ACCA BT · Chapter 14
Professional ethics in accounting and business MCQs with Answers
11 multiple-choice questions on Professional ethics in accounting and business for ACCA BT Business and Technology. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
Which of the following is NOT one of the fundamental principles in the ACCA Code of Ethics and Conduct?
- A) Profitability
- B) Integrity
- C) Objectivity
- D) Confidentiality
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Answer: A) Profitability
The five fundamental principles are integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Profitability is not an ethical principle and ethical duties take precedence over a desire for profit.
Question 2
Which fundamental principle requires a professional accountant to be straightforward and honest in all professional and business relationships?
- A) Integrity
- B) Objectivity
- C) Professional behaviour
- D) Professional competence and due care
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Answer: A) Integrity
Integrity means being straightforward and honest, and not being associated with information that is materially false or misleading. Objectivity means not allowing bias, conflicts of interest or undue influence to override judgement, professional behaviour means complying with laws and avoiding discredit to the profession, and competence and due care concern maintaining knowledge and acting diligently.
Question 3
An accountant tells a friend at a dinner party about the financial difficulties of a client, naming the client. Which fundamental principle has been breached?
- A) Objectivity
- B) Integrity
- C) Confidentiality
- D) Professional competence and due care
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Answer: C) Confidentiality
Confidentiality requires accountants to respect the confidentiality of information acquired through professional relationships and not disclose it without proper authority or a legal or professional duty to do so. Discussing a client's finances socially is a clear breach. The facts do not involve bias, dishonesty or lack of skill.
Question 4
An accountant is asked to prepare a complex valuation in an area in which she has no experience, with a tight deadline and no access to specialist support. Which fundamental principle is most at risk?
- A) Confidentiality
- B) Objectivity
- C) Integrity
- D) Professional competence and due care
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Answer: D) Professional competence and due care
Professional competence and due care require accountants to maintain the knowledge and skill needed to provide competent service and to act diligently. Accepting work beyond one's competence without appropriate support or time risks breaching this principle. Nothing in the scenario suggests disclosure of information, bias or dishonesty.
Question 5
An accountant holds a large number of shares in a client company whose financial statements she is reviewing. Which type of threat to her fundamental principles does this create?
- A) Self-review threat
- B) Advocacy threat
- C) Self-interest threat
- D) Familiarity threat
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Answer: C) Self-interest threat
A self-interest threat arises where a financial or other interest could inappropriately influence judgement or behaviour; holding shares in the client gives the accountant a personal stake in the reported results. Self-review threats arise from evaluating one's own previous work, advocacy threats from promoting a client's position, and familiarity threats from close relationships.
Question 6
A firm's audit team includes a manager who prepared the client's accounting records earlier in the year before transferring to the audit department. Which threat does this create?
- A) Intimidation threat
- B) Advocacy threat
- C) Self-interest threat
- D) Self-review threat
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Answer: D) Self-review threat
A self-review threat arises when a professional accountant evaluates work that they, or their firm, performed previously, so they may not spot or may be reluctant to admit their own errors. The manager would be auditing records they prepared. There is no pressure (intimidation), promotion of the client (advocacy) or direct financial interest (self-interest) in the scenario.
Question 7
A finance director tells a junior accountant that he will lose his job unless he records a dubious sales transaction before the year end. Which threat to compliance with the fundamental principles does this represent?
- A) Familiarity threat
- B) Intimidation threat
- C) Self-review threat
- D) Advocacy threat
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Answer: B) Intimidation threat
An intimidation threat arises where a professional accountant is deterred from acting objectively by actual or perceived pressures, including threats of dismissal. The appropriate response involves refusing to record the transaction improperly and escalating the matter through appropriate channels, seeking advice if necessary.
Question 8
An accountant has worked closely with the same client's finance director for many years and they now holiday together. Which threat is most likely to arise?
- A) Self-review threat
- B) Intimidation threat
- C) Familiarity threat
- D) Advocacy threat
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Answer: C) Familiarity threat
A familiarity threat arises from a long or close relationship with a client or employer, so that the accountant becomes too sympathetic to their interests or too accepting of their work. Rotation of senior staff and independent review are common safeguards against this threat.
Question 9
Which of the following is an example of a safeguard created by the profession, legislation or regulation, rather than by the work environment?
- A) The firm's own internal review of engagements
- B) Rotation of staff on a client assignment by the firm
- C) Continuing professional development requirements
- D) An employer's whistleblowing hotline
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Answer: C) Continuing professional development requirements
Safeguards created by the profession, legislation or regulation include educational and experience requirements for entry, continuing professional development, corporate governance regulations, professional standards and external review. Internal reviews, staff rotation decided by the firm, and employer whistleblowing procedures are safeguards in the work environment.
Question 10
When an accountant faces an ethical conflict that cannot be resolved informally within the organisation, which of the following is generally the most appropriate next step?
- A) Immediately disclose the matter to the media
- B) Ignore the matter because it is the employer's responsibility
- C) Seek advice, for example from the professional body's ethics helpline or a legal adviser, while documenting the issue
- D) Resign without informing anyone of the reason
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Answer: C) Seek advice, for example from the professional body's ethics helpline or a legal adviser, while documenting the issue
The recommended approach to resolving ethical conflicts includes gathering facts, considering the principles involved, using internal procedures and escalation, and seeking advice from the professional body or a legal adviser, documenting each step. Disclosure to the media is rarely appropriate and may breach confidentiality, ignoring the issue risks association with wrongdoing, and resignation is a last resort.
Question 11
ACCA's Code adopts a conceptual framework approach to ethics. Which of the following best describes this approach?
- A) Accountants identify threats to compliance with the fundamental principles, evaluate their significance and apply safeguards to eliminate them or reduce them to an acceptable level
- B) Accountants follow a comprehensive list of prohibited actions, and anything not on the list is permitted
- C) Ethical decisions are left entirely to each employer's own policies
- D) Accountants must refuse any work where any threat at all exists
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Answer: A) Accountants identify threats to compliance with the fundamental principles, evaluate their significance and apply safeguards to eliminate them or reduce them to an acceptable level
The conceptual framework requires accountants to identify, evaluate and address threats to the fundamental principles using safeguards, applying judgement to circumstances that rules could not anticipate. It is principles-based rather than a rules-based list of prohibitions, it is not delegated to employers, and it does not require refusal whenever any threat exists, only where threats cannot be reduced to an acceptable level.