Chapter 7 - Ethics and Public Trust

What is acting in the public interest?

Making decisions that benefit society as a whole, not personal or private interests. Accountants do this by following the ICAEW Code of Ethics in spirit, not just in letter.

What is professional scepticism?

Critically assessing information with a questioning mind, staying alert to possible errors or fraud. It leads to more reliable financial information and is required by auditing standards.

What is professional judgement?

Using knowledge and experience to make informed decisions in complex situations that cannot be resolved by rules alone.

What are cognitive biases?

Unconscious thought patterns that distort decision-making. They can undermine professional scepticism and reduce the quality of judgements.

Give three examples of cognitive biases.

• Anchoring: over-relying on the first piece of information received.

• Confirmation: favouring evidence that supports existing beliefs.

• Framing: being influenced by how information is presented rather than the facts.

What are accountability, transparency and governance?

Accountability = being held responsible for your actions.

Transparency = being open to scrutiny.

Governance = directing and controlling an organisation sustainably.

Together, they build trust and reduce corruption.

What are the consequences of unethical behaviour?

For individuals: job loss, fines, legal action, reputational damage. For firms: fines, loss of licences, loss of clients, increased regulatory scrutiny.

What is ICAEW's regulatory role?

ICAEW sets conduct standards, entry requirements, and eligibility for public practice. It investigates and sanctions members, students, affiliates and firms who breach its rules or Code of Ethics.

What sanctions can ICAEW impose?

On individuals: reprimand, fines, removal of Practising Certificate, exclusion from membership, mandatory training.

On firms: loss of the "Chartered Accountants" title and withdrawal of licences.

Rules-based vs principles-based code of ethics — what's the difference?

Rules-based: explicit, prescriptive rules — easy to enforce but can have gaps and loopholes.

Principles-based: broad principles requiring judgement — flexible and adaptable but harder to enforce. Principles-based is generally preferred for professional codes.

What are the three ethical codes for professional accountants?

• IESBA Code: global foundation, applies to all professional accountants.

• ICAEW Code: includes IESBA plus additional UK-specific guidance, applies to all ICAEW members, students and firms.

• FRC Ethical Standard: applies to audit and assurance engagements, focuses on independence and objectivity.

How do the three codes relate to each other?

IESBA is the global baseline. The ICAEW Code builds on it with additional guidance. The FRC Ethical Standard adds requirements specific to audit work. All three share the same five fundamental principles.

What are the five fundamental principles? (PIPCO)

• Professional competence and due care — maintain skills and act diligently.

• Integrity — honest and straightforward.

• Professional behaviour — comply with laws and avoid discrediting the profession.

• Confidentiality — do not disclose information without authority.

• Objectivity — free from bias and conflicts of interest

What is the duty to report, and when does the Code apply to you?

All members, students and firms must report potential misconduct to ICAEW and cooperate with investigations. The ICAEW Code of Ethics applies from the day you register as an ACA student.

What should you know about ICAEW disciplinary hearings and unconscious bias?

Hearings are held in public and outcomes are published. Remorse does not avoid disciplinary action, though it may affect the sanction.

Unconscious bias is unintentional discrimination based on characteristics like race or gender, and must be addressed through diversity, equality and inclusion policies.