Edexcel IGCSE Accounting: Technology in accounting and professional ethics (4AC1) – Revision Notes

These notes condense sections 1.3 Use of technology in accounting and 1.4 Professional ethics of Topic 1, The accounting environment, in the Pearson Edexcel International GCSE in Accounting (4AC1) specification, Issue 1, October 2016. Paper 1 draws exclusively on Topics 1 to 3. For full explanations and worked examples, use the study guide.

Links: 4AC1 Accounting course hub, printable checklist, free 10-minute diagnostics. For exam-style questions, use the practice set. All money amounts here are in dollars.

1.3 (a) Benefits of technology

Tool	Benefit	Because
Accounting software	Speed	One entry is posted to every linked account
Accounting software	Accuracy	The program does the arithmetic and posts both sides
Accounting software	Reports on demand	Trial balance or statement of profit or loss without re-adding
Accounting software	Easy searching and storage	Records are electronic, found by name or number
Spreadsheet	Formulas	Totals and ratios recalculate when inputs change
Spreadsheet	What-if testing	Change one assumption and every result updates
Spreadsheet	Templates	Monthly layouts reused
Spreadsheet	Charts	Trends in sales or costs shown visually

Limit to remember: technology processes what it is given. A wrong figure typed in stays wrong.

Spreadsheet reminder

Straight-line depreciation in a cell: =(cost-residual)/life.

For cost 7,200, residual value 600 and life 6 years: (7,200 − 600) ÷ 6 = 1,100 a year. Change the life to 5 years and the charge becomes (7,200 − 600) ÷ 5 = 1,320, with no re-typing.

Method in steps: “Explain a benefit” answers

1. Name the tool (software or spreadsheet).
2. State the benefit (for example, speed).
3. Give the reason (one entry posts to all accounts).
4. Give the effect on the business (less time, fewer errors, sooner information).

1.3 (b) Security issues

Issue	Meaning	Typical causes	Possible effect
Data loss	Records destroyed or unreadable	Hardware failure, virus, power cut, fire, theft, accidental deletion	Cannot show who owes or is owed; time lost re-keying
Access	Who can open or change records	No passwords, shared login, room left open	Fraud, altered figures, deleted records
Confidentiality	Information kept private	Hacking, printouts left out, staff talking, visible screens	Lost trade, harm to customers, legal trouble

Must-know distinction: access is about who gets in. Confidentiality is about what happens to the information. A person with proper access can still breach confidentiality by passing information on.

1.3 (c) Protection methods

Hardware	Software
Backups on external drives, kept off-site	Passwords and user access levels
Fireproof safe for backup media	Encryption of files and backups
Uninterruptible power supply	Antivirus and firewall, kept updated
Locked server room or cabinets	Scheduled automatic backups, including online copies
Keycards or fingerprint scanners	Audit trail showing who changed what

Match issue to method: backups and UPS for data loss; passwords, locks and access levels for access; encryption and restricted access for confidentiality.

Backup arithmetic reminder

A business keys 6 transactions an hour for 8 hours a day. If a disk fails after 3 hours of a day and the last backup was at the end of the previous day, work lost is 3 × 6 = 18 transactions. If 2 full days of work were done since the last backup, work lost is (2 × 8 + 3) × 6 = 114 transactions.

1.4 (a) Principles of professional ethics

The specification asks you to describe the principles without listing them. A widely used set is the five fundamental principles in the international code for professional accountants.

Principle	One-line meaning	Quick test
Integrity	Honest and straightforward	Would I be linked with a false statement?
Objectivity	Judgement free from bias and pressure	Is someone’s wish deciding the figure?
Professional competence and due care	Up-to-date knowledge, careful work	Am I applying the rules properly?
Confidentiality	Do not disclose or misuse work information	Am I sharing something I learned through my job?
Professional behaviour	Obey law, protect profession’s reputation	Would this harm trust in accountants?

1.4 (b) Applying principles to roles and functions

Role or function	Typical situation	Principle tested
Bookkeeper recording	Asked to leave a purchase unrecorded to reduce costs shown	Integrity
Accounts clerk paying suppliers	Supplier offers a gift to be paid first	Objectivity
Accountant preparing statements	Not sure how to treat a new item, but guesses	Professional competence and due care
Payroll clerk	Friend asks about a colleague’s pay	Confidentiality
Auditor	Client is also a close relative	Objectivity
Any accountant	Takes part in a scheme to avoid tax unlawfully	Professional behaviour

Method in steps: “Apply” answers

1. Pick out the facts that matter in the situation.
2. Name the principle the facts test.
3. Say why the action would breach it.
4. State what the accountant should do (refuse, correct, seek advice, keep quiet).

Worked reminder

Sunita Pell, bookkeeper at Anvil Road Cycles, is told to leave out a supplier invoice of 9,000 so that profit of 36,400 looks higher. Profit would show 36,400 + 9,000 = 45,400, which is 24.7% higher (9,000 ÷ 36,400 × 100). Principle: integrity, because the figures would mislead; competence and due care also applies, since the expense belongs to the period. Action: record the invoice and explain why.

1.4 (c) Public interest

Definition: the wellbeing of the wider community, including people who rely on accounts but are not the client or employer, such as lenders, investors, suppliers, employees and tax authorities.

Role	How it is applied
Bookkeeper or accountant	Prepares truthful records that others will use
Accountant advising	Declines to help conceal income or inflate results
Auditor	Reports honestly, even when the client objects

Must-know distinction: public interest is not the same as the employer’s interest. When they conflict, the accountant must not mislead others for the employer’s gain.

Must-know distinctions

Pair	Difference
Issue and method	Data loss is an issue; a backup is a method of protecting against it
Software (benefit) and software (protection)	Accounting software helps record and report; security software such as antivirus protects the data
Hardware and software protection	Hardware is physical equipment (drive, UPS, lock); software is a program or setting (password, encryption)
Integrity and objectivity	Integrity is honesty in what you say and record; objectivity is keeping judgement free from bias and pressure
Confidentiality and public interest	Confidentiality limits disclosure; public interest can mean an accountant must not help hide wrongdoing from those who rely on the accounts
Spreadsheet and accounting software	A spreadsheet is flexible and built by the user; accounting software posts to linked accounts automatically

Worked reminder: choosing protections

Scenario (invented): Coastline Pet Supplies keeps its records on one office computer. The risks are a power cut, a theft and a former employee who still knows the shared password. Suitable protections: a UPS (hardware, data loss); a backup drive kept off-site (hardware, data loss); individual passwords that are removed when staff leave (software, access); encryption of the backup (software, confidentiality).

Quick self-test

1. State two benefits of accounting software.
2. Give two benefits of using a spreadsheet for a budget.
3. A spreadsheet cell holds =(B1-B2)/B3, with B1 = 9,600, B2 = 1,200 and B3 = 7. Calculate the result.
4. Identify the data security issue when a flood destroys the only copy of the sales records.
5. Explain how a user password helps with the access issue.
6. Name one hardware and one software method of protecting data against data loss.
7. A clerk emails a customer list to a rival in return for payment. Name the principle breached.
8. Describe the principle of objectivity.
9. Explain the public interest in the work of an auditor.
10. A business backs up at 17:00 each day and enters 5 transactions an hour. The system fails at 12:00 and work began at 09:00. How many transactions must be re-entered?

Answers

1. Any two with reasons: speed (automatic posting), accuracy (calculations done by the program), reports on demand, easy searching.
2. Any two: formulas recalculate, what-if testing, templates, charts.
3. (9,600 − 1,200) ÷ 7 = 1,200.
4. Data loss.
5. It restricts entry to people who know the password, and it identifies who made changes.
6. Hardware: external drive backup kept off-site (or a UPS). Software: scheduled automatic backup (or antivirus, or encryption).
7. Confidentiality (and integrity or professional behaviour would also apply).
8. Not letting bias, conflict of interest or pressure from others override professional judgement.
9. An auditor’s report is relied on by people outside the business, such as lenders and investors. An honest report protects them even if the client dislikes the result.
10. 3 hours × 5 = 15 transactions.

Where marks are usually lost

• Writing “it is faster” or “it is more secure” with no reason.
• Describing a problem when the question asks for a method of protection, or the reverse.
• Naming a method without saying which issue it addresses.
• Answering an “apply” question in general terms without using the facts given.
• Saying a situation is “unethical” without naming the principle.
• Mixing up access (who gets in) and confidentiality (what is done with the information).
• Treating public interest as the employer’s interest, or as only the interest of the client.
• Claiming that software removes all errors.

Frequently asked questions

What are the principles of professional ethics for accountants? The specification does not list the principles by name; the five fundamental principles commonly used are integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. In an answer, name the principle and apply it to the situation.

What is the difference between access and confidentiality? Access is about who can get into the records and open, change or delete them. Confidentiality is about what is done with the information, keeping it private and using it only for the purpose it was given.

Does accounting software remove all errors? No. Software does the arithmetic and posts to the correct sides, but it can only process what it is given, so a wrong entry is still wrong however fast it is posted.

Does confidentiality still apply after an employee leaves a job? Yes. Information gained through a job, such as a colleague’s salary, must not be disclosed, and the principle continues to apply after the person changes jobs.

Official syllabus

Pearson Edexcel International GCSE in Accounting (4AC1) specification, Issue 1, October 2016, published by Pearson Education Limited – Topic 1: The accounting environment, Use of technology in accounting and Professional ethics (1.3 and 1.4 on this site).