select THREE.)

Multiple response
A) Customer due diligence including identification
B) Destroying records after one week
C) Telling customers when a report has been made
D) Ongoing monitoring of transactions
E) Reporting of suspicious transactions to the BFIU

Correct: A, D, E difficult Money laundering controls

The first three are standard. Tipping off is prohibited, and records must be retained.

48. Which TWO statements about the regulation of the accountancy profession are correct? (Select TWO.)

Multiple response
A) Self-regulation draws on members' expertise
B) Independent oversight is incompatible with self-regulation
C) A profession is defined by freedom from any duty to the public
D) Regulation aims to protect the public interest and maintain confidence

Correct: A, D difficult Professional regulation

Public interest and expertise are central. Professions accept duties to the public, and oversight can complement self-regulation.

49. Which TWO measures could narrow the audit expectation gap? (Select TWO.)

Multiple response
A) Public education about what an audit does and does not provide
B) Clearer communication of the auditor's responsibilities in the audit report
C) Reducing the scope of audits to exclude fraud considerations
D) Promising users that audits detect all fraud

Correct: A, B difficult Expectation gap

Communication and education narrow the gap. Overpromising or reducing scope widens it.

50. Which THREE statements are correct about use of titles? (Select THREE.)

Multiple response
A) Anyone may use 'Chartered Accountant' if they pay a fee
B) Statutory audit requires no certificate of practice
C) 'Chartered Accountant' is restricted via ICAB
D) 'Cost and Management Accountant' is restricted via ICMAB
E) There is no general legal bar on describing oneself as an 'accountant'

Correct: C, D, E difficult Title restrictions

The first three are correct. The last two are false.