CIMA BA4 · Chapter 2
The CIMA Code of Ethics: fundamental principles MCQs with Answers
10 multiple-choice questions on The CIMA Code of Ethics: fundamental principles for CIMA BA4 Fundamentals of Ethics, Corporate Governance and Business Law. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
Which of the following is NOT one of the five fundamental principles in the CIMA Code of Ethics?
- A) Integrity
- B) Objectivity
- C) Independence
- D) Confidentiality
Show answer & explanation
Answer: C) Independence
The five fundamental principles are integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Independence is an important related concept, especially for those providing assurance services, but it is not itself listed as one of the five fundamental principles.
Question 2
Which fundamental principle requires a member to be straightforward and honest in all professional and business relationships?
- A) Integrity
- B) Objectivity
- C) Professional behaviour
- D) Professional competence and due care
Show answer & explanation
Answer: A) Integrity
Integrity means being straightforward and honest in all professional and business relationships, and implies fair dealing and truthfulness. Objectivity concerns avoiding bias, conflicts of interest and undue influence. Professional behaviour concerns complying with laws and avoiding discredit to the profession.
Question 3
Which fundamental principle is breached when a management accountant allows a close friendship with a supplier to bias her recommendation on which supplier to use?
- A) Confidentiality
- B) Objectivity
- C) Professional competence and due care
- D) Professional behaviour
Show answer & explanation
Answer: B) Objectivity
Objectivity requires that a member does not allow bias, conflict of interest or the undue influence of others to override professional judgement. Allowing a friendship to bias a recommendation is a clear failure of objectivity. The other principles concern secrecy of information, competence and reputation of the profession.
Question 4
A management accountant is asked to prepare a complex tax computation for her employer even though she has no tax training and there is no time to obtain help. Which fundamental principle is most threatened?
- A) Integrity
- B) Confidentiality
- C) Professional competence and due care
- D) Objectivity
Show answer & explanation
Answer: C) Professional competence and due care
Professional competence and due care requires members to act diligently and to undertake only work they have the knowledge and skill to perform, or to obtain appropriate help. Taking on a task outside her expertise without support threatens this principle. There is no suggestion of dishonesty, disclosure of information or bias.
Question 5
In which of the following situations may a member disclose confidential information without breaching the principle of confidentiality?
- A) When disclosure is required by law, for example in response to a court order
- B) When a former employer's information would help the member in a new job
- C) When a friend asks for the information for personal investment purposes
- D) When the member believes that the information is already rumoured in the market
Show answer & explanation
Answer: A) When disclosure is required by law, for example in response to a court order
The Code permits disclosure where it is required by law (such as a court order or anti-money-laundering reporting), permitted by law and authorised by the client or employer, or where there is a professional duty or right to disclose. Using information for personal advantage or that of third parties is prohibited, and a rumour does not make information public.
Question 6
A member who moves to a new employer uses detailed pricing information from his previous employer to help his new employer undercut it. Which statement is correct?
- A) He does not breach confidentiality, because the duty ends when employment ends
- B) He breaches objectivity, but not confidentiality
- C) He does not breach any principle, because he is acting in his new employer's interests
- D) He breaches confidentiality, because the duty continues after the employment relationship has ended
Show answer & explanation
Answer: D) He breaches confidentiality, because the duty continues after the employment relationship has ended
The duty of confidentiality continues even after the end of a relationship between a member and a client or employer. A member may use general experience and expertise gained, but must not use or disclose confidential information acquired from a previous employer. Acting in the new employer's interest does not justify the breach.
Question 7
A member posts on social media that a rival accounting firm's staff are 'incompetent crooks', without any evidence. Which fundamental principle is most directly breached?
- A) Confidentiality
- B) Professional behaviour
- C) Objectivity
- D) Professional competence and due care
Show answer & explanation
Answer: B) Professional behaviour
Professional behaviour requires compliance with relevant laws and regulations and avoidance of any action that discredits the profession. Making disparaging, unsupported claims about others' work is specifically inconsistent with this principle. No confidential information, bias in judgement or technical competence is involved.
Question 8
Which of the following is included in the principle of professional competence and due care?
- A) Never accepting gifts or hospitality from clients
- B) Keeping all business information secret in every circumstance
- C) Acting diligently in accordance with applicable technical and professional standards
- D) Ensuring that the employer achieves its profit targets
Show answer & explanation
Answer: C) Acting diligently in accordance with applicable technical and professional standards
Professional competence and due care has two elements: attaining and maintaining professional knowledge and skill, and acting diligently in accordance with applicable technical and professional standards. Gifts relate to objectivity threats, confidentiality is a separate principle with exceptions, and profit targets are not an ethical principle.
Question 9
A member knowingly signs off a management report that omits a material loss, although every figure that IS in the report is accurate. Which statement is correct?
- A) No principle is breached, because all the figures included are accurate
- B) Only confidentiality is breached, because the loss was kept secret
- C) Only professional competence is breached, because the report is incomplete by mistake
- D) Integrity is breached, because a member must not be associated with information that omits or obscures information where the omission would be misleading
Show answer & explanation
Answer: D) Integrity is breached, because a member must not be associated with information that omits or obscures information where the omission would be misleading
Integrity requires that a member is not knowingly associated with reports or information that contain materially false or misleading statements, statements furnished recklessly, or that omit or obscure required information where this would be misleading. Accurate figures do not cure a misleading omission. The omission was knowing, so it is not merely a competence error.
Question 10
Which statement best describes the 'reasonable and informed third party' test used in the CIMA Code of Ethics?
- A) It asks whether a hypothetical person with relevant knowledge, weighing all the specific facts known to the member, would be likely to reach the same conclusions
- B) It asks whether the member's line manager agrees with the member's decision
- C) It asks whether a court would find the member liable in negligence
- D) It asks whether a majority of the public, without any specialist knowledge, would approve of the decision
Show answer & explanation
Answer: A) It asks whether a hypothetical person with relevant knowledge, weighing all the specific facts known to the member, would be likely to reach the same conclusions
The test considers whether the same conclusions would probably be reached by another party who has the relevant knowledge and experience to understand and evaluate the appropriateness of the member's conclusions, weighing all the relevant facts. It is an objective benchmark, not the view of a manager, a court or an uninformed public.