AQA A-Level Accounting: The impact of ethical considerations (7127) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover section 3.18, The impact of ethical considerations, of the AQA A-level Accounting (7127) specification (version 1.1, October 2026, for A-level exams from June 2019 onwards). The qualification is not tiered, and section 18 is listed for both Paper 1 and Paper 2. All businesses, people and figures are invented.

Learn the content in the study guide and the revision notes. A question on the consequences of breaching each principle is in the role of the accountant practice set. See also the AQA A-level Accounting hub and the 7127 checklist.

Questions

1. Identify the fundamental principle breached in each case.

(a) A payroll clerk tells a neighbour how much the managing director earns. [1] (b) An accountant prepares a client’s tax computation using last year’s rules without checking for changes. [1]

2. Explain the difference between an accountant in business and an accountant in public practice, giving one ethical threat each is likely to face. [4]

3. Explain what each of these audit opinions tells a shareholder: qualified, adverse, disclaimer. [3]

4. Explain the role and composition of a remuneration committee and how it supports ethical behaviour. [4]

5. Explain the role of each of the following in the regulatory framework for accounting: the Financial Reporting Council, the government, and the European Union. [6]

6. Explain how CCAB and CIMA help establish and enforce codes of conduct for accountants. [4]

7. Pellow & Co audits Marston Ltd. The same partner has led the audit for eleven years. Pellow & Co also prepares Marston’s financial statements, which it then audits. Fees from Marston are 30% of Pellow & Co’s income. Identify three threats to the fundamental principles and suggest a safeguard for each. [6]

8. Dana is the management accountant on a panel choosing a new packaging supplier. One bidder offers her a free weekend at a spa hotel. Explain the ethical issues and recommend what Dana should do. [4]

9. Ashby Kitchens Ltd has a draft profit for the year of £150,000. Closing inventory includes discontinued units at cost of £24,000; they can now be sold for only £6,000. Draft current assets are £210,000 and current liabilities £120,000. A bank loan requires a current ratio of at least 1.70 : 1. The managing director tells the accountant to keep the units at cost.

(a) Calculate the corrected profit for the year. [2] (b) Calculate the current ratio before and after the correction and state whether the loan condition is met. [3] (c) Explain the ethical issues and recommend the accountant’s course of action. [4]

10. Brindle Foods plc plans to pay small suppliers within 30 days instead of 75, and to switch to fully recyclable packaging at higher cost. One shareholder says: “Corporate social responsibility conflicts with the directors’ duty to shareholders.” Evaluate this view. [10]

11. Corvell Logistics plc reports a profit for the year after tax of £3,400,000 and has 8,000,000 issued ordinary shares. Executive share awards vest only if earnings per share is at least 40p. Tom, the financial controller, finds that £520,000 of vehicle repairs was recorded as non-current assets and depreciated at 10%. The chief financial officer tells Tom “the board is happy with it”. Ignore taxation.

(a) Calculate the corrected profit for the year and earnings per share, and state whether the target is met. [4] (b) Evaluate the courses of action open to Tom. [8]

Answers

1. (a) Confidentiality [1]. (b) Professional competence and due care [1]. Examiner insight: One word answers are fine for “identify”, but “honesty” is not the name of a principle; use the specification’s wording.

2. An accountant in business is employed by one organisation and prepares its records [1]; they may face an intimidation threat from a manager who wants better results [1]. An accountant in public practice sells services such as audit and tax to clients for fees [1]; they may face a self-interest threat if one client provides a large share of fees [1]. [4] Examiner insight: Each threat must match the role; a threat given without a reason linked to that role is unlikely to gain the second mark.

3. Qualified: the statements are true and fair except for a specific material matter [1]. Adverse: misstatements are material and pervasive, so the statements are not true and fair [1]. Disclaimer: the auditor could not obtain enough evidence to give any opinion [1]. [3] Examiner insight: Adverse and disclaimer are often swapped; disagreement is adverse, lack of evidence is a disclaimer.

4. It decides the pay of executive directors [1]. It is made up of independent non-executive directors [1], and no director decides their own pay [1]. This reduces the self-interest threat, so pay is less likely to reward short-term figures that executives can influence [1]. [4] Examiner insight: Saying the committee “includes the managing director” contradicts its purpose and loses the composition mark.

5. The FRC sets UK accounting standards and the UK Corporate Governance Code [1], and regulates auditors and accountants, investigating misconduct and imposing sanctions [1]. The government makes company law, such as the Companies Act 2006, which requires accounts to give a true and fair view [1]; the department named in the specification (BIS) has since been replaced, and the Department for Business and Trade now oversees Companies House, the Insolvency Service and the FRC [1]. The EU’s IAS Regulation required publicly traded companies to use international standards for consolidated accounts [1]; since the UK left, those standards were frozen into UK law and UK-adopted standards now apply [1]. [6] Examiner insight: Two developed points per body are needed for full marks; “the government makes laws” alone is too vague.

6. CCAB is a forum through which its member bodies agree common positions and speak to the UK government with one voice [1]. Each member body publishes a code of ethics that its members must follow as a condition of membership [1]. CIMA, outside CCAB, publishes its own Code of Ethics built on the five fundamental principles [1]. The bodies enforce codes by investigating complaints and disciplining members, up to exclusion from membership [1]. [4] Examiner insight: Describing CIMA as a CCAB member is a factual error; keep the two bodies separate.

7. Familiarity threat from eleven years with the same partner [1]; safeguard: rotate the audit partner [1]. Self-review threat from auditing statements the firm prepared [1]; safeguard: use a separate team for preparation, or have an independent partner review the audit [1]. Self-interest threat from dependence on 30% of fees [1]; safeguard: an independent quality review, or reduce dependence or decline reappointment if it cannot be managed [1]. [6] Examiner insight: Each safeguard must fit its threat; rotating the partner does nothing about fee dependence.

8. The gift could bias her choice, a threat to objectivity [1]. Even if she stays fair, others may see a conflict of interest, which risks professional behaviour and integrity [1]. This is a self-interest threat [1]. She should decline the offer, declare it to her manager under the organisation’s gifts policy, and step back from the decision if necessary [1]. [4] Examiner insight: Recommend a specific action; “she should be careful” gains nothing.

9. (a) Write-down to net realisable value = 24,000 − 6,000 = £18,000 [1]. Corrected profit = 150,000 − 18,000 = £132,000 [1]. (b) Before: 210,000 / 120,000 = 1.75 : 1 [1]. After: 192,000 / 120,000 = 1.60 : 1 [1]. The corrected ratio is below 1.70 : 1, so the condition is not met [1]. (c) Keeping the units at cost knowingly overstates profit and assets, breaching integrity [1]. Inventory must be valued at the lower of cost and net realisable value, so it breaches professional competence and due care [1]. The bank would be misled about a broken loan condition, and the accountant faces an intimidation threat [1]. The accountant should refuse, explain the rule in writing, raise it with the board and auditors, and seek advice from their professional body if it is not corrected [1]. Examiner insight: In (b), an error carried from (a) can still earn method marks if the method is shown; a bare ratio cannot.

10. Section 172 of the Companies Act 2006 requires directors to promote the success of the company for its members [1]. For the view: both plans raise costs, reducing profit and possibly dividends [1]. Paying in 30 days instead of 75 means cash leaves earlier, reducing liquidity [1]. Shareholders own the company, and spending on others transfers value away from them [1]. Against: s172 also requires regard to suppliers, the community and the environment, so CSR is part of the duty, not a conflict [1]. Faster payment keeps small suppliers in business and secures supply [1]. Recyclable packaging can protect reputation and customer loyalty, supporting long-term revenue [1]. It lowers the risk of future regulation or penalties [1]. Under good governance the board should report its approach openly so shareholders can judge it [1]. Judgement: CSR conflicts with short-term profit, but not with long-term shareholder value, provided Brindle can afford the cash cost [1]. [10] Examiner insight: “Evaluate” needs points on both sides and a supported judgement; a one-sided answer cannot reach full marks.

11. (a) Add back depreciation charged: 520,000 × 10% = £52,000 [1]. Deduct repairs as an expense: 3,400,000 − 520,000 + 52,000 [1] = £2,932,000 [1]. EPS = 293,200,000p / 8,000,000 = 36.65p, below the 40p target, so the awards would not vest [1]. (b) Recording repairs as non-current assets breaches integrity and professional competence and due care (revenue expenditure treated as capital) [1]. Executives face a self-interest threat: the target is met only because of the misstatement [1]. Tom faces an intimidation threat from the CFO [1]. Option 1, escalate internally: go above the CFO to the audit committee of independent NEDs [1]; this keeps the matter confidential and lets the company correct the accounts before publication [1]. Option 2, go outside: seek advice from his professional body and, if needed, report to the auditors or a regulator [1]; this may be protected under the Public Interest Disclosure Act 1998 if the disclosure qualifies, but risks his job and needs firm evidence [1]. Judgement: Tom should first put his concern in writing to the audit committee, refuse to sign off the figures, and go outside only if the board will not correct them [1]. Examiner insight: Weigh at least two options before the judgement; a list of actions with no comparison limits marks.

Where marks are usually lost

• Naming a principle without the fact from the scenario that breaches it.
• Calling every breach “integrity” when objectivity or competence fits better.
• Giving a safeguard that does not match the threat.
• Swapping adverse and disclaimer opinions.
• Putting executives on the remuneration committee.
• Saying the government sets accounting standards; that is the FRC.
• Recommending external reporting with no internal step first.
• Skipping the calculation when figures show the ethical effect.
• Finishing an evaluation without a judgement.

Next steps

• Revision notes for this topic
• Study guide for this topic
• Exam preparation guide
• AQA A-level Accounting hub
• 7127 checklist
• All free 10-minute diagnostics
• Book a free trial class

Official syllabus

AQA A-level Accounting (7127) specification, version 1.1, October 2026, for A-level exams June 2019 onwards, published by AQA – section 3.18, The impact of ethical considerations.