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Syllabus F: Professional ethicsSection BSyllabus FMTQEthics

ACCA · Question 52 · Syllabus F: Professional ethics

SCENARIO: 'AuditPro LLP' is facing several ethical dilemmas. Partner A is asked to audit a complex financial valuation that Partner A's own firm prepared last month. Partner B has been the lead audit partner for the same client for 15 years and goes on holiday with the client's CEO. Partner C is caught using confidential client data to buy shares before a public announcement. To fix Partner B's issue, the firm decides to replace Partner B with a new lead partner.

Identify the correct ethical terms:

  1. The threat created by Partner A's situation.
  2. The threat created by Partner B's 15-year tenure.
  3. The fundamental principle breached by Partner C.
  4. The type of action taken to fix Partner B's issue.

Which option represents the correct combination?

Answer options:

A.

1-Self-interest threat, 2-Advocacy threat, 3-Objectivity, 4-Disciplinary action

B.

1-Self-review threat, 2-Familiarity threat, 3-Confidentiality, 4-Safeguard

C.

1-Self-review threat, 2-Intimidation threat, 3-Professional Competence, 4-Safeguard

D.

1-Advocacy threat, 2-Familiarity threat, 3-Confidentiality, 4-Penalty

How to approach this question

1. Auditing own work = Self-review. 2. Long relationship = Familiarity. 3. Insider trading = Confidentiality breach. 4. Action to reduce threat = Safeguard.

Full Answer

B.1-Self-review threat, 2-Familiarity threat, 3-Confidentiality, 4-Safeguard✓ Correct
1. Evaluating work your firm previously did is a Self-review threat. 2. Long association (15 years) creates a Familiarity threat. 3. Insider trading uses secret client information for personal gain, breaching Confidentiality (and Integrity). 4. Actions taken by a firm to eliminate or reduce threats to an acceptable level are called Safeguards (e.g., partner rotation).

Common mistakes

Thinking insider trading only breaches integrity. The core mechanism of the crime is the misuse of *confidential* information.
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