Chapter 1 - Ethics

Question 1

What are the five fundamental principles of the ICAEW ‘Code of Ethics for Professional Accountants’?

Answer 1

1. Integrity
2. Objectivity
3. Professional competence and due care
4. Confidentiality
5. Professional behaviour

Question 2

What is the meaning of integrity?

Answer 2

To be straightforward and honest in all professional and business relationships.

Question 3

What is the meaning of objectivity?

Answer 3

To not allow bias, conflict of interest or the undue influence of others to override
professional or business judgements.

Question 4

What is meant by professional competence and due care?

Answer 4

To maintain professional knowledge and skill at the level required

Question 5

What is meant by confidentiality?

Answer 5

To respect the confidentiality of information acquired as a result of professional
and business relationship

Not to disclose such information without proper and
specific authority unless there is a legal or professional right or duty to disclose

Refrain from using the information for their personal advantage or the advantage of third parties.

Question 6

What is meant by professional behaviour?

Answer 6

To comply with relevant laws and regulations and avoid any action that discredits the profession.

Question 7

What are the five categories of threats to compliance with the fundamental principles of the ‘Code of Ethics for Professional Accountants’?

Answer 7

1. Self-interest threats
2. Self-review threats
3. Advocacy threats
4. Familiarity threats
5. Intimidation threats

Question 8

What is meant by self-interest threats?

Answer 8

Which may occur as a result of the financial or other interests of a professional accountant or of an immediate or close family member

Question 9

What is meant by self-review threats?

Answer 9

Which may occur when a previous judgement needs to be re-evaluated by the person responsible for that judgement.

Question 10

What is meant by advocacy threats?

Answer 10

Which may occur when a professional accountant promotes a position or opinion to the point that objectivity may be compromised

Question 11

What is meant by familiarity threats?

Answer 11

Which may occur when, because of a close relationship, a professional accountant becomes too sympathetic to the interests of others.

Question 12

What is meant by intimidation threats?

Answer 12

Which may occur when a professional accountant may be deterred from acting objectively by actual or perceived pressures

Question 13

What are six factors a professional accountant should consider when initiating an ethical resolution process?

Answer 13

1. relevant facts
2. relevant parties
3. ethical issues involved
4. fundamental principles related to the matter in question
5. established internal procedures
6. alternative courses of action

Question 14

What safeguards exist that may eliminate threats or reduce them to an acceptable level?

Answer 14

1. Educational, training and experience requirements for entry into the profession.
2. Continuing professional development requirements.
3. Corporate governance regulations.
4. Professional standards.
5. Professional or regulatory monitoring and disciplinary procedures.
6. External review by a legally empowered third party
7. An effective, well-publicised complaints system
8. An explicitly stated duty to report breaches of ethical requirements.

Question 15

Is tax avoidance legal?

Answer 15

Yes

Question 16

Is tax evasion legal?

Answer 16

No