Steps on how to approach ethical issue question in ACCA P7.

Ethical issue question is one of the most regular question in ACCA P7 exam. Ethical question test student understanding on the ACCA code of ethics which is the cornerstone on of accountant’s every day professional engagement

When attempting ethical issue question you need to follow the following steps:

  • First you need to identify the fundamental principle which is affected by the scenario in the question. Accountant need to comply with all five fundamental principle in the code of ethics which are integrity, objectivity, professional competence and due care, professional behaviour and confidentiality. And condition which may lead to non compliance with these five fundamental principal can lead to ethical issue.
  • After identifying the fundamental principle which may affected by the scenario you need to identify the threat which may lead to non compliance with fundamental principle. The threat may be either self interest threat, self review threat, advocacy threat, familiarity threat and intimidation threat.
  • The step which follow after identifying the threat to fundamental principle s is to assess the magnitude of the threat. If the threat is assessed to be significant then the accountant need to resign from the engagement or find mitigation measures which may reduce the threat to acceptable level. When the threat is assessed to be insignificant the accountant may just accept it and continue with the engagement.
  • Last step of of attempting the ethical issue question is to suggest mitigation measures which can help to reduce the threat to low acceptable level. If accountant find that he can not reduce identified threat to acceptable level he need to resign from engagement or he should not accept the engagement at the first place.

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