An analyst has been writing research reports on a company for many years. As part of the analyst’s continuing research efforts, the analyst allows the firm to fly him to the firm’s headquarters and put him up in the guest quarters the company has for all corporate visitors. According to Standard I(B), Independence and Objectivity, this is: A) a violation if the headquarters are within reasonable driving distance from the analyst’s home. B) a violation no matter what the circumstances. C) not a violation even if the headquarters are within reasonable driving distance from the analyst’s home. D) not a violation under any circumstances
B
b
A) Under some exceptional circumstances (remote location, no hotel around), the corporation may provide lodging. See Example 1 page 26 http://www.cfapubs.org/doi/pdf/10.2469/cpb.v2007.n2.6002 so B) is inaccurate
b is the best option. however, I can think of a situation when it’s still going to be ok. For example, if the headquarters are in an island 10 miles away from the shore in Alaska and there are no hotels in the area and no commerical flights to the island.
maratikus Wrote: ------------------------------------------------------- > b is the best option. however, I can think of a > situation when it’s still going to be ok. For > example, if the headquarters are in an island 10 > miles away from the shore in Alaska and there are > no hotels in the area and no commerical flights to > the island. yep.
maratikus Wrote: ------------------------------------------------------- > b is the best option. however, I can think of a > situation when it’s still going to be ok. For > example, if the headquarters are in an island 10 > miles away from the shore in Alaska and there are > no hotels in the area and no commerical flights to > the island. Not so sure, if under some circumstances that wouldn’t be a violation, than “no matter what the circumstances” is innacurate. However, “if the headquarters are within reasonable driving distance from the analyst’s home” then, we know that it doesn’t fit the remote location setting and hence in this case, it would be a violation and A) would be the right answer
Nice work, Olivier. But it was a pretty tricky/*&&&tty way to pose the question… Your answer: B was incorrect. The correct answer was A) a violation if the headquarters are within reasonable driving distance from the analyst’s home. If such a trip is “out-of-the-way,” payment by the company for the trip is acceptable. If the headquarters are within reasonable driving distance, the analyst should drive there.
it was a good question. I’m glad we have enough time to learn from our mistakes.
jumping in a little late here…but I SWEAR by my Schweser …and CFA books…I would’ve answered A…
I was going w/ B, which would’ve been wrong. I have a question though: The CFAI text doesn’t mention anything about “driving distance”. It only says that the analyst should pay for the air travel and accommodation, unless the headquarters of the clients are located in the middle of nowhere. Since the question doesn’t mention anything about the location of the headquarters, I would presume that it’s reachable by a commercial flight. It doesn’t have to be within driving distance! Edit: I think Olivier explained it quite well.
I agree with ruhi22 but I did not like B because it said “no matter what”, and we all agree if the company was located in the middle of nowhere then it would be ok. Obviously D does not work because of the reasons ruhi22 gave above. C is clearly wrong. Drive yourself you lazy analyst! That leaves us with A, which would be the best answer considering the other options they gave us.
i don’t like that question at all. Thankfully, at least at L1, the CFAI takes all the ambiguity out of the questions. Here’s to hoping that continues.
I remember schweser stating that you SHOULD pay for travel expenses, but as long as it is reasonable, it is permissable (just not recommended).
Yeah, I would’ve definitely said A). Guys, we all know by now that Schweser drops questions in where they, clearly, try to be creative and deviate a little from the literal meaning of the standard. While I would try to be open to BS like this in the Q-bank (not getting too hung up on if we’ve only heard of paying for one’s flight or driving before), I wouldn’t waste too much time on trivial shite like this…this is pretty much a level 1 questions and the ethics questions last year were wayyy harder and more involved (mostly all of them were the classic two-parters). I do remember corporate governance being a main focus last year…lots of questions about the board and structure and things in shareholders’ best interests.