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ICAEW ACA (Associate Chartered Accountant), Next Generation syllabus · Sustainability and Ethics

ICAEW SE The fundamental ethical principles: practice questions with answers

6 free exam-style questions on The fundamental ethical principles for ICAEW SE Sustainability and Ethics. Try each one, then open the answer to read the explanation. Fincora has 21 original questions on this syllabus area.

Question 1

Aisha Rahman is an ICAEW student employed in the finance team of Ridgemont Plastics Ltd, a manufacturer, where she prepares the monthly management accounts. She does not work for an accountancy firm. Which parts of the ICAEW Code of Ethics apply most directly to her work?

  1. A Part 1 (principles and conceptual framework) and Part 3 (accountants in public practice)
  2. B Part 1 (principles and conceptual framework) and Part 2 (accountants in business)
  3. C Part 2 (accountants in business) only, since Part 1 binds qualified members only
  4. D Part 4A (independence for audits and reviews) and Part 2 (accountants in business)
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Answer: B. The ICAEW Code applies to members, students, affiliates and employees of member firms (and to member firms where relevant), so Aisha is bound by it as a student.

- Part 1: complying with the Code, the fundamental principles and the conceptual framework. Applies to everyone.
- Part 2: professional accountants in business (sections 200-280), for example preparing and presenting information (section 220).
- Part 3: professional accountants in public practice.
- Parts 4A and 4B: International Independence Standards for audit/review and for other assurance engagements.

As an employee of a manufacturer preparing management accounts, Aisha applies Parts 1 and 2.

Question 2

Marta Kowalczyk is an ICAEW Chartered Accountant whose LinkedIn profile shows her profession and employer. In her own time, using a personal phone, she posts a series of mocking comments on the platform about a former colleague's disability. Under the ICAEW Code as revised with effect from 1 July 2025, which statement is correct?

  1. A No principle applies, because the posts were made in her own time and on her own device
  2. B The posts raise an issue under confidentiality only if they reveal information about her employer
  3. C Her posts fall within her professional life and may breach the principle of professional behaviour
  4. D The posts raise an issue under objectivity, because her view of the former colleague is biased
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Answer: C. From 1 July 2025 the ICAEW Code expanded the professional behaviour principle (section 115). Accountants are expected to act consistently with the profession's responsibility to act in the public interest, and a reasonable and informed third party would expect them to treat others fairly and with respect and dignity in their professional life.

Professional life goes beyond the workplace: it includes social media where the person's status as an accountant can be identified, work social events and remote working. Bullying, harassment, victimisation and unfair discrimination are given as conduct that could discredit the profession.

Marta is identifiable as a chartered accountant on LinkedIn, so her mocking posts about a person's disability fall within the principle.

Question 3

Keisha Hammond, a management accountant at Westmere Logistics plc, assesses capital expenditure bids from three depots. One bid comes from the depot run by Tom, a long-standing friend who recommended her for her job. She gives Tom's bid the highest score after a lighter review of its assumptions than she gives the other bids. Which fundamental principle is most directly threatened?

  1. A Integrity
  2. B Confidentiality
  3. C Professional behaviour
  4. D Objectivity
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Answer: D. Objectivity (Code section 112) requires an accountant to exercise professional or business judgement without being compromised by bias, conflict of interest or undue influence of, or undue reliance on, individuals, organisations, technology or other factors.

Keisha's long friendship with Tom, and her sense of obligation to him, create a familiarity threat to objectivity, and her lighter review of his bid shows that the threat is affecting her judgement. Appropriate actions would include disclosing the relationship and asking a colleague to assess or review that bid.

Question 4

Oliver Bates has just moved from Brightwater Drinks Ltd to a competitor, Fallowfield Beverages Ltd, as head of commercial finance. His new chief executive asks him for a summary of Brightwater's pricing plans for next year, which Oliver saw in draft before he left. What should Oliver do?

  1. A Provide the summary, since his duty of confidentiality to Brightwater ended when he left
  2. B Provide the summary, as long as Fallowfield first signs a non-disclosure agreement
  3. C Decline: he may use his general experience, but not Brightwater's confidential information
  4. D Provide the summary orally, since only written disclosure of the plans is restricted
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Answer: C. Under confidentiality (Code section 114) an accountant shall not use or disclose confidential information acquired through a professional or business relationship after that relationship has ended. On changing employment, an accountant is entitled to use prior experience, but not confidential information acquired or received in the previous role.

Brightwater's draft pricing plans are commercially sensitive information obtained through Oliver's former employment. Using them to benefit Fallowfield would also breach the requirement not to use confidential information for the advantage of the accountant or a third party. Oliver should refuse, and explain why.

Question 5

Halberd Engineering Ltd, a UK company, uses a local agent to obtain a construction permit overseas. Without the board's knowledge, the agent pays a government official a small sum to speed up the issue of the permit. Which statement best describes Halberd's position under the Bribery Act 2010?

  1. A It is not liable, because small payments to speed up routine official action are exempt
  2. B It is liable only if a director authorised or knew about the payment made by the agent
  3. C It may commit the offence of failing to prevent bribery unless it can show it had adequate procedures
  4. D It cannot be liable, because the offence covers only bribes paid within the United Kingdom
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Answer: C. The Bribery Act 2010 creates offences of bribing (s1), being bribed (s2) and bribing a foreign public official (s6). Under s7, a relevant commercial organisation is guilty of failing to prevent bribery if a person associated with it (such as an employee, agent or subsidiary performing services for it) bribes another person to obtain or keep business or an advantage for the organisation.

The only defence is to show that the organisation had adequate procedures designed to prevent such conduct. There is no exemption for small facilitation payments, and the Act reaches conduct overseas. Accountants help by supporting risk assessment, due diligence on agents and controls over payments.

Question 6

Rosa Lindqvist is the engagement partner on the audit of Ambleside Tiles Ltd. Her husband holds a significant shareholding in Ambleside. Rosa is confident that this has not influenced any of her audit judgements. Which statement is correct?

  1. A Her independence is intact, because independence of mind is all that the Code requires
  2. B No threat arises, because the shares belong to her husband rather than to her
  3. C No threat arises, because independence rules apply only to audits of listed companies
  4. D Her independence in appearance is compromised, even if her judgement has in fact been unaffected
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Answer: D. The Code (Part 4A) requires independence in two senses:

- Independence of mind: a state of mind that allows a conclusion to be expressed without being affected by influences that compromise professional judgement.
- Independence in appearance: avoiding facts and circumstances so significant that a reasonable and informed third party would be likely to conclude that integrity, objectivity or professional scepticism had been compromised.

A spouse's financial interest in an audit client creates a self-interest threat, and for an engagement partner it is not acceptable. Users of financial statements rely on the auditor's opinion only if they can trust that the auditor is independent, so appearance matters as much as Rosa's actual state of mind.

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