1. An accountant prepared the valuation of a company's intangible assets for the financial statements. The audit committee now asks the same accountant to review that valuation. Which threat to the fundamental principles arises?

A) Advocacy
B) Familiarity
C) Self-review
D) Self-interest

Correct: C difficult Ethical threats

A self-review threat arises when a professional evaluates a judgement or service that he or she previously provided. Advocacy would involve promoting a client's position. Familiarity arises from a close relationship. Self-interest arises from a financial or other personal interest. If you chose any of these you looked at a feature that is not present in the scenario.

2. The chief executive tells the finance director that her bonus and job depend on reducing a loan-loss provision that she believes is required. What is the most appropriate first response?

A) Refuse to change the provision, document the discussion and escalate to the audit committee
B) Resign immediately without telling anyone the reason for leaving
C) Disclose the matter to the press to put pressure on the chief executive
D) Make the change but record a private note of your disagreement

Correct: A difficult Intimidation threat

Pressure to breach integrity is an intimidation threat. The professional should maintain the correct accounting, keep a record and escalate to those charged with governance. If you chose to make the change you compromised integrity. If you resigned silently you left a misstatement unaddressed. Going to the press would breach confidentiality before internal escalation was tried.

3. Which THREE are fundamental principles of the IESBA-based professional code of ethics? (Select THREE.)

Multiple response
A) Integrity
B) Profitability
C) Objectivity
D) Professional competence and due care
E) Transparency
F) Independence of appearance

Correct: A, C, D difficult Fundamental principles

The five fundamental principles are integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Profitability, transparency and 'independence of appearance' are not among them. If you chose B, E or F you picked a plausible-sounding concept that the code does not list.

4. Which TWO are appropriate early steps for an accountant facing an ethical conflict? (Select TWO.)

Multiple response
A) Establish the relevant facts and identify the fundamental principles at risk
B) Report the matter immediately to the police
C) Consult the employer's ethics policy and internal procedures
D) Ignore the matter if the amount is small
E) Publish the issue on social media

Correct: A, C difficult Ethical conflict resolution

A structured approach starts with the facts, principles and parties, then the employer's procedures and, if needed, advice from the professional body or a lawyer. Immediate reporting externally, ignoring small matters and publicising the issue skip the process. If you chose B, D or E you chose a step that is premature or inappropriate.

5. Consider professional ethics. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. A legal duty to disclose can override the duty of confidentiality.   Yes

2. An accountant who suspects money laundering should warn the client so that it can correct the position.   No

3. Professional behaviour requires compliance with relevant laws and regulations.   Yes

Correct: Y, N, Y difficult Confidentiality and behaviour

(1) Yes. (2) No: warning the client is tipping off. (3) Yes.

6. A senior audit manager has worked on the same long-standing client for eleven years, lunches regularly with its finance director and tends to accept the director's explanations without further testing. Which type of threat does this most clearly illustrate?

A) Intimidation
B) Self-review
C) Advocacy
D) Familiarity

Correct: D difficult Threats to ethical behaviour

A long, close relationship that makes a professional too sympathetic to, or accepting of, another party's views is a familiarity threat. A self-review threat arises when someone evaluates their own earlier work. Intimidation arises from pressure or threats. Advocacy arises when a professional promotes a client's position to the point objectivity is compromised.

7. A member of ICAB works as the finance manager of a private company that has no code of ethics. What does the workbook say about the member's obligations?

A) The member has no ethical duties because the ICAB Code applies only to members in public practice and not to those in business
B) The member is exempt from the Code in personal conduct but must report the lack of a company code to the regulator immediately
C) The member must introduce the ICAB Code of Ethics as the company's own code and arrange an annual ethical audit of the whole business
D) The member must apply the ICAB Code to their own conduct and is encouraged to promote an ethics-based culture to the extent their seniority allows

Correct: D difficult ICAB members and business ethics

There is no requirement on ICAB members in business to implement the Code for the business itself, or to introduce a code of ethics or an ethical audit; they must apply the Code to their own conduct and are encouraged to promote ethical culture as far as their position allows.

8. Which THREE are the means by which an ethical culture can be promoted in a company? (Select THREE.)

Multiple response
A) Ethical leadership from the board
B) Maximising executive bonuses
C) Codes of ethics or business conduct
D) Policies and procedures that support ethical behaviour
E) Reducing the number of audit committee meetings
F) Recruiting only ICAB members

Correct: A, C, D difficult Promoting an ethical culture

An ethical culture is promoted by ethical leadership from the board ('tone at the top'), codes of ethics or conduct, and supporting policies and procedures. Bonus levels, meeting frequency and membership of ICAB are not mechanisms for promoting ethics.

9. Which TWO statements about whistleblowing or complaints systems are correct? (Select TWO.)

Multiple response
A) They help to identify and deter unethical behaviour
B) They replace the board's responsibility for ethical leadership
C) They should be available only to senior managers
D) A helpline lets staff report a line manager to someone outside the normal management hierarchy
E) They should be used only after the matter has been reported to an external regulator

Correct: A, D difficult Whistleblowing

The purpose is to let employees draw attention to unethical behaviour, and a helpline is useful because it avoids the managerial hierarchy. They support, and do not replace, board leadership; they should be open to all employees; and they are an internal route that need not wait for a regulator.

10. Consider business ethics. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. Business ethics goes beyond legal requirements to discretionary decisions guided by values.   Yes

2. In Bangladesh, the BSEC Corporate Governance Code 2018 applies to all large private companies.   No

3. The starting point for an ethical culture must come from corporate values and the directors.   Yes

4. An ethical audit measures the consistency of a company's values base.   Yes

Correct: Y, N, Y, Y difficult Business ethics

(1) Yes. (2) No: the Code applies to listed companies; private companies are mainly governed by the Companies Act 1994. (3) Yes. (4) Yes.

11. A partner's firm earns 45% of its total fees from one listed audit client. The partner is concerned about losing the client if difficult accounting issues are raised. Which threat arises and which safeguard is most appropriate?

A) Intimidation threat, reduced by moving the audit to a lower-cost team
B) Self-interest threat, reduced by an independent review of the audit and limits on fee dependence
C) Familiarity threat, reduced by inviting the client's finance director to review the audit file
D) Advocacy threat, reduced by promoting the client's position publicly

Correct: B complex Self-interest threat

Reliance on one client for a large share of fees creates a financial self-interest threat to objectivity. Safeguards include independent review, fee limits and consultation. The other threats and safeguards do not match the facts.

12. A purchasing accountant is offered an expensive watch by a supplier bidding for a large tender he helps to evaluate. What is the appropriate response?

A) Accept the watch and score the supplier more harshly to offset any bias
B) Accept the watch because its value is below the level of any code of conduct
C) Accept the watch but declare it, because declaration removes all threats to objectivity
D) Decline the gift and report the offer to senior management, because accepting it could compromise objectivity

Correct: D difficult Gifts and inducements

A valuable gift from a bidder is an inducement that creates a self-interest threat to integrity and objectivity. The safeguard is to decline and report. Declaring or compensating does not remove the threat.

13. A firm is asked to advise two competing bidders for the same Chattogram property. Which response best meets the Code?

A) Accept the larger fee and decline the other without telling either party
B) Disclose the conflict, apply safeguards such as separate teams and obtain consent, or decline if safeguards are insufficient
C) Accept both engagements and say nothing, since each client pays its own fee
D) Accept both engagements and share each bidder's information to speed up advice

Correct: B difficult Conflicts of interest

A conflict of interest must be identified, disclosed and managed through safeguards and consent, or the engagement declined. Sharing confidential information or concealing the conflict breaches the Code.

14. A senior accountant in a company learns that the finance director plans to pay an official to speed up a licence. What is the most appropriate first step?

A) Pay a smaller amount to keep a record of the payment
B) Post details of the matter on social media immediately
C) Raise the matter with the finance director or a higher level of management and consider legal advice
D) Do nothing because payment of an official is a commercial matter

Correct: C difficult Non-compliance with laws

The accountant should seek to address the matter through appropriate levels of management and take advice, and not take part in the unlawful act.

15. In which situation may a professional accountant disclose confidential client information?

A) When the information is interesting to colleagues in other firms
B) When a competitor of the client asks for it to help negotiations
C) When the accountant wants to use it to win a new client
D) When disclosure is required by law, such as a court order

Correct: D difficult Confidentiality

Confidential information may be disclosed when required or permitted by law or authorised by the client, or when there is a professional duty to disclose. Commercial curiosity is not a justification.

16. An accounting firm advertises that it is 'the only firm in Dhaka qualified to handle tax disputes' when this is untrue. Which fundamental principle is most clearly breached?

A) Confidentiality
B) Professional behaviour
C) Professional competence
D) Objectivity

Correct: B complex Professional behaviour

Making false claims about services or qualifications discredits the profession and breaches professional behaviour (and integrity).

17. Which THREE are fundamental principles of the Code of Ethics? (Select THREE.)

Multiple response
A) Competitiveness
B) Objectivity
C) Confidentiality
D) Integrity
E) Profit maximisation
F) Popularity

Correct: B, C, D difficult Fundamental principles

The fundamental principles are integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

18. An accountant is told by the managing director to sign off the accounts he reviewed last year himself, or lose his job. Which TWO threats are present? (Select TWO.)

Multiple response
A) Transparency
B) Familiarity
C) Intimidation
D) Self-review
E) Advocacy

Correct: C, D complex Identifying threats

Reviewing his own earlier work creates a self-review threat, and the threat of dismissal is intimidation.

19. According to the attributes of ethical leaders, which THREE are examples? (Select THREE.)

Multiple response
A) Dismissive of challenge
B) Avoiding independent views
C) Open-minded and willing to learn
D) Focusing only on short-term results
E) Determined to stamp out poor behaviour
F) Honest and considerate

Correct: C, E, F difficult Ethical leaders

Ethical leaders are open-minded, determined and direct, honest and considerate, and willing to challenge the status quo.

20. Which TWO are objectives of a corporate code of ethics? (Select TWO.)

Multiple response
A) To avoid all external audit
B) To increase staff turnover
C) To build reputation and trust
D) To improve behaviour
E) To reduce the number of shareholders

Correct: C, D difficult Objectives of codes of ethics

A code aims to improve behaviour, build trust and improve performance.

21. Which TWO statements about an ethical culture are correct? (Select TWO.)

Multiple response
A) It begins with corporate values and the directors
B) It encourages people to behave ethically
C) It reduces the need for stakeholders' trust
D) It can be created by writing a code and doing nothing else
E) It does not need the board's involvement

Correct: A, B difficult Ethical culture

An ethical culture is led from the top. A code alone is not sufficient and trust is central.

22. Which THREE steps are appropriate when facing an ethical dilemma? (Select THREE.)

Multiple response
A) Consider relevant principles and consult as necessary
B) Ignore the issue
C) Identify the ethical issues
D) Resign immediately in every case
E) Wait for the matter to become public
F) Gather the relevant facts

Correct: A, C, F difficult Responses to ethical conflict

Good practice is to establish the facts, identify the issues, apply the principles, consult and choose a course of action.

23. Consider the threats to the fundamental principles. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. Pressure to alter a report under threat of dismissal is an advocacy threat.   No

2. Relying on one client for most of the firm's fees creates a self-interest threat.   Yes

3. A long association with a client creates an intimidation threat.   No

4. Reviewing your own earlier work creates a self-review threat.   Yes

Correct: N, Y, N, Y complex Threats to compliance

(1) No: that is intimidation. (2) Yes. (3) No: that is a familiarity threat. (4) Yes.

24. A purchasing officer is offered gifts by suppliers. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. Any hospitality, however modest, is always prohibited.   No

2. Accepting a valuable gift from a bidder can threaten objectivity.   Yes

3. Declaring a gift removes any threat to objectivity.   No

4. Declining and reporting the offer is an appropriate safeguard.   Yes

Correct: N, Y, N, Y difficult Gifts and hospitality

(1) No: modest hospitality may be acceptable if it is not likely to influence judgement. (2) Yes. (3) No. (4) Yes.

25. Consider confidentiality. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. Disclosure may be required by law.   Yes

2. The duty of confidentiality ends when the relationship with the client ends.   No

3. Disclosure is permitted if the client consents.   Yes

4. Confidential information may be used for personal advantage if the client is not harmed.   No

Correct: Y, N, Y, N difficult Confidentiality

(1) Yes. (2) No: the duty continues after the relationship ends. (3) Yes. (4) No.