AAT L3 Ethics for Accountants 2 — Questions and Answers
Question 1: Under the AAT's ethical guidance, which of the following should be reported to the firm's Money Laundering Reporting Officer (MLRO)?
- A client who consistently pays invoices late
- A client whose transactions suggest the proceeds of tax evasion (Correct answer)
- A client who disagrees with accounting treatment
- A client who has changed their bank account
Correct answer: A client whose transactions suggest the proceeds of tax evasion
Tax evasion is a predicate offence under POCA 2002; transactions suggesting the proceeds of tax evasion (a criminal offence) must be reported internally to the MLRO, who decides whether to file a SAR with the NCA.
Question 2: Tipping off under anti-money laundering legislation means:
- Warning a manager that a junior has made an error
- Informing a client or suspect that a suspicious activity report has been filed or an investigation is underway (Correct answer)
- Disclosing a client's tax affairs to a third party
- Reporting a colleague for unethical behaviour
Correct answer: Informing a client or suspect that a suspicious activity report has been filed or an investigation is underway
Tipping off is a criminal offence under POCA 2002: telling someone that a SAR has been filed or that law enforcement is investigating could prejudice the investigation and is strictly prohibited.
Question 3: Confidentiality requires an accountant NOT to use client information for:
- Preparing the client's financial statements
- Completing the client's tax return
- Personal advantage or the advantage of a third party (Correct answer)
- Answering HMRC's legitimate enquiries
Correct answer: Personal advantage or the advantage of a third party
Confidentiality prohibits an accountant from using client information for their own personal gain or for the benefit of third parties; the information was provided for specific professional purposes only.
Question 4: Which of the following describes the 'reasonable and informed third party' test?
- Asking the most senior partner to review the decision
- Considering whether a knowledgeable, impartial person would conclude the accountant acted appropriately (Correct answer)
- Checking whether the action is profitable
- Asking a colleague who is familiar with the client
Correct answer: Considering whether a knowledgeable, impartial person would conclude the accountant acted appropriately
The RITP test asks: would a reasonable person, fully informed of all relevant facts and circumstances, conclude that the accountant has complied with the fundamental principles? It is an objective ethical check.
Question 5: Under the AAT Code, which action is appropriate if an accountant's employer asks them to do something unethical?
- Comply with all employer instructions without question
- Discuss the concern with a senior colleague or mentor, and refuse to carry out the unethical action (Correct answer)
- Immediately resign without further discussion
- Report the employer to the police straightaway
Correct answer: Discuss the concern with a senior colleague or mentor, and refuse to carry out the unethical action
The accountant should first discuss the ethical concern, seeking guidance from a senior colleague or the AAT. If the issue cannot be resolved, they should refuse the instruction; in serious cases, resignation or further escalation may be necessary.
Question 6: Professional competence requires accountants to:
- Claim expertise in all areas of accountancy
- Only accept work they are already fully competent to perform without any further learning
- Maintain up-to-date knowledge through continuing professional development (CPD) (Correct answer)
- Limit their practice to their original qualification subject areas for life
Correct answer: Maintain up-to-date knowledge through continuing professional development (CPD)
Professional competence is maintained through CPD — continuing education and training to keep knowledge and skills current with evolving technical standards, legislation, and professional requirements.
AAT L3 Ethics for Accountants 2
Under the AAT's ethical guidance, which of the following should be reported to the firm's Money Laundering Reporting Officer (MLRO)?