BT: Ethics
21 free practice questions on ethics, Section F of the ACCA Business and Technology (BT) question bank. Topics include IESBA principles, IESBA ethical principles, Ethical threats, Reporting unethical conduct, Acting in the public interest, IFAC ethical principles. Each question carries its syllabus reference and a worked explanation. Practise them in the quiz with instant feedback, or read every question with its answer further down this page.
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All 21 ethics questions
The same questions the quiz above draws on, in syllabus order, each with its answer and worked explanation. All 21 are multiple choice.
An audit senior discovers that a close personal friend working at the audit client has asked her to keep quiet about information she encountered during the audit. Which fundamental principle of the IESBA Code is most directly threatened?
- Confidentiality
- Professional competence and due care
- Objectivity
- Integrity
Show answer and explanation
Answer: C. The most directly threatened principle is objectivity. The close personal friendship creates a familiarity threat — a specific threat to objectivity recognised in the IESBA Code — where the audit senior's professional judgement may be compromised by loyalty or affection toward her friend. Although confidentiality is also relevant (she should not disclose audit information to the friend), the request to 'keep quiet' about audit findings goes to the heart of whether she can remain objective and independent in her work. The IESBA Code requires that objectivity is free from bias, conflict of interest, or undue influence of others.
An accountant in practice is asked by a long-standing client to prepare the financial statements and also conduct the audit of those same statements. Which ethical threat does this create?
- Advocacy threat
- Familiarity threat
- Intimidation threat
- Self-review threat
Show answer and explanation
Answer: D. A self-review threat arises when a professional must review and provide assurance over their own previous work. Auditing financial statements you have prepared makes it very difficult to approach the audit with the necessary critical objectivity — you are effectively auditing your own output. This is why independence rules prohibit this arrangement.
An accountant discovers that a colleague has been falsifying expense claims. According to ACCA's ethical guidance, what should the accountant do first?
- Report the matter through the organisation's internal channels, such as a line manager or ethics officer
- Immediately report to the external regulator without informing anyone internally
- Confront the colleague directly and give them the opportunity to self-report
- Take no action unless the amounts involved are material to the financial statements
Show answer and explanation
Answer: A. ACCA guidance indicates that concerns about unethical conduct should first be raised through internal channels — such as a line manager, internal audit, or ethics officer. External reporting may be appropriate if internal channels fail or are compromised, or if the matter involves illegal activity that internal management will not address.
Which of the following best explains what it means for an accountant to act in the public interest?
- Maximising the financial return for the shareholders of the employing organisation at all times
- Recognising that a wide variety of stakeholder groups are affected by organisational action, and ensuring professional behaviour is beneficial to most, if not all, of them
- Ensuring all client information is disclosed publicly so that society can scrutinise organisational activity
- Reporting all suspected financial irregularities directly to the government without internal escalation
Show answer and explanation
Answer: B. Acting in the public interest means two things: first, recognising that a wide variety of groups — not just the immediate client — are affected by an organisation's actions; and second, ensuring that professional behaviour is beneficial to most, if not all, of those stakeholders. It does not mean maximising shareholder returns (A), which is a narrow commercial objective. It does not require total public disclosure (C) — some information must remain confidential. And it does not mean reporting everything to government (D) — that would be disproportionate and breach confidentiality in most circumstances.
A management accountant is preparing a financial analysis to support a capital investment decision. Her manager, who is a personal friend and strong advocate of the investment, pressures her to present the figures in the most favourable light. The accountant adjusts her assumptions to produce a more positive NPV than her independent assessment would support. Which of the IFAC/IESBA fundamental ethical principles has she most directly breached?
- Professional competence and due care — she has not prepared the analysis to the standard expected of a competent accountant
- Confidentiality — she has disclosed sensitive financial projections to her manager without proper authorisation
- Professional behaviour — she has brought the profession into disrepute through her conduct
- Objectivity — she has allowed a personal relationship and management pressure to bias her professional judgement
Show answer and explanation
Answer: D. Objectivity requires that a professional accountant does not allow bias, conflicts of interest, or undue influence by others to override professional or business judgements. The accountant has allowed a personal relationship and management pressure to bias her analysis — she has produced figures she does not independently believe are accurate. This is a direct breach of objectivity. Professional competence (Option A) relates to maintaining knowledge and skills to perform competently — this is a bias failure, not a competence failure. Confidentiality (Option B) relates to protecting sensitive information — not relevant here. Professional behaviour (Option C) relates to complying with laws and avoiding discreditable actions — while this behaviour is unprofessional, objectivity is the most directly applicable principle.
An accountant working in industry is asked by a friend at a social event whether their mutual acquaintance's business — which happens to be a client — is in financial difficulty. The accountant knows this to be true from their professional work. What should the accountant do?
- Share the information as it is for a personal conversation and no commercial gain is involved
- Decline to comment, explaining that professional confidentiality prevents them from discussing client information
- Share only general information without confirming specific details about the client
- Report the friend's enquiry to the client immediately as a potential security threat
Show answer and explanation
Answer: B. Confidentiality is one of the five fundamental principles of the IESBA Code of Ethics. It requires accountants not to disclose confidential information acquired through professional work to third parties without proper authority, and not to use such information for personal advantage or the advantage of others. The social setting and absence of commercial gain are irrelevant — the obligation applies regardless of context. Sharing even general information that could confirm the client's situation (C) would breach confidentiality. Reporting the enquiry to the client (D) is disproportionate — this is a social conversation, not a security incident.
Which of the following best describes what is meant by 'ethics' in a professional context?
- A system of legal rules that professionals must follow to avoid regulatory penalties
- The personal preferences and cultural background of individual professionals
- A code of conduct imposed externally by a professional body that has no internal dimension
- A set of moral principles that guide behaviour — defining what is right, fair, and honest in professional relationships and decisions
Show answer and explanation
Answer: D. Ethics refers to moral principles — standards of right and wrong that guide behaviour. In a professional context, ethics goes beyond mere legal compliance (A) — something can be legal but unethical. Ethics is more than personal preference (B) — professional ethics involves universally applicable principles recognised by the profession. While professional bodies publish codes of ethics (C), ethics has both an external codified dimension and an internal personal dimension — genuine ethical behaviour comes from internalised values, not just compliance with external rules.
An accountant discovers that their employer has been overstating revenue in the management accounts presented to the board. After raising the issue internally with their line manager and receiving no response, what is the appropriate next step?
- Escalate the concern to a more senior level within the organisation, such as the audit committee or board, before considering external disclosure
- Immediately report the matter to the external regulator without any further internal escalation
- Accept the manager's silence as approval and continue processing the accounts as before
- Resign from the organisation to avoid personal liability for the misstatement
Show answer and explanation
Answer: A. When internal escalation to a line manager fails, the appropriate next step is to escalate further within the organisation — to the audit committee, a senior partner, legal counsel, or another appropriate internal authority — before considering external disclosure. Immediate external reporting (B) without exhausting internal routes is generally premature unless the matter involves illegality that the organisation is actively concealing. Accepting silence as approval (C) could make the accountant complicit. Resignation (D) does not address the ethical problem and abandons any opportunity to correct it.
A company decides to publish a detailed ethical code of conduct for all employees and provides annual ethics training. Which of the following best describes a business benefit of this approach?
- Guaranteed elimination of all unethical behaviour within the organisation
- Reduced risk of fraud, reputational damage, and legal liability, alongside improved employee trust and stakeholder confidence
- A reduction in the need for external regulation and oversight of the organisation
- Lower staff turnover exclusively due to employees feeling better informed about rules
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Answer: B. A strong ethical culture reduces the likelihood of fraud and misconduct, protects reputation, reduces legal exposure, and builds trust with employees, customers, and other stakeholders. Option A overstates the benefit — codes of conduct reduce but cannot guarantee elimination of unethical behaviour. Option C is incorrect — ethical codes are not a substitute for external regulation. Option D is partially right (ethical culture can improve retention) but the 'exclusively' and 'better informed about rules' framing is too narrow — the benefit is cultural not just informational.
An accountant is asked by a client to advise on a complex tax matter in a jurisdiction where they have limited expertise. According to the IESBA Code, what should the accountant do?
- Accept the engagement and conduct research to fill the knowledge gap during the work
- Decline the engagement or bring in a suitably qualified specialist, rather than accept work beyond their level of competence
- Accept the engagement to maintain the client relationship and disclose the limitation only if problems arise
- Refer the client to a competitor firm, as any advice given on unfamiliar territory would breach confidentiality
Show answer and explanation
Answer: B. Professional competence and due care requires accountants to only accept work they are competent to perform. Where a matter falls outside current expertise, the appropriate response is to decline, refer to a specialist, or bring in specialist support. Option A is problematic — conducting research during an engagement is insufficient where the complexity requires established expertise. Option C risks providing inadequate advice and conceals a material limitation. Option D misidentifies confidentiality as the issue — competence is the concern.
An accountant's largest client offers her a luxury holiday as a thank-you for her firm's work over the past year. According to the IESBA Code, which type of threat to her fundamental principles does this create?
- Advocacy threat — she may feel obliged to promote the client's interests in future
- Intimidation threat — the client is using the gift to exert inappropriate pressure
- Self-interest threat — the gift could influence her professional judgement in favour of the client
- Familiarity threat — long association with the client has already compromised her independence
Show answer and explanation
Answer: C. A self-interest threat arises when a financial or other interest inappropriately influences professional judgement. Accepting a luxury gift from a major client creates a self-interest threat — the accountant may unconsciously favour the client to maintain the relationship and future gifts. Advocacy threat (A) arises when promoting a client's position. Intimidation threat (B) arises from actual or perceived pressure or coercion. Familiarity threat (D) arises from close personal relationships — while the long relationship is noted, the specific threat created by the gift is self-interest.
An accounting firm introduces a policy requiring a second partner to independently review audit files before sign-off. Which category of ethical safeguard does this represent?
- A safeguard created by legislation — a statutory requirement imposed by financial regulators
- A safeguard created by the client — an internal control the client has implemented to assist the auditors
- An elimination strategy — the threat has been removed rather than merely reduced
- A safeguard created by the profession or firm — an internal quality control mechanism designed to reduce threats to independence
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Answer: D. The IESBA Code identifies safeguards in two main categories: those created by the profession, legislation, or regulation (e.g. independence standards, continuing education requirements), and those created in the work environment (e.g. firm policies, quality review procedures). An internal firm policy requiring independent partner review is a firm-created safeguard — it reduces threats by introducing independent oversight. It is not a legislative requirement (A), not client-created (B), and it does not eliminate the threat — it reduces it (C).
A senior manager instructs a management accountant to exclude certain costs from a report that will be presented to the board, making divisional performance appear better than it actually is. The accountant believes this is misleading. What should they do first?
- Raise the concern with the senior manager, explaining the professional obligation to prepare reports that are not misleading
- Comply with the instruction to preserve the working relationship and raise concerns later
- Immediately contact the external auditors to report the manipulation
- Prepare two versions of the report — one for the board and one accurately reflecting actual performance
Show answer and explanation
Answer: A. When facing pressure to act unethically, the first step is to raise the concern directly with the person giving the instruction — clearly and professionally. This gives the manager the opportunity to reconsider and respects the internal escalation process. If the concern is not resolved, further escalation is appropriate. Immediate compliance (B) abandons professional obligations. Contacting external auditors (C) is premature at this stage — internal routes should be exhausted first. Preparing two versions (D) perpetuates the problem rather than resolving it.
Which of the following best defines whistleblowing in an organisational context?
- The process by which an employee formally raises a grievance about their working conditions through internal HR channels
- The disclosure by an employee of information about wrongdoing or illegal activity within their organisation, typically to an external authority
- The practice of an organisation publishing its own compliance shortcomings in an annual transparency report
- The legal obligation of external auditors to report suspected fraud to the relevant regulatory authority
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Answer: B. Whistleblowing involves an individual disclosing information about wrongdoing — fraud, illegal activity, safety breaches, or ethical misconduct — within their organisation, usually to an external authority or regulator. It is distinguished from internal grievance procedures (A), which address personal employment disputes. Option C describes voluntary corporate transparency reporting. Option D describes a statutory auditor duty — auditors are not whistleblowers in the conventional sense.
The IESBA principle of integrity requires accountants to be straightforward and honest in all professional and business relationships. Which of the following behaviours would breach the integrity principle?
- Declining to comment on a client matter due to professional confidentiality obligations
- Qualifying a professional opinion due to uncertainty about the completeness of information received
- Knowingly associating with a report that contains materially misleading information, even without preparing it directly
- Charging a fee that is higher than a competitor's for equivalent services
Show answer and explanation
Answer: C. Integrity requires honesty and straightforwardness. Knowingly allowing your name to be associated with misleading information — even without preparing it — is a breach of integrity, as the IESBA Code explicitly states. Option A (declining to comment for confidentiality reasons) is a legitimate and ethically appropriate action, not a breach. Option B (qualifying an opinion due to uncertainty) is professionally responsible. Option D (higher fees) is not an ethical breach — pricing is a commercial decision, not an integrity matter.
An accountant working on a company's acquisition analysis becomes aware of the deal before it is publicly announced. They purchase shares in the target company expecting the share price to rise when the deal is announced. Which offence does this describe?
- Bribery — making a payment to obtain a commercial advantage
- Money laundering — concealing the proceeds of criminal activity within legitimate financial transactions
- Misappropriation — taking company assets for personal use without authorisation
- Insider dealing — using price-sensitive information not available to the public to trade in securities for personal gain
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Answer: D. Insider dealing (or insider trading) involves using material, non-public information to trade in securities. As an acquisition is price-sensitive information — not yet public — trading on it before announcement is a criminal offence in most jurisdictions. The accountant's professional access to this information makes the breach particularly serious. This is not bribery (A) — no payment to an official is made. Not money laundering (B) — no criminal proceeds are being concealed. Not misappropriation (C) — no company assets are taken.
A fund manager spreads false rumours about a competitor's financial difficulties on social media, knowing this will cause the competitor's share price to fall and benefit their own portfolio. Which term best describes this behaviour?
- Market abuse — the deliberate manipulation of financial markets through false information
- Corporate espionage — obtaining confidential information about a competitor's business
- Defamation — making false statements that damage another person or organisation's reputation
- Regulatory arbitrage — exploiting differences in regulatory frameworks between jurisdictions
Show answer and explanation
Answer: A. Market abuse covers behaviours that undermine the integrity and fairness of financial markets, including spreading false or misleading information to manipulate prices (market manipulation). This is a criminal offence regulated by financial authorities. It may also constitute defamation (C) — but in the context of financial markets regulation, market abuse is the more precise and relevant classification. Corporate espionage (B) involves obtaining confidential information, not spreading false information. Regulatory arbitrage (D) involves exploiting regulatory differences, not market manipulation.
Which of the following best describes the concept of the 'triple bottom line' in the context of business ethics and sustainability?
- Requiring businesses to produce three separate annual reports: a financial report, a sustainability report, and a governance report
- Measuring organisational performance across three dimensions: financial profit, social responsibility, and environmental impact
- Dividing profits equally between shareholders, employees, and the community in which the business operates
- A requirement that businesses achieve profitability across three consecutive financial years before they are considered sustainable
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Answer: B. The triple bottom line (Elkington) holds that businesses should measure performance not just by financial profit (the traditional bottom line) but also by their social impact ('people') and environmental impact ('planet'). This framework has influenced sustainability reporting and corporate responsibility practice. Option A confuses the concept with a reporting requirement — the triple bottom line is a performance measurement philosophy, not a reporting mandate. Option C is an incorrect description. Option D has no connection to the concept.
Why is it important for an external auditor to be independent not only in fact but also in appearance?
- Because independence in appearance is a higher standard than independence in fact and subsumes it
- Because regulators only assess independence in appearance and do not evaluate actual independence
- Because appearance of independence is sufficient — actual independence is aspirational but not required in practice
- Because users of financial statements must be able to trust that the audit opinion is objective — if the auditor appears to lack independence, confidence in the audit is undermined even if the auditor is actually independent
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Answer: D. Independence in fact means the auditor is genuinely unbiased. Independence in appearance means a reasonable and informed observer would perceive the auditor as unbiased. Both matter: if users suspect bias — even where none exists — the credibility and value of the audit opinion is undermined. Public confidence in financial reporting depends on both. Option A reverses the relationship — the standards are distinct and neither subsumes the other. Regulators assess both (B). Option C would allow cosmetically independent but actually biased audit opinions, which would be unacceptable.
Which of the following best describes professional scepticism as it applies to an accountant's work?
- An attitude of distrust toward all clients and colleagues, assuming that dishonesty is the default
- Refusing to sign off any work until absolute certainty about every figure has been achieved
- Completing work quickly to meet deadlines and raising concerns only if something is obviously wrong
- A questioning mindset that critically evaluates evidence and does not assume that information provided is accurate or complete without appropriate corroboration
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Answer: D. Professional scepticism is a questioning, critical mindset — neither assuming the best nor the worst, but requiring appropriate evidence before accepting information as complete and accurate. It is not blanket distrust (A) — it is calibrated and proportionate. It does not require absolute certainty (B) — professional judgement is exercised under conditions of uncertainty. Option C describes the opposite of scepticism — speed without challenge.
The IESBA principle of professional behaviour requires accountants to comply with relevant laws and regulations and avoid actions that discredit the profession. Which of the following would constitute a breach of this principle?
- Charging fees that are higher than those of competitor firms for the same services
- Making exaggerated claims about the services offered by the accountant's firm in marketing materials
- Declining to take on new clients when the accountant's workload is already at capacity
- Advising a client to seek legal advice on a matter outside the accountant's expertise
Show answer and explanation
Answer: B. Professional behaviour includes not making false, misleading, or exaggerated claims about services — doing so would discredit the profession and potentially mislead clients. The IESBA Code explicitly addresses marketing and the prohibition on claims that cannot be substantiated. Option A — charging higher fees — is a commercial decision, not an ethical breach. Option C — managing capacity — is responsible practice. Option D — referring clients appropriately — demonstrates professional competence and integrity.
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