Chapter 8: Code of Ethics - Fundamental Principles

Define all five fundamental principles of the ICAEW Code of Ethics

P — Professional competence and due care — maintain knowledge and skill, act diligently.

I — Integrity — honest and straightforward in all relationships.

P — Professional behaviour — comply with laws and avoid conduct that discredits the profession.

C — Confidentiality — protect client information; don't disclose without consent or legal requirement.

O — Objectivity — no bias or undue influence on judgement.

What must an accountant never do under the principle of integrity?

Must not be linked to false, misleading, or incomplete information. If they are, they must disassociate themselves.

What are the five categories of threat to the fundamental principles?

1. Self-interest

2. Self-review

3. Advocacy

4. Familiarity

5. Intimidation

What is the difference between independence of mind and independence in appearance?

Independence of mind is internal — reaching unbiased conclusions unaffected by outside influence.

Independence in appearance is external — avoiding situations that would lead a reasonable third party to doubt your impartiality.

What is a conflict of interest and what problems can it cause?

when personal or client interests conflict with professional duties. It can impair objectivity, damage trust, and lead to legal or disciplinary action

When must an accountant disclose confidential information, and when are they merely permitted to?

Must disclose: when required by law, to report money laundering or fraud, or to respond to regulatory investigations.

Permitted but not required: when defending themselves in court, or when it is in the public interest.

What is NOCLAR and what steps should an accountant take when they identify it? (UEAAD)

Non-Compliance with Laws and Regulation Steps:

1. Understand the nature of the matter

2. Escalate to management or those charged with governance (TCWG);

3. Advise on remedial action

4. Assess the response and consider further action

5. Document everything

What are the three conditions in the fraud triangle?

Pressure (a personal problem they feel unable to share)

Opportunity (a weakness in controls)

Rationalisation (how they justify the act to themselves)

What are the main types of fraud an accountant should be able to recognise? (AGFI)

• Asset theft (stealing company property or cash)

• Ghost employees (fictitious payroll entries)

• False financial reporting (manipulating statements to deceive stakeholders)

• Insider trading (trading on confidential information before it is public).

What are bribery and tipping off, and what are the accountant's duties regarding each?

Bribery is offering or accepting an advantage to act improperly — both parties are guilty.

Tipping off is alerting a suspect that they are under investigation — it is a criminal offence and must be avoided even when reporting money laundering.

What are the three stages of money laundering and what must an accountant do if they suspect it?

1. Placement (introducing funds into the financial system),

2. Layering (disguising the trail through multiple transactions)

3. Integration (reinvesting into legitimate business).

Suspicions must be reported to the firm's Money Laundering Reporting Officer (MLRO), who files a Suspicious Activity Report (SAR) with the National Crime Agency (NCA). The client must not be informed.