ACCA BT Professional ethics: practice questions with answers

Question 1

An accountant holds shares in a client company whose financial statements she is reviewing. What type of threat to her objectivity does this create?

1. A Self-review
2. B Intimidation
3. C Advocacy
4. D Self-interest

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Answer: D. A financial interest in the client creates a self-interest threat: she may benefit from the outcome of her own judgements.

Question 2

ACCA's Code of Ethics and Conduct is described as a 'principles-based' code. What does this mean?

1. A It lists every prohibited action in detail
2. B It only applies to members in public practice
3. C It sets out principles that members apply using professional judgement
4. D It is optional for students

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Answer: C. A principles-based code gives a framework of principles, threats and safeguards that members apply with judgement, rather than a rule for every situation.

Question 3

What is the main purpose of a corporate code of ethics?

1. A To guarantee profits
2. B To replace employment law
3. C To set out the standards of behaviour expected of staff

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Answer: C. A corporate code of ethics communicates the organisation's values and expected standards of behaviour.

Question 4

Which of the following best defines a corporate code of ethics?

1. A A statement by an organisation of its values and the standards of behaviour it expects from its staff, often with guidance on specific issues
2. B A set of rules issued by a professional body that its members must follow, whoever they work for
3. C A legally binding agreement between a company and its shareholders that sets out the directors' powers
4. D A manual of the procedures that staff must follow when recording and authorising transactions

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Answer: A. A corporate code of ethics is a statement issued by an organisation setting out its values and the standards of behaviour expected of its staff (and often of others who act for it). It typically covers areas such as honesty with customers, treatment of employees, conflicts of interest, gifts and hospitality, confidentiality and how to raise concerns. It differs from a professional code, which is issued by a professional body to its members.

Question 5

Ama, an accountant employed by Selby Co, is told by the finance director to delay recording several large supplier invoices until next year so that this year's profit meets the target in a bank loan agreement. What is the most appropriate first course of action for Ama?

1. A Comply with the instruction, because the finance director is more senior and is responsible for the accounts
2. B Explain to the finance director why this would mislead the bank and, if he insists, raise it through Selby Co's internal procedures
3. C Contact a newspaper immediately so that the bank and the public learn what is happening
4. D Resign at once without discussing the matter with anyone

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Answer: B. Ama faces an ethical dilemma: her employer's instruction conflicts with her professional duty of integrity, because recording invoices in the wrong period would mislead the bank. The appropriate approach is to raise the concern with the person concerned, document it, and if it is not resolved, escalate through internal channels (such as a more senior director, the audit committee or a whistleblowing procedure), and seek advice from her professional body if needed. External disclosure or resignation are later steps, not the first response.

Question 6

Halloway Group operates in 14 countries, where local customs on gifts, hospitality and payments to officials differ widely. What is the main benefit of introducing a single group-wide corporate code of ethics in this situation?

1. A It overrides the local laws of each country, so the group only needs to comply with its own code
2. B It sets consistent standards of behaviour, so staff know what is expected wherever they work
3. C It guarantees that no member of staff in any country will ever offer or accept a bribe
4. D It removes the need for ethics training, as staff can read the code themselves

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Answer: B. A corporate code of ethics sets out an organisation's values and the behaviour it expects of staff, often with guidance on issues such as gifts, hospitality, bribery and conflicts of interest. Its benefits include consistency of behaviour across the organisation (especially important where local customs differ), clear guidance for staff facing dilemmas, and an improved reputation with stakeholders. It operates alongside, not instead of, the law, and needs training and leadership to be effective.