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Chartered Institute of Management Accountants (CGMA) · Fundamentals of Ethics, Corporate Governance and Business Law

CIMA BA4 Business ethics and ethical conflict: practice questions with answers

6 free exam-style questions on Business ethics and ethical conflict for CIMA BA4 Fundamentals of Ethics, Corporate Governance and Business Law. Try each one, then open the answer to read the explanation. Fincora has 104 original questions on this syllabus area.

Question 1

Under the CIMA Code of Ethics, which fundamental principle requires a professional accountant not to compromise professional or business judgements because of bias, conflict of interest or the undue influence of others?

  1. A Integrity
  2. B Professional behaviour
  3. C Confidentiality
  4. D Objectivity
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Answer: D. The five fundamental principles in the CIMA Code are:

- Integrity – be straightforward and honest in all professional and business relationships.
- Objectivity – do not compromise professional or business judgements because of bias, conflict of interest or undue influence of others.
- Professional competence and due care – maintain the knowledge and skill needed and act diligently in line with applicable standards.
- Confidentiality – respect the confidentiality of information acquired as a result of professional and business relationships.
- Professional behaviour – comply with relevant laws and regulations and avoid any conduct that the accountant knows or should know might discredit the profession.

Question 2

Which of the following statements about continuing professional development (CPD) for CIMA members is correct?

  1. A CPD is required only during the first three years after a member qualifies, while experience is gained
  2. B CPD obligations apply only to members who work in public practice, not to those employed in business
  3. C Each member must identify their own development needs and maintain competence throughout their career
  4. D CPD can only be achieved by passing further formal examinations set by CIMA or another body
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Answer: C. Continuing professional development supports the fundamental principle of professional competence and due care, which requires accountants to maintain professional knowledge and skill at the level required to provide competent service as technical, professional and business developments occur. CIMA expects every member to take ownership of their development: identify what they need to learn, plan and carry out relevant activities (formal or informal), and reflect on the effect on their work, throughout their career.

Question 3

How is compliance with the CIMA Code of Ethics enforced?

  1. A A breach of the Code is a criminal offence, which CIMA prosecutes in the national courts
  2. B CIMA can investigate complaints and discipline members and students, with sanctions up to expulsion
  3. C The Code applies only to members in public practice, so CIMA members employed in business cannot be disciplined under it
  4. D CIMA imposes a fine on the member's employer whenever one of its staff breaches the Code
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Answer: B. The CIMA Code applies to all members and students. CIMA can investigate complaints about their conduct through its disciplinary procedures. Sanctions can include reprimands, fines, suspension and, for serious misconduct, expulsion from membership. This self-regulation sits alongside the law: conduct such as fraud or bribery may also be a criminal offence dealt with by the state.

Question 4

Which of the following is a disadvantage of a principles-based approach to ethics, compared with a rules-based approach?

  1. A It cannot be applied to new situations that the authors of the code did not foresee when it was written
  2. B Different people may interpret the principles differently, so breaches can be harder to prove
  3. C It leads to very long codes that must be updated every time business circumstances change
  4. D It prevents accountants from using their own professional judgement when deciding what to do
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Answer: B. A principles-based approach (such as the CIMA Code's conceptual framework) sets broad principles and requires the accountant to use judgement to apply them. It is flexible and can be applied to new situations, but:

- people may interpret the principles differently, so behaviour can be inconsistent;
- it is harder to say with certainty whether a principle has been breached, so enforcement is more difficult;
- it places more responsibility on individuals, who need training and experience to apply it.

A rules-based approach is clearer and easier to enforce, but cannot cover every situation, needs frequent updating and can encourage a 'tick-box' attitude.

Question 5

Which of the following is a role of CIMA as a professional body?

  1. A Issuing the International Financial Reporting Standards that companies use to prepare their financial statements
  2. B Prosecuting its members in the criminal courts whenever they are suspected of committing fraud
  3. C Setting ethical and professional standards for its members and students, and disciplining those who fail to meet them
  4. D Setting the rates of tax payable by the companies and other organisations that employ CIMA members
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Answer: C. As a professional body, CIMA (now part of the Association of International Certified Professional Accountants) acts in the public interest by:

- setting and assessing the entry standard through its qualification;
- issuing the CIMA Code of Ethics that members and students must follow;
- requiring members to maintain their competence through continuing professional development (CPD);
- investigating complaints and disciplining members and students who fall short.

It does not issue accounting standards, bring criminal prosecutions or set tax rates.

Question 6

Which statement best describes the relationship between a professional accountant in business and their employing organisation under the CIMA Code?

  1. A The accountant's first duty is to the employer, so the employer's instructions override the fundamental principles whenever the two conflict
  2. B The accountant owes no duty to the employer at all, but only to CIMA and to the public, whose interests always come first
  3. C The accountant must follow the employer's instructions in all cases, unless obeying them would clearly amount to a criminal offence
  4. D The accountant should support the employer's legitimate, ethical objectives, but instructions never excuse breaching the principles
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Answer: D. Part 2 of the Code (professional accountants in business) recognises that investors, creditors, employers and others rely on the work of accountants in business. Such accountants support the legitimate and ethical objectives established by their employer and are expected to encourage an ethics-based culture.

However, their responsibility to act in the public interest means that they must comply with the fundamental principles even when the employer instructs otherwise. If an instruction would involve a breach, the accountant should use the Code's guidance on resolving ethical conflicts, escalating the matter and, if it cannot be resolved, refusing to remain associated with it.

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