AAT L2 Professional Ethics in Accounting 5 — Questions and Answers
Question 1: An accountant realises they have made a material error in a client's VAT return that has already been submitted. What should they do?
- Say nothing and hope it goes unnoticed
- Correct the error in the next return without informing the client
- Inform the client promptly and advise on correcting the return with HMRC (Correct answer)
- Immediately contact HMRC directly without telling the client
Correct answer: Inform the client promptly and advise on correcting the return with HMRC
Professional integrity requires the accountant to inform the client about the error and advise on the appropriate corrective action with HMRC.
Question 2: Which of the following scenarios represents a 'familiarity threat' to ethical behaviour?
- Being offered a commission for recommending a client to another firm
- Providing both bookkeeping and external audit services to the same client
- Being too closely associated with a long-standing client and overlooking errors out of loyalty (Correct answer)
- Being pressured by a manager to approve misleading accounts
Correct answer: Being too closely associated with a long-standing client and overlooking errors out of loyalty
A familiarity threat arises when an accountant becomes too sympathetic to a client's interests due to a close or long-standing relationship.
Question 3: What is the purpose of 'customer due diligence' (CDD) in the context of anti-money laundering regulations?
- To assess whether a client is financially solvent before offering credit
- To verify a client's identity and assess the risk that they may be involved in money laundering (Correct answer)
- To check a client's credit rating before taking them on
- To review a client's accounting records for errors
Correct answer: To verify a client's identity and assess the risk that they may be involved in money laundering
CDD involves verifying the identity of clients and understanding the nature of their business to assess money laundering risk.
Question 4: An AAT student is pressured by their employer to process a transaction they believe is improper. This is an example of which type of threat?
- Self-interest threat
- Familiarity threat
- Intimidation threat (Correct answer)
- Advocacy threat
Correct answer: Intimidation threat
An intimidation threat occurs when a member feels coerced or pressured by a client, employer or other party to act improperly.
Question 5: When is it acceptable for an AAT member to disclose confidential client information without the client's consent?
- When a business contact asks for it informally
- When required to do so by law, such as in response to a court order (Correct answer)
- When the member believes it would benefit the client
- When the information is more than five years old
Correct answer: When required to do so by law, such as in response to a court order
Confidential information can be disclosed without consent when there is a legal or regulatory duty to do so, such as a court order or statutory requirement.
Question 6: What is the AAT's recommended approach when a member faces an ethical dilemma that cannot be resolved internally?
- Resign from the job immediately
- Seek guidance from the AAT's ethics advice service or another professional body (Correct answer)
- Ignore the dilemma if no one else has noticed it
- Comply with the employer's instructions to avoid conflict
Correct answer: Seek guidance from the AAT's ethics advice service or another professional body
When internal resolution fails, AAT members are encouraged to seek independent guidance from the AAT ethics helpline or relevant professional bodies.
Question 7: Which statement correctly describes the difference between 'ethical rules' and 'ethical principles' in the AAT Code?
- Rules are optional guidelines; principles are legally binding
- Principles provide a framework for judgement; rules prescribe specific required actions (Correct answer)
- Principles apply only to senior members; rules apply to all members
- Rules cover technical competence; principles cover social behaviour only
Correct answer: Principles provide a framework for judgement; rules prescribe specific required actions
The AAT Code is principles-based, providing a framework for professional judgement, whereas a rules-based approach would prescribe every specific required action.
AAT L2 Professional Ethics in Accounting 5
An accountant realises they have made a material error in a client's VAT return that has already been submitted.
What should they do?