ICAEW SE Concept of ethics and its significance: practice questions with answers

Question 1

Priya Nandra is an ICAEW student working at Halden & Crewe LLP, a firm of chartered accountants. Which of the following is an example of professional ethics, rather than personal or business ethics?

1. A Priya's own decision not to invest her savings in tobacco companies, because of her personal moral values
2. B Halden & Crewe's policy that staff must refuse supplier hospitality above a set value
3. C Priya's duty, as an ICAEW student, to keep client information confidential when out with friends
4. D Halden & Crewe's decision to pay all its support staff above the voluntary real Living Wage

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Answer: C. Personal ethics are an individual's own moral values, shaped by upbringing, culture and belief. Business ethics are the values and standards an organisation applies to its own conduct (its policies on gifts, pay, suppliers and so on). Professional ethics are the standards a profession imposes on everyone who belongs to it, whatever their personal views or their employer's policies.

The ICAEW Code of Ethics applies to members, students, affiliates and employees of member firms, so Priya's duty of confidentiality is a professional ethical requirement. It applies outside the office too.

Question 2

Tomas Ferreira ACA has just joined Brackwater Foods Ltd as financial controller. Staff there routinely round up their mileage claims, managers tolerate it, and Tomas personally sees it as harmless. Which statement about Tomas's position is correct?

1. A He is bound by the Code's principles, including integrity, whatever the company's culture or his own view
2. B He may follow the company's culture, because business ethics take priority over professional ethics at work
3. C He may rely on his personal view, because personal ethics override professional ethics where sincerely held
4. D He is bound by the Code only when acting for clients in public practice, not when working as an employee

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Answer: A. Personal, business and professional ethics can point in different directions. Where they conflict, a professional accountant must still meet the standards of the profession. Overstated expense claims are false records, so Tomas's integrity (being straightforward and honest) is at stake. He must not make such claims himself and should consider how to raise the issue, because the ICAEW Code (Parts 1 and 2) applies to members working in business, not only to those in public practice.

Question 3

Hartwell Apparel Ltd, a UK clothing brand, buys garments from an overseas supplier that complies with all local laws. Local law allows a minimum wage below what workers need to live on and 70-hour working weeks, and the supplier pays and schedules its staff accordingly. Which statement is most accurate?

1. A The arrangement raises no ethical issue, because the supplier complies with all laws that apply to it
2. B The arrangement may be lawful, but the law sets only a minimum and lawfulness does not make it ethical
3. C The arrangement must be illegal under UK law, because anything unethical abroad is unlawful in the UK
4. D The arrangement is a purely commercial matter, because ethics applies to individuals and not to companies

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Answer: B. Ethics and law overlap, but they are not identical. The law sets a minimum standard that society enforces. Ethical behaviour often requires more, so an action can be legal but unethical (as here). Less commonly, an action can be ethical but technically unlawful.

Hartwell's purchases are lawful on the facts, but paying below a living wage and requiring very long hours raise ethical concerns about fairness and human rights in its supply chain. These are also social sustainability issues.

Question 4

The board of Ostley Dairies plc is deciding whether to move milk processing from a rural plant to a larger site 150 miles away. The move would raise profits but cut local jobs and add lorry journeys. In making an ethical decision, how should the board treat the interests of stakeholders?

1. A Treat shareholders' financial return as the only legitimate interest, since the directors are appointed by the shareholders
2. B Follow the wishes of whichever stakeholder group has the most power to influence the company's future
3. C Give every stakeholder group an equal veto, so that no option can be chosen unless all of the groups agree
4. D Identify everyone affected, weigh each option's effect on their legitimate interests, and justify the balance struck

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Answer: D. Ethical decision making requires the decision maker to:

1. identify who is affected, including those with no contract with the company (local residents, the wider community, future generations);
2. consider how each option affects their legitimate interests and any rights or duties involved;
3. reach a balance that can be explained and defended openly.

Stakeholder interests often conflict (here, profits against local jobs and extra emissions). Ethics does not require every interest to be satisfied. It requires them to be considered fairly, and it does not let the most powerful group decide alone.

Question 5

Ravensworth Engineering plc, which has annual turnover of about £300 million, describes its approach to corporate social responsibility (CSR) in its annual report. Which of the following actions is the best example of CSR that goes beyond legal compliance?

1. A Voluntarily funding engineering apprenticeships in a local area with high youth unemployment
2. B Filing its annual accounts and its confirmation statement at Companies House on time each year
3. C Paying all of its employees at least the national minimum wage required by UK employment law
4. D Publishing a slavery and human trafficking statement each year on its website

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Answer: A. Corporate social responsibility (CSR) describes an organisation's responsibilities to society beyond making a profit and obeying the law: to its workforce, communities and the environment.

Filing accounts, paying the national minimum wage and publishing a modern slavery statement (required under s54 of the Modern Slavery Act 2015 for organisations with turnover of £36m or more) are legal duties. Funding apprenticeships in an area of high youth unemployment is a voluntary contribution to society, so it is CSR beyond legal compliance.

Question 6

Imogen Shaw ACA is sustainability reporting manager at Tarnside Retail plc. The chief executive asks her to leave out of the sustainability report the emissions from a supplier contract that would show emissions rising, and to highlight only the categories that fell. Which statement about Imogen's ethical position is correct?

1. A The Code applies only to financial statements, so the content of the sustainability report is a matter for the chief executive
2. B The Code covers sustainability information as well as financial information, so she must not be party to misleading it
3. C The Code applies to the sustainability report only if an external firm will be giving assurance on the report's contents
4. D The Code applies to sustainability reporting only for accountants in public practice, not those in business

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Answer: B. The ethical requirements of the ICAEW Code apply to all professional work, including sustainability reporting and sustainability assurance.

Under the integrity principle, a professional accountant must not knowingly be associated with information that contains materially false or misleading statements, or that omits or obscures information in a misleading way (Code R111.2). Section 220, on preparing and presenting information, applies to sustainability information as well as financial information. Leaving out a rising category and highlighting only falling ones would give a misleading picture, whether or not the report is assured. IESBA revised its Code in 2025 to address sustainability reporting expressly, but the principle has always applied.