ICAEW SE · Chapter 6
The concept of ethics and its significance for the accountancy profession MCQs with Answers
10 multiple-choice questions on The concept of ethics and its significance for the accountancy profession for ICAEW SE Sustainability and Ethics. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
Which of the following best describes professional ethics?
- A) The personal moral beliefs an individual developed during childhood
- B) The laws that apply to all citizens in a country
- C) The values set out in a company's marketing slogan
- D) The principles and standards of behaviour expected of members of a profession in carrying out their work
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Answer: D) The principles and standards of behaviour expected of members of a profession in carrying out their work
Professional ethics are the standards of conduct that a profession expects of its members, such as those set out in the ICAEW Code of Ethics. Personal ethics are an individual's own values, and business ethics concern how organisations behave. Law and ethics overlap but are not the same.
Question 2
Which statement correctly contrasts ethical objectivism with ethical relativism?
- A) Objectivism holds that ethics depends on the outcome of actions, whereas relativism holds that ethics depends on rules
- B) Objectivism holds that some moral truths apply universally regardless of culture, whereas relativism holds that what is right depends on the culture or individual
- C) Objectivism holds that there are no moral truths, whereas relativism holds that all cultures share the same values
- D) Objectivism applies only to accountants, whereas relativism applies only to lawyers
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Answer: B) Objectivism holds that some moral truths apply universally regardless of culture, whereas relativism holds that what is right depends on the culture or individual
Ethical objectivism holds that there are universal moral standards that apply to everyone. Ethical relativism holds that moral standards vary between cultures or individuals, so no single standard is universally correct. Focusing on outcomes versus rules is the distinction between teleological and deontological approaches.
Question 3
A finance manager refuses to backdate a contract, even though doing so would help the company meet a target and harm no-one, because she believes that misrepresenting facts is wrong in itself. Which ethical approach is she applying?
- A) Deontological ethics
- B) Teleological ethics
- C) Utilitarianism
- D) Ethical relativism
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Answer: A) Deontological ethics
Deontological ethics judges actions according to duties and rules, regardless of their consequences. The manager regards misrepresentation as wrong in itself, even if the outcome seems harmless. Teleological approaches, including utilitarianism, would instead focus on the consequences of the action.
Question 4
Which of the following statements best describes teleological (consequentialist) ethics?
- A) An action is right if it follows a fixed rule, whatever its results
- B) An action is right if it is permitted by law
- C) An action is judged right or wrong according to its outcomes
- D) An action is right if the person carrying it out feels comfortable about it
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Answer: C) An action is judged right or wrong according to its outcomes
Teleological, or consequentialist, ethics evaluates the morality of an action by its consequences. Utilitarianism is the best-known form. Judging an action by whether it follows rules is deontological, and legality alone does not determine whether an action is ethical.
Question 5
A company must choose one of three options. Its analysis of the effect on stakeholders, in units of wellbeing, is: Option 1: 300 people each gain 2 units; 40 people each lose 10 units Option 2: 100 people each gain 5 units; 10 people each lose 20 units Option 3: 50 people each gain 8 units; 200 people each lose 1 unit Which option would a strict utilitarian choose?
- A) Option 1
- B) Option 3
- C) Option 2
- D) None, because utilitarianism ignores consequences
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Answer: C) Option 2
Utilitarianism chooses the action that produces the greatest total net benefit. Option 1: (300 x 2) - (40 x 10) = 200. Option 2: (100 x 5) - (10 x 20) = 300. Option 3: (50 x 8) - (200 x 1) = 200. Option 2 has the highest net benefit of 300 units. Option 1 benefits the most people, but utilitarianism compares total net welfare, not the number of people who gain.
Question 6
A company legally moves its profits to a low-tax jurisdiction through an artificial arrangement that has no commercial purpose. Many stakeholders criticise the company. What does this illustrate about the relationship between ethics and law?
- A) Anything that is legal is automatically ethical
- B) An action can be legal but still be considered unethical
- C) Ethics only applies where there is no relevant law
- D) Unethical actions are always illegal
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Answer: B) An action can be legal but still be considered unethical
Law sets minimum standards of behaviour, whereas ethics is about doing the right thing in the circumstances. An arrangement may comply with the letter of the law yet be seen as unfair or contrary to the spirit of the law. Ethical behaviour therefore often goes beyond legal compliance.
Question 7
Which statement best describes the relationship between ethics and sustainability?
- A) Sustainability is a purely technical issue with no ethical dimension
- B) Acting sustainably is part of behaving ethically, because it involves considering the effects of decisions on others, including future generations
- C) Ethics concerns only individuals, whereas sustainability concerns only governments
- D) A company can only be ethical if it ignores sustainability to maximise shareholder returns
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Answer: B) Acting sustainably is part of behaving ethically, because it involves considering the effects of decisions on others, including future generations
Ethics and sustainability are closely linked: both require decision-makers to consider the interests of others and the long-term consequences of their actions. Ethical business practices can help anticipate risks to the organisation and the wider environment. A responsible approach to sustainability is therefore part of behaving ethically.
Question 8
Which of the following is most important in establishing an ethical culture within an organisation?
- A) Rewarding staff solely on short-term sales targets
- B) Keeping the code of conduct confidential to the board
- C) Discouraging staff from raising concerns
- D) Senior management consistently demonstrating ethical behaviour ('tone at the top')
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Answer: D) Senior management consistently demonstrating ethical behaviour ('tone at the top')
An ethical culture depends heavily on leaders setting an example through their own behaviour. This is supported by a published code of conduct, training, reward systems that do not encourage unethical behaviour, and safe channels for raising concerns. Narrow sales-based rewards and discouraging concerns tend to undermine ethical culture.
Question 9
When a professional accountant is making an ethical decision, why is it important to identify the stakeholders affected?
- A) Because an ethical decision should consider how the outcome affects each affected party's interests, not just the interests of the decision-maker or their employer
- B) Because the decision should always favour whichever stakeholder pays the accountant's fees
- C) Because stakeholders must vote on every ethical decision
- D) Because identifying stakeholders removes the need to apply the fundamental principles
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Answer: A) Because an ethical decision should consider how the outcome affects each affected party's interests, not just the interests of the decision-maker or their employer
Ethical decision-making involves identifying who will be affected and weighing their interests, including the public interest. This helps the accountant see the full consequences of options and avoid decisions that serve only narrow interests. Stakeholder analysis supports, but does not replace, the fundamental principles in the Code.
Question 10
A professional accountant in practice is asked to provide assurance on a client's greenhouse gas emissions statement. Which statement about the ethical requirements that apply is correct?
- A) No ethical requirements apply because the engagement does not involve financial information
- B) Only the principle of confidentiality applies, because emissions data is commercially sensitive
- C) The fundamental principles and relevant independence requirements apply, just as they do to financial statement engagements
- D) Ethical requirements apply only if the client is a listed company
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Answer: C) The fundamental principles and relevant independence requirements apply, just as they do to financial statement engagements
The ICAEW Code of Ethics applies to all professional activities of members, including sustainability engagements. Because this is an assurance engagement, independence requirements apply alongside the five fundamental principles. Ethical requirements do not depend on whether the subject matter is financial or on the client being listed.