AAT L2 Professional Ethics in Accounting 2 — Questions and Answers
Question 1: Under the UK's Proceeds of Crime Act 2002, money laundering is best described as:
- Spending money on illegal goods or services
- The process by which proceeds of crime are disguised to appear as legitimately obtained funds (Correct answer)
- Failing to pay taxes on time
- Overcharging clients for accounting services
Correct answer: The process by which proceeds of crime are disguised to appear as legitimately obtained funds
Money laundering involves disguising the criminal origins of money to make it appear to have come from a legitimate source.
Question 2: What is a Suspicious Activity Report (SAR) and to whom is it submitted in the UK?
- A report about a client complaint, submitted to the AAT
- A report submitted to the National Crime Agency (NCA) when there is knowledge or suspicion of money laundering or terrorist financing (Correct answer)
- A report to HMRC about suspected tax avoidance
- A report about health and safety concerns submitted to the HSE
Correct answer: A report submitted to the National Crime Agency (NCA) when there is knowledge or suspicion of money laundering or terrorist financing
A SAR must be submitted to the National Crime Agency when an accountant knows or suspects that money laundering or terrorist financing is occurring.
Question 3: Which of the following would constitute the criminal offence of 'tipping off' in relation to money laundering?
- Telling a colleague about a client's accounting errors
- Disclosing to a client that a Suspicious Activity Report has been filed about them, in a way that could prejudice a money laundering investigation (Correct answer)
- Reporting a colleague's misconduct to a line manager
- Sharing information about a client's late payments with a credit agency
Correct answer: Disclosing to a client that a Suspicious Activity Report has been filed about them, in a way that could prejudice a money laundering investigation
Tipping off is a criminal offence that involves disclosing to a person under investigation that a SAR has been submitted, as this could prejudice the investigation.
Question 4: Which of the following is an example of a safeguard that could reduce threats to fundamental ethical principles?
- Completing work more quickly to reduce pressure
- Independent review of work completed by another suitably qualified person (Correct answer)
- Refusing to work with any clients who present ethical difficulties
- Reducing fees charged to clients to maintain good relationships
Correct answer: Independent review of work completed by another suitably qualified person
Safeguards such as independent review procedures reduce the risk that threats to ethical principles will compromise the quality or integrity of an accountant's work.
Question 5: An 'intimidation threat' to fundamental ethical principles occurs when:
- An accountant is given more work than they can complete
- An accountant is deterred from acting objectively due to actual or perceived threats from another person (Correct answer)
- A client refuses to pay an invoice on time
- A manager requests that an accountant works late on a deadline
Correct answer: An accountant is deterred from acting objectively due to actual or perceived threats from another person
An intimidation threat arises when threats, whether real or perceived, cause an accountant to act in a biased or non-objective manner.
Question 6: Which of the following best describes an 'advocacy threat' in professional ethics?
- An accountant recommending accounting software to a client
- When an accountant promotes a client's position so strongly that their own objectivity becomes compromised (Correct answer)
- When an accountant provides tax advice to a client
- When an accountant prepares a client's financial statements
Correct answer: When an accountant promotes a client's position so strongly that their own objectivity becomes compromised
An advocacy threat arises when an accountant promotes a client's interests so strongly that their objectivity is compromised and they can no longer act impartially.
Question 7: Which organisation is primarily responsible for regulating AAT members' professional conduct in the UK?
- HM Revenue & Customs (HMRC)
- The Financial Conduct Authority (FCA)
- The Association of Accounting Technicians (AAT) (Correct answer)
- Companies House
Correct answer: The Association of Accounting Technicians (AAT)
The AAT is responsible for regulating its members' professional conduct through its Code of Professional Ethics and disciplinary procedures.
AAT L2 Professional Ethics in Accounting 2
Under the UK's Proceeds of Crime Act 2002, money laundering is best described as: