ACCA AK Business Ethics and Governance — Questions and Answers
Question 1: According to the ACCA Code of Ethics and Conduct, which of the following is one of the five fundamental principles?
- Profit maximisation
- Professional competence and due care (Correct answer)
- Cost minimisation
- Market dominance
Correct answer: Professional competence and due care
The five fundamental principles in the ACCA Code are: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Profit maximisation, cost minimisation, and market dominance are not ethical principles.
Question 2: The UK Corporate Governance Code recommends that the board of a listed company should include:
- Only executive directors to ensure operational expertise
- A sufficient number of independent non-executive directors to provide effective challenge (Correct answer)
- Only family members of the founder
- External auditors as board members
Correct answer: A sufficient number of independent non-executive directors to provide effective challenge
The UK Corporate Governance Code recommends that at least half the board (excluding the chair) should be independent non-executive directors. They provide independent judgement, challenge executive management, and protect shareholder interests.
Question 3: What is the primary role of the audit committee?
- To prepare the annual financial statements
- To set the strategic direction of the company
- To oversee the financial reporting process, internal controls, and the external audit (Correct answer)
- To manage the day-to-day operations of the business
Correct answer: To oversee the financial reporting process, internal controls, and the external audit
The audit committee oversees the integrity of financial reporting, reviews internal controls and risk management systems, monitors the external audit process, and ensures the independence of auditors. It does not prepare accounts or manage operations.
Question 4: A self-interest threat to an accountant's objectivity arises when:
- The accountant has a financial interest in the outcome of an engagement (Correct answer)
- A colleague pressures the accountant to change a report
- The accountant becomes too familiar with a long-standing client
- The accountant is threatened with dismissal for reporting fraud
Correct answer: The accountant has a financial interest in the outcome of an engagement
A self-interest threat occurs when the accountant has a financial or other personal interest that could inappropriately influence their judgement — for example, owning shares in an audit client or being financially dependent on a single client's fees.
Question 5: Corporate social responsibility (CSR) encompasses:
- Only the legal obligations a company must meet
- The voluntary actions a company takes beyond legal requirements to address its impact on society and the environment (Correct answer)
- Exclusively the company's obligations to its shareholders
- The company's marketing and advertising strategy
Correct answer: The voluntary actions a company takes beyond legal requirements to address its impact on society and the environment
CSR refers to a company's voluntary commitment to managing its social, environmental, and economic impacts responsibly. It goes beyond mere legal compliance to include ethical behaviour, environmental stewardship, and community engagement.
Question 6: The Nolan Principles (Seven Principles of Public Life) include all of the following EXCEPT:
- Selflessness
- Profitability (Correct answer)
- Integrity
- Accountability
Correct answer: Profitability
The seven Nolan Principles are: selflessness, integrity, objectivity, accountability, openness, honesty, and leadership. Profitability is a commercial objective and is not one of the principles governing conduct in public life.
ACCA AK Business Ethics and Governance
According to the ACCA Code of Ethics and Conduct, which of the following is one of the five fundamental principles?