Principles of Professional Ethics (Edexcel IGCSE Accounting)
Spec point —
IGCSE_ACCOUNTING:S1.125
Principles of professional ethics
What are professional ethics?
-
The principles of professional ethics set out how people working in accounting roles must behave
-
The principles of professional ethics apply to all roles and functions related to accounting
- Payroll
- Reporting
- Auditing
- Bookkeeping
- Accountants
- Financial statements
-
There can be severe consequences if professional ethics are not followed
- Unethical practices can damage an accountant's reputation
- Businesses will refuse to hire accountants if they are unethical
- There can be legal repercussions for unethical practices, such as fines or, in serious cases, imprisonment
What are the five principles of professional ethics?
- There are five principles of professional ethics
| Principle | Explanation | Example |
|---|---|---|
| Integrity | - Accountants must be honest - Accountants must be straightforward and trustworthy | An accountant cannot agree to withhold information from the financial statements so that the business looks better. |
| Objectivity | - Accountants must be fair and free from bias - Accountants must make their own judgement - Accountants must not work for businesses where there is a conflict of interest | An accountant cannot produce financial statements for a relative. |
| Professional competence and due care | - Accountants must be suitably qualified - Accountants must **keep up to date **with changes to international accounting practices | An accountant should know the most recent terminology and accounting practices. |
| Confidentiality | - An accountant must not share information without the permission of a business unless there is a legal requirement - An accountant must not use confidential information for purposes other than accounting | An accountant cannot share information about wages with the employees of a business. |
| Professional behaviour | - An accountant must** follow the laws and regulations** of the profession - An accountant must not harm the reputation of the profession | An accountant must be truthful about their qualifications when advertising their services. |
What is the public interest for accountants?
-
Public interest refers to the external stakeholders of a business
-
External stakeholders should have confidence that work produced by an accountant will lead to:
- accurate and reliable financial statements
- information which can be compared with that of other businesses
- relevant and understandable information
-
Financial statements are audited to check this
Exam Hint Usually, a multiple-choice question is used to test your understanding of professional ethics.
You might be given a list and asked to identify which one is or is not one of the principles of professional ethics. Normally, the examiner will use the names of the accounting concepts to try and trick you. Therefore make sure you learn the difference between them.
You might also be given a statement and asked to identify which principle of professional ethics is being described.
Worked Example Identify the principle of professional ethics being described.
"Accountants must not share private information of a business with its competitors".
A Integrity B Objectivity C Confidentiality D Professional competence and due care Answer
Final answer: The correct answer is C, confidentiality.
Was this revision note helpful?
Build on this topic