OxfordAQA A-Level Accounting: The impact of ethical considerations (9615) – 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 3.2.10, The impact of ethical considerations, of the OxfordAQA International AS and A-level Accounting (9615) specification, Version 1.2, for International AS exams May/June 2025 onwards and International A-level exams May/June 2026 onwards. Ethics is second-year material (International A-level only) and the specification names it for Papers 3 and 4. All businesses, people and figures are invented; amounts are in dollars.

Revise first with the study guide and the revision notes.

Questions

1. State the fundamental principle most clearly breached in each case.

(a) Before results are announced, a management accountant uses the unpublished loss figure to sell her own shares in the company. [1] (b) An assistant accountant records a complex lease she does not understand and does not ask anyone for help. [1] (c) A small practice advertises that it “guarantees a lower tax bill for every client”. [1]

2. Distinguish between an executive director and an independent non-executive director (NED), and explain how an audit committee of independent NEDs supports ethical financial reporting. [4]

3. Explain what is meant by corporate social responsibility and give two ways an accountant’s work can support it. [3]

4. The auditor of Glenmoor Pumps Ltd is completing the audit.

(a) Closing inventory is overstated by 42,000. Profit for the year is 600,000. It is material but not pervasive, and the directors refuse to correct it. State the audit opinion and explain why. [2] (b) In another year, a flood destroys most records, so evidence for most balances cannot be obtained. State the audit opinion and explain why. [2]

5. Explain how professional accountancy bodies establish and enforce codes of conduct. [4]

6. Explain why accountants must work within regulatory guidelines, and state two consequences for a company of failing to do so. [4]

7. Trevanion Tiles Ltd has a bank loan that requires interest cover of at least 4 times. Profit from operations for the year is 236,000. Loan interest paid is 54,000, and 8,000 for the final month is owed at the year end. The managing director tells the accountant to leave out the 8,000.

(a) Calculate interest cover with and without the accrued interest, and state whether the loan condition is met in each case. [3] (b) Explain the ethical issues this raises and recommend a course of action for the accountant. [4]

8. Selwyn is a management accountant at Tollerby Plastics Ltd. He is preparing the make-or-buy costing for outsourcing moulding work. His brother-in-law directs the only outside firm being considered. Explain the threat to the fundamental principles and how Selwyn should resolve it. [4]

9. Calderhythe Castings Ltd pays its production manager a bonus of 5% of any favourable labour efficiency variance. The manager set the standard time at 2.5 hours per unit, although an engineering study found 2.0 hours to be achievable. In June, 3,600 units were made in 7,560 labour hours. The standard rate is 18 per hour.

(a) Calculate the labour efficiency variance using the manager’s standard and using the engineering standard. [4] (b) Calculate the bonus under each standard. [1] (c) Explain the ethical issues and recommend action for the management accountant. [3]

10. An accountant in public practice prepares the accounts of Brisemont Motors Ltd. Card-terminal statements show sales receipts of 1,240,000, but the directors want to report revenue of 1,105,000.

(a) Calculate the omitted revenue as a percentage of the revenue the directors want to report. [2] (b) Explain the courses of action the accountant should take. [4]

11. Yarrowfield Foods plc is listed. Its founder, Ruth Achterlonie, is chair and chief executive. The board has five executive and two non-executive directors; one non-executive still supplies packaging to the company. The finance director chairs the audit committee, and Ruth sets executive directors’ pay. The long-serving audit firm charged an audit fee of 64,000 and tax advisory fees of 96,000 this year. Dividends have risen every year.

Evaluate the corporate governance of Yarrowfield Foods plc and recommend changes. [12]

Answers

1. (a) Confidentiality: information obtained at work used for personal advantage [1]. (b) Professional competence and due care: work done without the knowledge needed or the care to seek help [1]. (c) Professional behavior: a misleading claim that could discredit the profession [1]. Examiner insight: Use the principle’s exact name; a loose paraphrase may not be accepted.

2. An executive director manages the company day to day [1]. An independent non-executive director has no management role and no close ties to the company, so can challenge executives [1]. An audit committee of independent NEDs oversees the auditor and internal controls without answering to the executives whose results are checked [1], reducing self-interest and intimidation threats behind misleading figures [1]. Examiner insight: Say why independence matters; describing membership alone leaves the second half unanswered.

3. Corporate social responsibility is a business taking account of how its actions affect staff, customers, suppliers, local people and the environment, alongside profit [1]. The accountant can report these effects honestly, for example accurate data on waste or staff turnover [1], and include non-financial factors, such as job losses, alongside the figures when making recommendations [1]. Examiner insight: Give actions specific to the accountant, not general statements about being “green”.

4. (a) Qualified (“except for”) [1], because the misstatement is material but confined to inventory, so the rest of the statements are still fairly presented [1]. (b) Disclaimer of opinion [1], because the auditor cannot obtain sufficient appropriate evidence and the possible effects could be material and pervasive [1]. Examiner insight: The reason must use the two tests, material and pervasive; naming the opinion alone leaves the “explain why” part unanswered.

5. Establish: a body publishes a code of ethics based on the fundamental principles [1] and makes following it a condition of membership, supported by exams and continuing professional development [1]. Enforce: it investigates complaints about members and holds disciplinary hearings [1], with sanctions such as fines, conditions on practice or exclusion from membership [1]. Examiner insight: Two verbs, establish and enforce: cover both.

6. Users such as investors and lenders can only rely on accounts prepared to known, enforced rules [1], and comparison between companies and years depends on everyone following the same standards [1]. Consequences, any two: fines or legal action; a modified audit opinion; restatement of the accounts; loss of investor or lender confidence, raising the cost of finance [1] [1]. Examiner insight: The consequences asked for are the company’s; penalties on an individual accountant do not answer that part.

7. (a) Correct finance costs = 54,000 + 8,000 = 62,000; interest cover = 236,000 / 62,000 = 3.81 times: condition not met [1]. Without the accrual: 236,000 / 54,000 = 4.37 times: condition appears met [1]. Interest cover = profit from operations / finance costs, used correctly in both [1]. (b) Omitting the accrual breaks the accruals concept, understating finance costs and current liabilities [1]. Doing it knowingly to pass the covenant breaches integrity and misleads the bank [1]. The managing director has a self-interest threat; the instruction is an intimidation threat to the accountant [1]. The accountant should explain the correct treatment in writing, refuse, and escalate to the board or audit committee if pressed [1]. Examiner insight: Show the formula and working; a bare ratio gives nothing to reward if a figure slips.

8. The family link creates a conflict of interest, a threat to objectivity [1]; his cost estimates could lean towards the relative’s firm, and a reasonable and informed third party would doubt the result [1]. He should disclose the relationship in writing to the finance director [1] and hand the costing to an unconnected colleague, or have it independently reviewed [1]. Examiner insight: “Resolve” needs disclosure plus a step that removes his influence on the figures; disclosure alone does not resolve it.

9. (a) Manager’s standard: standard hours = 3,600 x 2.5 = 9,000 [1]; variance = (9,000 - 7,560) x 18 = 25,920 favourable [1]. Engineering standard: standard hours = 3,600 x 2.0 = 7,200 [1]; variance = (7,200 - 7,560) x 18 = 6,480 adverse [1]. (b) Bonus = 5% x 25,920 = 1,296 under the manager’s standard; nil under the engineering standard [1]. (c) The slack standard turns real inefficiency into a “favourable” variance that pays the manager a bonus: a self-interest threat to objectivity and integrity [1]. Management loses control, as 360 excess hours go unnoticed [1]. The accountant should report both variances to senior management and recommend the engineering standard, with bonus targets set independently of the manager [1]. Examiner insight: Write “F” or “A” (or the full word) after every variance; correct arithmetic without a direction leaves the answer unfinished.

10. (a) Omitted revenue = 1,240,000 - 1,105,000 = 135,000 [1]; 135,000 / 1,105,000 x 100 = 12.2% [1]. (b) Establish the facts: reconcile the card statements to the records and ask the directors to explain, keeping a record [1]. Evaluate the significance: an omission this size could be tax evasion, which is illegal as well as unethical [1]. Refuse to prepare accounts that leave out revenue [1]. Seek external/professional help on any legal duty to report, and withdraw if the directors will not correct the figures [1]. Examiner insight: Check the base: dividing by the card receipts gives 10.9%, which answers a different question.

11. Issues. Combining chair and chief executive leaves no one to lead the board’s challenge of Ruth [1]. Only two of seven directors are non-executives, and one has a supply contract, a conflict of interest that threatens objectivity [1]. The finance director chairing the audit committee oversees the audit of accounts they are responsible for, a self-review threat [1]. Ruth setting directors’ pay is a self-interest threat [1]. Non-audit work is 96,000 / 160,000 = 60% of the firm’s fees from Yarrowfield [1]; with the long tenure, this creates self-interest and familiarity threats to auditor independence [1]. Counter-arguments. Rising dividends suggest the founder’s control has worked [1]. More non-executives and committees add cost and may slow decisions [1]. Recommendations. Separate chair and chief executive and appoint more independent NEDs [1]; staff the audit and remuneration committees with independent NEDs and review the auditor’s non-audit work and tenure [1]. Judgement. Past results do not prove the controls are sound, and a listed company depends on investors trusting its figures [1], so the weaknesses outweigh the cost of change and the recommendations should be adopted [1]. Examiner insight: To evaluate, set the case for the current set-up against its weaknesses and finish with a reasoned verdict; listing weaknesses alone reads as analysis.

Where marks are usually lost

• Defining a principle without quoting the fact in the scenario that breaches it.
• Writing the threat category (self-interest, intimidation) without the principle it endangers.
• Leaving out the formula, the working or the favourable/adverse label in calculations.
• Picking “adverse” for one contained misstatement, or “qualified” when evidence is missing for most balances.
• Recommending going to the media or a regulator first, before internal routes and professional advice.
• Ending an “evaluate” answer without a judgement.

Next steps

• Short notes with a self-test: revision notes
• Full explanations and worked examples: study guide
• Exam technique for the course: 9615 exam preparation guide
• Other topics: course hub and topic checklist
• Find your weak spots: all free 10-minute diagnostics
• Book a free trial class

Official syllabus

OxfordAQA International AS and A-level Accounting (9615) specification, Version 1.2, for International AS exams May/June 2025 onwards and International A-level exams May/June 2026 onwards, published by OxfordAQA – section 3.2.10, The impact of ethical considerations.