While performing certain non-audit services for an insurance company, a professional accountant is asked to recommend the appropriate accounting treatment for a weather hedge transaction. The accountant has worked with financial hedges but has no experience with weather hedges. Which of the following actions by the accountant would be in compliance with the IFAC Code of Ethics for Professional Accountants?
a.Refuse to conduct the research and make a recommendation, because of a conflict of interest.
b.Agree with the accounting treatment recommended by the company's hedge fund trader.
c.Agree to recommend the appropriate accounting treatment after performing sufficient research on weather hedges.
d.Refuse to conduct the research and make a recommendation, because of insufficient experience.
Answer:C
Choice "C" is correct. The accountant may agree to recommend the appropriate accounting treatment after performing sufficient research on weather hedges.Choice "d" is incorrect. An accountant may make a recommendation after performing research, even if the accountant does not have previous experience with weather hedge transactions. Choice "a" is incorrect. An accountant should not make a recommendation until sufficient research has been obtained on weather hedge transactions. This situation does not appear to be a conflict of interest.Choice "b" is incorrect. The accountant is responsible for gaining the required level of knowledge on hedge transactions. The recommendation may or may not agree with the accounting treatment recommended by the company's hedge fund trader.