ACA Professional Ethics (ICAEW Code) 2 — Questions and Answers
Question 1: When a professional accountant encounters an ethical conflict that cannot be resolved internally, the ICAEW Code suggests as a last resort:
- Immediately informing the press
- Resigning from the engagement or organisation (Correct answer)
- Accepting the situation and continuing
- Filing a complaint with HMRC
Correct answer: Resigning from the engagement or organisation
If internal escalation, consultation with professional advisers, and other steps fail to resolve an ethical conflict, the accountant may need to resign from the engagement or from the organisation as a last resort.
Question 2: Professional competence under the ICAEW Code requires accountants to:
- Be qualified to the highest possible level before taking on any work
- Maintain knowledge and skills at the level required to provide competent professional service (Correct answer)
- Only accept work in their immediate area of specialism
- Delegate all complex work to more senior colleagues
Correct answer: Maintain knowledge and skills at the level required to provide competent professional service
The principle requires accountants to maintain professional knowledge and skills at the level needed to ensure clients or employers receive competent service based on current technical and professional standards.
Question 3: An advocacy threat arises when an accountant:
- Audits work they have previously prepared
- Promotes a client's position to the point of compromising objectivity (Correct answer)
- Has a personal financial interest in a client
- Is threatened with dismissal
Correct answer: Promotes a client's position to the point of compromising objectivity
An advocacy threat arises when the accountant promotes a client's position (e.g., in litigation or during a takeover) so strongly that objectivity is compromised and they can no longer act impartially.
Question 4: Under UK anti-money laundering legislation, a professional accountant who suspects money laundering must:
- Confront the client directly with their suspicions
- Make an internal or external Suspicious Activity Report (SAR) to the National Crime Agency (Correct answer)
- Inform their ICAEW supervisor within 48 hours
- Withdraw immediately from the engagement without further action
Correct answer: Make an internal or external Suspicious Activity Report (SAR) to the National Crime Agency
Under the Proceeds of Crime Act 2002, accountants in regulated sectors must file a SAR with the NCA (or internal MLRO) when they know or suspect money laundering, and must not tip off the client.
Question 5: The ICAEW Code of Ethics is based on the Code issued by:
- The Financial Reporting Council
- The International Ethics Standards Board for Accountants (IESBA) (Correct answer)
- HMRC
- The Financial Conduct Authority
Correct answer: The International Ethics Standards Board for Accountants (IESBA)
The ICAEW Code of Ethics is based on and substantially equivalent to the IESBA Code of Ethics for Professional Accountants, ensuring consistency with international professional standards.
Question 6: When accepting a new client, the ICAEW Code requires the accountant to:
- Obtain a reference from the previous accountant only
- Consider whether acceptance would create threats to fundamental principles and perform client due diligence (Correct answer)
- Charge a lower fee for the first year
- Obtain written authorisation from Companies House
Correct answer: Consider whether acceptance would create threats to fundamental principles and perform client due diligence
Before accepting a new client, accountants should identify threats to compliance with fundamental principles (e.g., conflicts of interest, integrity concerns) and conduct client due diligence including KYC and anti-money laundering checks.
ACA Professional Ethics (ICAEW Code) 2
When a professional accountant encounters an ethical conflict that cannot be resolved internally, the ICAEW Code suggests as a last resort: