ICAEW SE · Chapter 10
Data ethics and the impact of technology MCQs with Answers
10 multiple-choice questions on Data ethics and the impact of technology for ICAEW SE Sustainability and Ethics. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
Which of the following is a principle commonly included in frameworks for the ethical use of data?
- A) Collecting as much data as possible in case it is useful later
- B) Keeping data subjects unaware of how their data is used
- C) Transparency about how data is collected and used
- D) Sharing data with any party willing to pay for it
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Answer: C) Transparency about how data is collected and used
Data ethics frameworks commonly include principles such as transparency, accountability and fairness. Individuals should understand how their data is collected and used. Collecting excessive data, hiding its use or selling it indiscriminately all conflict with these principles.
Question 2
A company collects customers' dates of birth, home addresses and employment details when it only needs an email address to send a newsletter. Which data protection principle is it failing to apply?
- A) Data minimisation
- B) Accuracy
- C) Storage limitation
- D) Integrity and confidentiality
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Answer: A) Data minimisation
Data minimisation requires personal data to be adequate, relevant and limited to what is necessary for the purposes for which it is processed. Collecting detailed personal information to send a newsletter goes beyond what is needed. The other principles relate to keeping data correct, not keeping it longer than necessary, and keeping it secure.
Question 3
A company collected customers' personal data to process deliveries. It now wants to use the same data, without telling customers, to build profiles for a third party's marketing campaigns. Which data protection principle does this most directly breach?
- A) Data minimisation
- B) Purpose limitation
- C) Storage limitation
- D) Accuracy
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Answer: B) Purpose limitation
Purpose limitation requires personal data to be collected for specified, explicit and legitimate purposes and not further processed in a way that is incompatible with those purposes. Using delivery data for third-party marketing without informing customers is an incompatible new purpose. It would also raise concerns about transparency and fairness.
Question 4
A bank trains an algorithm to assess loan applications using historical lending decisions, which had disadvantaged applicants from certain postcodes. What is the main ethical risk?
- A) The algorithm will be unable to process any applications
- B) The algorithm will automatically remove all bias from future decisions
- C) The algorithm will breach copyright law
- D) The algorithm may reproduce and reinforce the historical bias in its decisions
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Answer: D) The algorithm may reproduce and reinforce the historical bias in its decisions
Data bias occurs when the data used to train or inform a system is unrepresentative or reflects past discrimination. An algorithm trained on biased decisions is likely to repeat those patterns, leading to unfair outcomes. Accountants should challenge how data is selected and captured, and how outputs are tested for bias.
Question 5
A management accountant is given sustainability data from a supplier to include in the company's report. Which action best reflects the need to maintain an enquiring mind?
- A) Including the data as received because the supplier is a long-standing partner
- B) Considering the source and reliability of the data, how it was collected, and whether it is consistent with other information
- C) Excluding all supplier data from the report
- D) Rounding all the figures to make them look more consistent
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Answer: B) Considering the source and reliability of the data, how it was collected, and whether it is consistent with other information
An enquiring mind involves evaluating information from a variety of sources and perspectives, considering its reliability, completeness and consistency before relying on it. A long relationship does not guarantee accuracy. Excluding data without assessment, or adjusting it cosmetically, would not produce reliable information.
Question 6
A company uses a complex artificial intelligence (AI) model to make credit decisions, but cannot explain to rejected applicants why they were declined. Which ethical issue is most directly raised?
- A) Lack of transparency and explainability
- B) Data minimisation
- C) Self-review threat
- D) Lack of storage capacity
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Answer: A) Lack of transparency and explainability
Many AI systems operate as 'black boxes', making it hard to explain how decisions are reached. This undermines transparency and accountability, makes bias difficult to detect, and can prevent individuals from challenging decisions that affect them. Explainability is a key consideration in the ethical use of AI.
Question 7
An accountant uses an AI tool to draft a client's disclosure notes. The draft looks professional but cites an accounting standard requirement that does not exist. Which statement best describes the accountant's responsibility?
- A) The AI provider is fully responsible for any errors, so the accountant need not check the output
- B) The accountant should use the output as long as it looks professional
- C) The accountant remains responsible for the work and must review and verify AI-generated output before relying on it
- D) The accountant must stop using all technology in their work
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Answer: C) The accountant remains responsible for the work and must review and verify AI-generated output before relying on it
Professional competence and due care requires accountants to understand the limitations of the tools they use and to review their output. Generative AI can produce plausible but incorrect content, so over-reliance creates a risk of automation bias and errors. Responsibility for the work remains with the accountant; banning all technology is not required.
Question 8
What is the main purpose of data protection legislation such as the UK GDPR and the Data Protection Act 2018?
- A) To allow organisations to sell personal data without restriction
- B) To protect companies' trade secrets from competitors
- C) To set accounting standards for intangible assets
- D) To protect individuals' rights over their personal data and to set rules for how organisations process it
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Answer: D) To protect individuals' rights over their personal data and to set rules for how organisations process it
Data protection legislation gives individuals rights over their personal data and requires organisations to process it lawfully, fairly and transparently, keep it secure and use it only for legitimate purposes. Commercially sensitive information such as trade secrets is protected through other means, including contracts and confidentiality obligations.
Question 9
A trainee pastes a client's unpublished financial forecasts into a free public generative AI tool to help write a summary. Which is the main ethical concern?
- A) The summary may be too short
- B) The AI tool may round the figures differently from the client
- C) Confidential client information may be disclosed to, stored or used by a third party without authority, breaching confidentiality
- D) The trainee will be committing a money laundering offence
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Answer: C) Confidential client information may be disclosed to, stored or used by a third party without authority, breaching confidentiality
Entering confidential information into a public AI tool may mean it is stored, processed or used to train the model by a third party, which could amount to unauthorised disclosure. This risks breaching the principle of confidentiality and possibly data protection law. Firms should have policies on approved tools and on what information may be entered into them.
Question 10
Which of the following is an ethical issue arising from the development and use of new technology in finance functions?
- A) Faster processing of routine transactions
- B) Deepfake audio or video being used to impersonate senior managers and authorise fraudulent payments
- C) Improved accuracy in reconciling bank accounts
- D) Lower costs of storing documents
Show answer & explanation
Answer: B) Deepfake audio or video being used to impersonate senior managers and authorise fraudulent payments
Technology brings benefits such as speed, accuracy and lower costs, but also raises ethical issues including fraud risks such as deepfakes, cyber security, privacy, bias and job displacement. Accountants need to apply professional scepticism, for example by verifying unusual payment requests through independent channels.