OxfordAQA A-Level Accounting: The impact of ethical considerations (9615) – Revision Notes

These notes condense 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 sits in the second-year content (International A-level only) and appears in the specification for both Paper 3 and Paper 4. For full explanations and three worked examples, read the study guide first.

When you are ready, try the practice questions. Track your progress on the topic checklist, find other topics on the course hub and check weak spots with the free diagnostics. All names and figures are invented.

3.2.10 in six lines

1. The fundamental principles of ethical behaviour (five of them).
2. How they impact accountants in business, accountants in public practice, the board of directors, auditors and the audit report, corporate governance and CSR.
3. Legal and regulatory frameworks, why to work within them, and the consequences of failing to.
4. Professional bodies: establishing and enforcing codes of conduct.
5. Ethical conduct towards clients, suppliers, colleagues and other stakeholders.
6. The right response when an employer, colleague or client may have acted unethically or illegally.

The five principles

Principle	Remember it as	Typical breach
Integrity	Honest and straightforward	Approving a figure you know misleads
Objectivity	Judgement free of bias and pressure	Picking the estimate that suits your bonus
Professional competence and due care	Up to date and careful	Applying a standard you have not read
Confidentiality	Disclose only with authority; no personal gain	Passing client data to a friend’s business
Professional behavior	Lawful; protects the profession’s name	Misleading advertising of your services

The IESBA International Code of Ethics for Professional Accountants uses the same five principles.

Threats and safeguards

The IESBA Code’s approach: identify the threat, evaluate it (would a reasonable and informed third party think it acceptable?), then address it.

Threat	9615-style trigger	Safeguard
Self-interest	Bonus tied to a variance or profit; one client paying a large share of fees	Independent review; remove the person from the decision
Self-review	Checking your own budget, forecast or accounts	A different person reviews
Advocacy	Arguing an employer’s case so hard you lose balance	Keep the promoting and reporting roles separate
Familiarity	Long, close relationship with a client or colleague	Rotate staff
Intimidation	Threat of dismissal or of losing the client	Escalate above the person applying pressure

If no safeguard works, decline or end the work.

Six areas the principles affect

Area	Ethical focus
Accountant in business	Faithful records, budgets and forecasts despite pressure from managers
Accountant in public practice	Independence from clients who pay the fees
Board of directors	Mix of executives and independent NEDs; chair separate from chief executive; audit and remuneration committees of independent NEDs
Auditors and the audit report	Independent opinion to shareholders on a true and fair view
Corporate governance	How the company is directed and controlled
CSR	Effects on employees, customers, suppliers, community and environment

Audit opinions: the two-question grid

Ask: Is the problem material? Then: Is it pervasive?

Problem	Material, not pervasive	Material and pervasive
Misstatement found	Qualified (“except for”)	Adverse
Evidence not obtainable	Qualified (“except for”)	Disclaimer of opinion

No material problem: unmodified opinion. These categories come from the International Standards on Auditing (ISA 705).

Regulation and professional bodies

• Layers of rules: company law, accounting standards (often IFRS Accounting Standards from the IASB), auditing standards, tax law, anti-fraud and anti-bribery law, listing rules and governance codes.
• Why comply: users can only rely on and compare accounts prepared to known, enforced rules.
• Consequences of failing: fines, modified audit opinion, restated accounts, legal action or disqualification for directors, disciplinary action against the accountant, harm to stakeholders who relied on the figures.
• Establishing a code: publish it, make it a condition of membership, set exams and continuing professional development.
• Enforcing a code: investigate complaints, hold hearings, impose sanctions up to exclusion from membership.

Acting ethically with each group

Apply three things together: the principles of ethical behaviour, the codes of practice of professional bodies and the regulatory framework, plus your organisation’s own values and policies.

Group	Good practice	Warning sign
Clients	Confidentiality; only work you are competent to do; tell them plainly when a plan breaks the rules	Being asked to “find a way” round a standard
Suppliers	Award contracts on merit; declare any family or financial link	Gifts, hospitality or a relative on the bidding side
Colleagues	Support juniors; never ask anyone to change a figure without evidence	A manager asking for an entry “just for this year end”
Stakeholders	Complete, truthful and timely reports	Pressure to delay bad news until after a loan or share issue

Method in steps: an ethics scenario answer

1. Quote the fact from the scenario that causes concern.
2. If figures are given, calculate the effect first.
3. Name the principle at risk and the threat category.
4. Say who is harmed: shareholders, lenders, employees, tax authority, customers.
5. Recommend the course of action in order, and justify each step.
6. For “evaluate”, weigh the business’s view against the ethical case and end with a judgement.

Method in steps: suspected wrongdoing

The specification’s four courses of action, in a workable order:

1. Gather and record the facts.
2. Evaluate the significance of threats to the principles.
3. Ensure safeguards are in place.
4. Resolve conflicts of interest by declaring them and stepping back.
5. Escalate internally, above anyone involved.
6. Seek external/professional help when necessary: professional body, lawyer.
7. Refuse to take part; withdraw or resign as a last resort.

Small worked reminders

Overstated inventory moves profit between years. Closing inventory is overstated by 6,500.

This year:  cost of sales too low   -> profit overstated by 6,500
Next year:  opening inventory too high -> profit understated by 6,500
Two years together: no difference, but each year's report misleads

A missing cost inflates NPV. A forecast leaves out maintenance of 6,000 a year for 3 years; cost of capital 10%.

Factors: 0.909 + 0.826 + 0.751 = 2.486
NPV overstated by 6,000 x 2.486 = 14,916

Must-know distinctions

• Integrity vs objectivity: telling the truth vs judging without bias. An estimate skewed by self-interest breaches objectivity even if nothing false is said.
• Accountant in business vs in public practice: one employer vs many fee-paying clients.
• Executive vs independent non-executive director: runs the business vs challenges those who do.
• Qualified vs adverse: “except for” one material matter vs statements not fairly presented as a whole.
• Adverse vs disclaimer: the auditor has evidence of pervasive misstatement vs the auditor cannot form an opinion.
• Unethical vs illegal: a breach of principles may be lawful; fraud, bribery and tax evasion are crimes.
• Establishing vs enforcing a code: writing and requiring it vs investigating and disciplining.

Quick self-test

1. An audit manager’s spouse is the client’s finance director. Name the threat.
2. A firm earns 45,000 of its 300,000 annual fees from one client. Calculate the percentage and name the threat.
3. An auditor finds misstatements that are material and pervasive. Which opinion?
4. Which board committee oversees the external auditor and internal controls, and who should sit on it?
5. Closing inventory is overstated by 6,500. State the effect on this year’s and next year’s profit.
6. A budget officer is asked to review the budget she drew up. Name the threat.
7. List the four courses of action the specification names for a suspected unethical or illegal act.
8. Give two ways a professional body enforces its code of conduct.
9. Which principle does an accountant breach by claiming a qualification she does not hold on the firm’s website?
10. A forecast omits a cost of 6,000 a year for 3 years. At 10% (factors 0.909, 0.826, 0.751), by how much is NPV overstated?
11. State what CSR stands for and name two groups whose interests it takes into account besides shareholders.

Answers

1. Familiarity: a close family relationship with someone who prepares the figures being audited.
2. 45,000 / 300,000 x 100 = 15%; self-interest (fee dependence).
3. Adverse.
4. The audit committee, made up of independent NEDs.
5. This year +6,500; next year -6,500.
6. Self-review.
7. Ensure safeguards are in place; evaluate the significance of threats to the fundamental principles; resolve conflicts of interest; seek external/professional help when necessary.
8. Any two: investigating complaints; disciplinary hearings; fines or conditions on practice; exclusion from membership.
9. Professional behavior (and integrity).
10. 6,000 x 2.486 = 14,916.
11. Corporate social responsibility; any two of employees, customers, suppliers, the local community, the environment.

Where marks are usually lost

• Reciting the five principles without pinning each one to a detail from the case.
• Naming the threat category but not the principle it endangers, or the other way round.
• Skipping the calculation when figures are given, so the ethical point has no scale.
• Treating ethics as a Paper 3 issue only and missing it in budgets, standards and investment appraisals on Paper 4.
• Choosing “adverse” for a single, contained misstatement.
• Recommending going to the media first instead of internal routes and professional advice.
• Recommendations with no justification: say why each step comes in that order.
• One-sided “evaluate” answers with no final judgement.

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.