Ethical Framework (Cambridge International IGCSE Accounting)
Ethical framework
What is the ethical framework in accounting?
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The ethical framework sets out the fundamental principles of how people working in accounting roles must behave
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The principles of professional ethics apply to all roles and functions related to accounting
- Payroll
- Reporting
- Auditing
- Bookkeeping
- Accountants
What are the five principles of the ethical framework?
- 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 judgements - 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. |
Why is it important to apply the ethical framework?
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The framework enables stakeholders to have trust and confidence in the work performed by accountants
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The framework makes sure that the reputation of the profession is maintained
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The framework allows stakeholders to make informed and valid decisions
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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
Exam Hint This topic could come up on Paper 1 as a multiple-choice question. Make sure you know the difference between the five fundamental principles.
On a Paper 2 question, you might be required to explain why the ethical framework is important. Make sure you give one reason for each mark available.
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.
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