B1: 8.01 Ethics

The term ethics refers to a system of expected or desired behaviour. All the main accounting bodies in the UK have Codes of Professional Ethics that detail what is expected of their members. These codes are based upon the code of professional ethics created by the International Ethics Standards Board for Accountants (“IESBA”).

It is important that all of the accounting bodies hold their members to a high standard of behavior. If accounting professionals cannot be trusted, the profession will quickly fall into disrepute and there would be no advantage for accountants to become members of these bodies.

The Codes of Professional Ethics issued by all the UK accounting bodies include five fundamental principles that their members must adopt.

The Fundamental Ethical Principles


Accountants must be honest, straightforward and fair in all their professional and business relationships.

Accountants should therefore avoid telling lies or deliberately misleading others. They must also ensure that they are not associated with any documents (e.g. accounts or tax returns) that they know contain lies or misleading information.

Professional behavior

Accountants must act in accordance with laws and regulations that affect them and must not do anything that might bring the profession into disrepute.

Whilst an accountant’s primary responsibility is to their employer or their client, they also have responsibilities to act in the wider interest of society.


Accountants must ensure that their judgement is unaffected by bias, conflicts of interest and the undue interest of others

Professional competence and due care

Accountants must ensure that they have the necessary skills and knowledge to do their work to a high standard. They must also ensure that they put in the required time and effort when completing their work.


Accountants must not disclose (i.e. release) confidential information gained from their professional or business relations, nor can they gain from their knowledge of confidential information either directly or indirectly. There are however, some circumstances when an accountant may disclose confidential information:

  1. When the accountant has been properly authorized to disclose the information and it is legal to do so
  2. When there is a legal requirement to disclose the information
  3. When there is a professional right or duty to disclose the information

Threats to the fundamental ethical principles

Every year, some accountants and bookkeepers breach their ethical principles; buy why?

The codes of professional ethics identify five reasons why this might happen. These reasons are known as “threats” and are as follows:


A self-interest threat exists where the accountant or bookkeeper would benefit in some way by acting improperly. For example, if an accountant is offered money to disclose information about an employee’s pay, they would benefit from breaching confidentiality


A self-review threat exists where an accountant or bookkeeper is reviewing their own work or past decisions. This is because he or she might be inclined to overlook any errors in order to avoid criticism or other adverse consequences that may occur if the errors become known.


An intimidation threat exists where an accountant or bookkeeper has been threatened by another in order to force them to act improperly. This can include threats to their job security, their finances, the well-being and so on.


A familiarity threat exists where there is a long-standing or close relationship. For example, if you are preparing a VAT return for a close family member and discover that they have been deliberately under-declaring their VAT liabilities you might find it difficult to do the right thing as you would be causing problems for someone you care about.


Advocacy is a threat only for those working in an accountancy practice (i.e. where accountants offer their services to clients). It can exist when an accountant becomes too closely aligned with the interests of their client and thereby loses their independence. An example might be where an accountant helps a client raise money from investors and then audits that client’s accounts. In this situation the accountant has promoted the business and may therefore find it difficult to be objective when deciding whether the client’s accounts give a true and fair picture of the client’s finances.

Consequences of breaching the fundamental ethical principles

If an accountant breaches one or more of their fundamental ethical principles they may face some adverse consequences:

  1. The accountant could face criminal prosecution if their actions were illegal which could lead to fines or even, imprisonment
  2. The accountant could be sued in the civil courts if their actions caused losses to others and could then be ordered to pay damages
  3. The accountant could be disciplined at work or could lose clients
  4. If the accountant is a member of a professional accounting body they could be disciplined by that accounting body which could result in reprimands, fines or even expulsion from membership

It is therefore important for all accountants and bookkeepers to act ethically in all their business and professional activities.

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