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

This guide teaches 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 International A-level only; the specification names it for both Paper 3 (Financial Accounting) and Paper 4 (Accounting for analysis and decision making), so expect ethics in reporting scenarios and in costing or investment scenarios.

Use this guide with the revision notes and the practice questions. The 9615 role of the accountant guide lists the principles briefly; this guide develops them in full. Browse the course hub, the topic checklist and try the diagnostic quizzes. Every business, person and figure below is invented.

What section 3.2.10 covers

Specification content (3.2.10)	What you must be able to do
The fundamental principle of ethical behavior	Name and explain each principle; identify breaches in a scenario
How the principles of ethical behaviour impact the behaviour of accounting professionals and organisations	Apply them to the six areas listed in the specification
The legal and regulatory frameworks which relate to the accounting sector	Explain why the rules matter and the consequences of breaking them
The role of professional bodies in establishing and enforcing codes of conduct	Explain how codes are set and how members are disciplined
How to act ethically when working with clients, suppliers, colleagues and stakeholders	Combine principles, professional codes and regulation in a scenario
Appropriate courses of action to take if there is a suspicion that an unethical or illegal act has been, or may be, committed by an employer, colleague or client	Choose and justify a course of action

Behind all six rows sits the duty, named in the specification’s aims, to be truthful and accurately represent the facts.

1. The five fundamental principles

The International Code of Ethics for Professional Accountants, developed by the International Ethics Standards Board for Accountants (IESBA), is built on the same five principles that the specification lists. Many national bodies align with it.

Principle	In plain words	Ask yourself
Integrity	Be straightforward and honest	Would the reader accept how this figure was produced?
Objectivity	No bias, conflict of interest or undue pressure overriding judgement	Is anyone’s personal gain shaping this?
Professional competence and due care	Current knowledge, applied carefully	Do I know the rules, and have I checked?
Confidentiality	No disclosure without authority; no personal advantage	Who is entitled to see this?
Professional behavior	Obey laws and regulations; do not discredit the profession	Would this embarrass the profession?

Threats, safeguards and the “third party” test

The IESBA Code asks accountants to identify, evaluate and address threats to the principles. It groups threats into five categories: self-interest, self-review, advocacy, familiarity and intimidation. To judge whether a threat is at an acceptable level, the Code uses the view of a reasonable and informed third party: someone who knows the facts and could weigh them impartially.

If a threat is too high, the accountant removes its cause, applies a safeguard (an action reducing it to an acceptable level, such as an independent review), or declines or ends the work.

2. Six areas the principles affect

The accountant in business

Working inside a single organisation, the accountant in business produces its records, budgets and forecasts. The pressure comes from managers whose pay or projects depend on the numbers. The accountant reports what the evidence supports. This includes management accounting: a standard, budget or forecast can be bent as easily as published accounts.

The accountant in public practice

An accountant in public practice works for a firm selling audit, tax and advisory services to clients. Because the client pays, the firm may be reluctant to upset a valuable one. Typical threats are fee dependence (self-interest), auditing figures the firm prepared (self-review) and long relationships with client staff (familiarity).

The role and composition of the board of directors

The board directs the company for its shareholders. Executive directors run the business. Independent non-executive directors (NEDs) have no close ties to the company, so they can challenge executives. Good composition usually means:

• a balance of executives and independent NEDs
• a chair who is not also the chief executive
• audit and remuneration committees of independent NEDs.

The role of auditors and the audit report

Shareholders appoint external auditors to report independently on whether the financial statements are true and fair. Under the International Standards on Auditing (ISAs), issued by the International Auditing and Assurance Standards Board (IAASB), the possible opinions are:

Opinion	When it is given
Unmodified	The statements are fairly presented
Qualified (“except for”)	A misstatement, or missing evidence, is material but not pervasive
Adverse	Misstatements are both material and pervasive
Disclaimer of opinion	The auditor cannot obtain enough appropriate evidence, and the possible effects could be material and pervasive

Corporate governance

Corporate governance describes how a company is directed and controlled: board structure, committees, internal controls and reporting to shareholders. Good governance makes it harder for one person to override controls.

Corporate social responsibility (CSR)

Under CSR, a business weighs how its decisions affect staff, customers, suppliers, local people and the environment, as well as profit. Accountants support it by reporting these effects honestly and including non-financial factors in recommendations.

3. Legal and regulatory frameworks

Accountants work inside layers of rules:

• Company law: records, filing of accounts, appointment of auditors.
• Accounting standards: many countries use IFRS Accounting Standards, issued by the International Accounting Standards Board (IASB); others set national standards.
• Auditing standards, such as the ISAs.
• Tax law and laws against fraud, bribery and money laundering.
• Listing rules and governance codes for listed companies.

Working within these guidelines matters because users can only rely on, and compare, accounts prepared to a known, enforced standard.

Consequences of failing to do so fall on several parties:

Who	Possible consequences
The company	Fines, a modified audit opinion, restated accounts, loss of investor and lender confidence
Directors	Legal action, disqualification, loss of office
The individual accountant	Disciplinary action by a professional body, loss of membership, dismissal, prosecution where an offence is involved
Stakeholders	Decisions made on false information; lost money or jobs

4. Professional bodies and codes of conduct

Professional accountancy bodies establish codes of conduct by publishing a code of ethics (often aligned with the IESBA Code) and making compliance a condition of membership. They also set exams and require continuing professional development.

They enforce codes by investigating complaints, holding disciplinary hearings and imposing sanctions: a warning, a fine, conditions on practice or exclusion from membership. Many also offer members confidential ethics advice.

5. Acting ethically with each group

Group	Ethical practice
Clients	Keep their affairs confidential; accept only work you are competent to do
Suppliers	Choose on merit; declare any personal connection
Colleagues	Never pressure others to alter figures; raise concerns properly
Stakeholders	Give truthful, complete and timely information

Acting ethically means applying three things at once: the principles of ethical behaviour, the codes of practice of professional bodies, and the regulatory framework. An organisation’s own values and policies sit alongside these.

Worked example 1: a project forecast under pressure (management accounting)

Corrander Kilns Ltd is deciding whether to buy a new kiln for 180,000. The kiln lasts 4 years. Each unit sold adds 10 of net cash inflow. Marketing forecasts 5,200 units a year. The production manager, Ifeoma Nkemdirim, wants the kiln and tells the management accountant to use 6,200 units, an early estimate that marketing has since revised down. The cost of capital is 10%, and company policy requires payback within 3 years. All figures are in dollars.

Step 1: payback.

Marketing forecast:  annual inflow = 5,200 x 10 = 52,000
                     payback = 180,000 / 52,000 = 3.46 years (3 years 5.5 months)
Manager's figure:    annual inflow = 6,200 x 10 = 62,000
                     payback = 180,000 / 62,000 = 2.90 years (2 years 10.8 months)

Step 2: net present value at 10%.

Year   Factor    PV at 52,000    PV at 62,000
1      0.909         47,268          56,358
2      0.826         42,952          51,212
3      0.751         39,052          46,562
4      0.683         35,516          42,346
Total PV            164,788         196,478
Less cost           180,000         180,000
NPV                 (15,212)         16,478

Step 3: ethical analysis. The current forecast fails both tests; the manager’s figure passes both. Using a forecast known to be out of date breaches integrity and professional competence and due care. The manager has a self-interest threat, and the instruction creates an intimidation threat for the accountant.

Step 4: action. Present the appraisal on the current forecast. Any non-financial benefits can be stated separately, not hidden in the cash flows. If pressure continues, raise it with the finance director.

6. If you suspect an unethical or illegal act

The specification lists four courses of action (steps 2, 3, 4 and 6 below). Fit them into a sequence:

1. Establish the facts and keep a written record.
2. Evaluate the significance of threats to the fundamental principles: the amount, whether it is a crime, who could be harmed.
3. Ensure safeguards are in place, such as a second review.
4. Resolve conflicts of interest: declare them and step back.
5. Escalate internally, going above anyone involved.
6. Seek external/professional help when necessary: the professional body or a lawyer, including on any legal duty to report.
7. Refuse to take part; as a last resort, resign or withdraw.

Worked example 2: a public practice firm and its biggest client

Faulkbridge & Delacombe earns fees of 760,000 a year. Strathcarrow Freight plc pays 74,000 for its audit and 58,000 for accounts preparation and tax work.

Fees from Strathcarrow = 74,000 + 58,000 = 132,000
Share of firm's fees = 132,000 / 760,000 x 100 = 17.4%

Threats. Reliance on one client is a self-interest threat; auditing accounts the firm prepared is a self-review threat. Safeguards: a separate team for the accounts work, an independent partner review of the audit, and less non-audit work.

During the audit, Strathcarrow’s directors refuse to recognise a provision of 85,000 for a customer’s legal claim that the auditor judges probable. Profit before tax is 940,000, so the provision is 9.0% of it. The rest of the statements are fairly presented. The auditor judges the matter material but not pervasive, so the right opinion is qualified (“except for”). Issuing an unmodified opinion to protect 17.4% of fee income would breach integrity and objectivity.

Worked example 3: a suspected payroll fraud (accountant in business)

At Haverstone Textiles Ltd, the assistant accountant, Rhosyn Haldorsen, finds three names on the payroll with no staff records. Each has been paid 1,450 a month for 7 months.

Monthly cost  = 3 x 1,450 = 4,350
Total paid    = 4,350 x 7 = 30,450

The payroll supervisor is a close friend of Rhosyn’s line manager. Rhosyn should recheck and document the evidence without confronting anyone. Her manager has a conflict of interest, so she reports to the finance director or the audit committee. If the company does not act, she seeks advice from her professional body before any report outside the company.

Common errors

• Naming a principle without tying it to a specific fact in the scenario.
• Mixing up objectivity (free from bias) and integrity (honesty).
• Reading a qualified opinion as a verdict on all the statements; that is an adverse opinion.
• Treating ethics as a financial accounting topic only, and missing it in budgets, standards and investment appraisals.
• Jumping straight to the press or a regulator before internal routes and professional advice.
• Ignoring given figures: show the effect, then the ethics.

Next steps

Test yourself with the revision notes, then work through the practice questions. For exam technique, read the 9615 exam preparation guide before your mocks.

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.