The Five Fundamental Ethical Principles

The five fundamental ethical principles

Professional accountants follow five fundamental principles, set out in the international code of ethics that professional bodies build on. Most ethics questions ask which principle a situation puts at risk, or which threat is at work.

Integrity	Being straightforward and honest in every professional and business relationship
Objectivity	Not letting bias, a conflict of interest or pressure from others override judgement
Professional competence and due care	Keeping knowledge and skill up to date and working carefully to the right standards
Confidentiality	Not disclosing or using information from work without proper authority or a legal or professional duty
Professional behaviour	Obeying the law and avoiding anything that would discredit the profession

Integrity

Being straightforward and honest in every professional and business relationship

Objectivity

Not letting bias, a conflict of interest or pressure from others override judgement

Professional competence and due care

Keeping knowledge and skill up to date and working carefully to the right standards

Confidentiality

Not disclosing or using information from work without proper authority or a legal or professional duty

Professional behaviour

Obeying the law and avoiding anything that would discredit the profession

The five threats

Self-interest: a financial or other interest that could sway a judgement, such as owning shares in a client.
Self-review: checking your own earlier work, so a mistake is unlikely to be spotted.
Advocacy: promoting a client's or employer's position so far that objectivity suffers.
Familiarity: a long or close relationship that makes you too sympathetic or too trusting.
Intimidation: actual or threatened pressure that deters you from acting objectively.

Safeguards

Safeguards come from the profession and the law (education, codes, monitoring and discipline) and from the workplace (review by a second person, rotation of staff, clear reporting lines and a corporate code of ethics). Where no safeguard reduces a threat to an acceptable level, the accountant declines or withdraws from the work.

How to answer ethics questions

Name the threat first, then ask which principle it endangers. Sharing a client's figures with a friend breaches confidentiality; being offered a large gift by a supplier you assess is a self-interest threat to objectivity.

Try 3 questions

Question 1 · Section A · Syllabus F1, F2, F3, F42 marks

Professional ethics

The professional code of ethics follows a principles-based (conceptual framework) approach rather than a rules-based one.

What is the main advantage of this approach? (2 marks)

It sets out a detailed rule for every situationIt means an accountant needs only to avoid the acts that the code specifically prohibitsIt gives the same outcome every timeIt can be applied to new situations that no specific rule anticipated

Question 2 · Section A · Syllabus C62 marks

Internal controls

Before a batch of supplier invoices is keyed in, a clerk adds together the supplier account numbers on them (not the invoice amounts). The system calculates the same total of account numbers after input and the two are compared.

What is this total of account numbers called? (2 marks)

A hash totalA financial control totalA check digitA sequence check

Question 3 · Section A · Syllabus E1, E2, E3, E42 marks

Personal effectiveness

In what order should a personal development plan be put together? (2 marks)

Set objectives, carry out activities, assess current skills, then reviewReview progress, set objectives, assess skills, then carry out activitiesAssess skills, carry out activities, review progress, then set objectives at the end so they match what was achievedAssess current skills and gaps, set SMART objectives, plan and carry out activities, then review progress

Questions people ask

What are the five fundamental ethical principles?

Integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

Is ethics tested in every BT exam?

Yes. Professional ethics is section F of the syllabus, and Section B of the exam has a multi-task question on each of the six sections.

What is the difference between a threat and a safeguard?

A threat is something that could lead an accountant to breach a principle; a safeguard is an action or control that reduces the threat to an acceptable level.