ETHICS
Ethics
ACCA SBR – ETHICS IN CORPORATE REPORTING
Topic: Professional Ethics for Strategic Business Reporting (SBR)
Audience: ACCA SBR Students
Lecture Objective: To understand the ethical responsibilities of a professional accountant in the
context of financial reporting and corporate transparency.
PART 1: The Importance of Ethics in SBR
1) Ethics is central to professional judgment, accounting estimates, and fair presentation in financial
reporting.
2) Corporate scandals (e.g., Enron, Wirecard) show how unethical reporting can destroy public trust.
3) ACCA expects accountants to go beyond compliance — to uphold public interest.
PART 2: The Five Fundamental Principles of Professional Ethics (IESBA Code)
PART 3: Types of Ethical Threats
PART 4: Ethics in SBR Case Scenarios
(Always apply the ethics within accounting situations.)
Example Case 1:
You are the financial controller. The CEO asks you to delay the recognition of an impairment loss until
next year to avoid a breach of loan covenant.
Ethical Analysis:
Threat: Self-interest (to save job or bonus)
Breach: Integrity & Objectivity
Impact: Misstatement of assets and financial position
Action: Document findings, advise CEO, escalate if necessary, consider whistleblowing
PART 5: Safeguards Against Ethical Threats
PART 6: Concept Clarity Exercises
Exercise 1: Identify the Principle
Scenario: You discover the company is understating environmental liabilities to appear more
profitable.
Q: Which ethical principles are under threat? What actions should you take?
Expected Answer: Integrity, Professional Behavior. Action: Document, escalate, potentially
report under whistleblowing policy.
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Exercise 2: Real-life Reflection
Task: Research one real-world case where unethical accounting led to company collapse.
Present:
i) The ethical breach
ii) The accounting manipulation
iii) The consequences
Example Answer: Enron — used SPEs to hide debt → Breach of Integrity/Objectivity →
Bankruptcy and global audit reforms
PART 7: Exam Technique for Ethics in SBR
Apply ethics to scenario — don’t just list principles
Use headings: Ethical Issue, Principles, Impact, Action
Marks awarded for logical reasoning, not rote learning
Closing Message for Students:
“As future accountants, your reputation is built not just on your knowledge of IFRS, but your ethical
compass. The SBR exam tests your values — not just your technical ability. Let ethics be your guide
when the pressure is high.”
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Specimen Exam 1 Q#2
Abby
Answer:
Ethical & Accounting Implications –
Bullet Point Answer From the perspective of the reporting accountant (Abby Ltd):
1. Related Party Transactions (IAS 24)
The director’s company (Arwight) is a related party due to joint ownership with spouse — disclosure is
mandatory. IAS 24 requires: Nature of the relationship Transaction amounts and outstanding balances
Arm’s length is not an exemption from disclosure. Failure to disclose may mislead users and affect fair
presentation (IAS 1).
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2. Segment Reporting (IFRS 8)
Disclosure of operating segment profit/loss is required — no exemption for competitive harm. Only
CODM-reviewed information is reportable; selective reporting is not allowed. Failure to disclose full
segment info undermines transparency and risk assessment for investors. Withholding data contradicts
IFRS 8 principles and ethical obligation of integrity.
3. Allowance for Receivables
Arwight’s overdue payment indicates liquidity issues — probable impairment of receivable. Refusal to
allow provisioning may breach IFRS 9 (Expected Credit Loss model). The director prohibiting disclosure
raises ethical concerns: Intimidation and self-interest threats Possible bias in professional judgment
Accountant should discuss, document, and escalate appropriately.
4. Subsidiary Fair Value Adjustments (IFRS 3 & IFRS 13)
Director insists on no positive fair value adjustments — likely to inflate goodwill and suppress
depreciation. This misstates assets and post-acquisition profit. May mislead stakeholders on group
performance. Rejecting such manipulation aligns with professional behavior and objectivity.
5. Goodwill Impairment (IAS 36)
Director pressures accountant to: Use lower discount rate and inflated cash flows Avoid impairment and
boost asset values Offers a salary raise for compliance — a clear self-interest threat Discount rate must
reflect market risks — not manipulated. Ethical breach: Objectivity compromised, undue influence,
coercion. Action: Refuse unethical pressure, escalate internally, document all discussions.
6. Ethical Responsibilities of the Accountant (ACCA Code)
Accountants must: Uphold integrity, objectivity, professional competence Avoid compliance with
unethical directives Ensure full compliance with IFRSs (IAS 1) Document concerns, seek advice, and
consider resignation if unresolved. May need to consult professional/legal advisers or report under
whistleblowing protocols.
------------------------------- Best wishes -----------------------------
