ACA Professional Ethics (ICAEW Code) 1 — Questions and Answers
Question 1: The five fundamental principles in the ICAEW Code of Ethics are integrity, objectivity, professional competence and due care, confidentiality, and:
- Independence
- Professional behaviour (Correct answer)
- Transparency
- Accountability
Correct answer: Professional behaviour
The five fundamental principles are: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Independence is a concept linked to objectivity but is not itself a fundamental principle.
Question 2: The principle of confidentiality requires a professional accountant NOT to disclose client information EXCEPT when:
- A colleague requests it
- Disclosure is required by law, authorised by the client, or there is a professional duty or right to disclose (Correct answer)
- The client is suspected of tax evasion
- The information is more than two years old
Correct answer: Disclosure is required by law, authorised by the client, or there is a professional duty or right to disclose
Confidentiality may be overridden when disclosure is legally required (e.g., money laundering), authorised by the client, or where there is a professional duty or right to disclose in the public interest.
Question 3: The self-interest threat to objectivity arises when:
- The accountant reviews their own work
- The accountant has a financial interest in the client (Correct answer)
- A third party applies pressure on the accountant
- The accountant has a long-standing relationship with the client
Correct answer: The accountant has a financial interest in the client
A self-interest threat occurs when a financial or other interest in the client could inappropriately influence the accountant's behaviour or judgement — for example, holding shares in an audit client.
Question 4: Which of the following best describes an intimidation threat?
- An accountant is afraid of making a technical error
- A client threatens litigation or other action to influence the accountant's opinion (Correct answer)
- An accountant is too familiar with the client to be objective
- The accountant audits their own previous work
Correct answer: A client threatens litigation or other action to influence the accountant's opinion
Intimidation threats arise when an accountant is deterred from acting objectively by actual or perceived threats from a client or employer — for example, threats of litigation or dismissal.
Question 5: Under the ICAEW Code, when should an accountant refuse to follow management's instructions?
- Whenever they personally disagree with a business decision
- When following those instructions would result in a breach of fundamental principles (Correct answer)
- When the instructions conflict with budget targets
- When a colleague raises an objection
Correct answer: When following those instructions would result in a breach of fundamental principles
The ICAEW Code requires professional accountants to refuse instructions that would involve a breach of the fundamental ethical principles, such as producing misleading financial information.
Question 6: The familiarity threat arises when:
- The auditor is new to the engagement
- A long-standing relationship causes the accountant to be too sympathetic to the client's interests (Correct answer)
- The accountant has a financial interest in the client
- The accountant advocates for the client in a legal dispute
Correct answer: A long-standing relationship causes the accountant to be too sympathetic to the client's interests
Familiarity threats develop over time — a close or long-standing relationship with a client or colleague can erode professional scepticism and lead to uncritical acceptance of their judgement.
ACA Professional Ethics (ICAEW Code) 1
The five fundamental principles in the ICAEW Code of Ethics are integrity, objectivity, professional competence and due care, confidentiality, and: