Strategic Business Reporting (International) · Professional and ethical behaviour in corporate reporting

Ethical Threats and Safeguards in ACCA SBR

Updated 11 October 2026 · Fact-checked

Ethical threats are situations that could stop you following the fundamental principles. The ACCA Code groups them as self-interest, self-review, advocacy, familiarity and intimidation. Safeguards are actions that remove a threat or reduce it to an acceptable level. If they cannot, you decline the work or withdraw.

Understand Ethical Threats and Safeguards

Every accountant must follow the fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. A threat is anything that could make it harder to follow them. A threat is not a breach. It is a risk of one.

The Code groups threats into five categories. A self-interest threat arises when your own financial or other interest could influence your judgement. A self-review threat arises when you must evaluate your own earlier work or judgement, or that of a colleague in your firm or employer. An advocacy threat arises when you promote a client's or employer's position so strongly that your objectivity suffers. A familiarity threat arises from a close or long relationship that makes you too sympathetic or too trusting. An intimidation threat arises when pressure, real or perceived, deters you from acting objectively.

The key difference students search for is self-interest versus self-review. Self-interest is about what you gain or lose. Self-review is about checking your own work. A bonus tied to reported profit is self-interest. Auditing figures your own firm prepared is self-review. Ask: is the problem my reward, or my own earlier work?

Once you spot a threat, you judge whether it is at an acceptable level. This means whether a reasonable and informed third party would conclude that compliance with the principles is not compromised. If not, apply safeguards. These include safeguards created by the profession, law or regulation, safeguards in the work environment (such as an audit committee or review policies), and those you apply yourself (such as a second reviewer or separate teams). If no safeguard works, you eliminate the circumstance, decline the engagement or resign.

In SBR the scenario usually involves pressure from a finance director or board to report in a favourable way. You must name the threat, link it to a principle, and propose practical safeguards.

Key rules to remember

Self-interest threat: Your financial or other interest could influence judgement; Examples: bonus linked to profit, share ownership, fee dependency, loan or job at stake.
Self-review threat: You must evaluate your own or your team's earlier work; Examples: auditing figures you helped prepare, reviewing a valuation you produced.
Advocacy threat: You promote a position so far that objectivity is compromised; Examples: presenting management's case to lenders or investors with optimistic figures.
Familiarity threat: A close or long relationship makes you too sympathetic or trusting; Examples: long service with the same client, friendship with the finance director.
Intimidation threat: Actual or perceived pressure deters objective action; Examples: threat of dismissal, bullying by a dominant CEO, pressure to accept a view.
Acceptable level test: Would a reasonable and informed third party conclude that compliance with the principles is not compromised?; If yes, the threat is acceptable. If no, apply safeguards or decline.
Order of response: Identify threat → evaluate → address (eliminate, safeguard, or decline/withdraw); Use this order in every answer.

How to solve Ethical Threats and Safeguards questions

Use this method on any scenario that asks you to discuss ethical issues or threats. Keep each step tied to facts in the scenario.

1Read the scenario and underline who is under pressure, who benefits and which figures or judgements are affected.
2Name the role you are in (accountant in business, or professional accountant advising) and the principles at risk, such as integrity and objectivity.
3Identify each threat by category. Quote the fact that creates it, for example a bonus linked to profit gives self-interest.
4Evaluate the seriousness. Say whether a reasonable and informed third party would see compliance as compromised.
5Recommend specific safeguards that fit the facts: independent review, audit committee involvement, separate teams, policy changes, documentation.
6Cover the reporting issue itself. Say what the correct accounting treatment is under IFRS and why the pressure should not change it.
7State what happens if safeguards fail: escalate, seek advice, refuse to be associated, or resign.
8Close with a clear conclusion and recommendation to earn professional skills marks.

Quickest way: Threat, fact, safeguard in three lines

When to use it: When time is short and the question asks for threats and safeguards for a few marks.

Write the threat name, then the fact from the scenario in the same sentence.
Add the principle at risk in two or three words.
Give one safeguard that directly fits, then move on.
Finish with the fallback: if unresolved, escalate or withdraw.

Common mistakes in Ethical Threats and Safeguards

Confusing self-interest with self-review.
Both can involve a conflict about figures, so they feel similar.
Fix: Ask whether the issue is personal gain or loss (self-interest) or checking your own earlier work (self-review).
Listing the five threats as definitions with no link to the scenario.
Students recall theory and do not apply it.
Fix: Only name threats the facts support, and quote the fact that creates each one.
Giving generic safeguards such as 'follow the Code'.
Students run out of ideas under time pressure.
Fix: Suggest actions that fit: review by an independent partner, audit committee oversight, separating teams, written documentation of judgements.
Saying a threat means a breach has occurred.
Threat and breach sound alike.
Fix: Say a threat is a risk to compliance. A breach happens only if the principle is actually not followed.
Ignoring the accounting issue behind the ethics.
Students treat ethics as separate from IFRS.
Fix: State the correct IFRS treatment and the effect of the proposed treatment on profit or position.
Stopping at safeguards without a fallback.
Students assume safeguards always work.
Fix: Add that if the threat cannot be reduced to an acceptable level you decline, withdraw or resign, after seeking advice.

Worked examples

Example 1

You are the financial controller of Zenith Ltd. The finance director tells you to delay recognising an impairment so that group profit meets the target on which both your bonuses depend. Identify the ethical threats and recommend safeguards.

Show the solution

Self-interest: your bonus depends on reported profit, so you gain if the impairment is delayed. This threatens integrity and objectivity.
Intimidation: the finance director is senior to you and is instructing you. Refusing may risk your standing or job.
Evaluate: a reasonable and informed third party would likely see the threats as significant, because the pressure directly affects a reported figure.
Safeguards: document the impairment analysis under IAS 36; discuss with the audit committee or an independent non-executive director; seek advice from ACCA or legal advisers if needed.
Accounting point: if the asset's carrying amount exceeds its recoverable amount, IAS 36 requires the impairment now. Bonus targets do not change this.
Fallback: if the director insists and the matter cannot be resolved, escalate to the board and consider resigning rather than being associated with misleading statements.

Answer: The main threats are self-interest (profit-linked bonus) and intimidation (instruction from a senior director). Safeguards are documentation, audit committee involvement and external advice. If unresolved, escalate and consider resignation. The impairment must be recognised if the IAS 36 test requires it.

Example 2

Delta & Co has audited Orion plc for twelve years. The firm also prepared Orion's year-end valuation of its investment property, which the audit team must now review. The audit partner often socialises with Orion's finance director. Identify the threats and suggest safeguards.

Show the solution

Self-review: the firm prepared the valuation that the audit team now reviews. The team is checking work from its own firm.
Familiarity: twelve years of service and the partner's friendship with the finance director could make the team too trusting.
Principle at risk: objectivity, together with professional behaviour.
Safeguards for self-review: use a different team or an independent valuer not connected with the firm for the valuation, or have it reviewed by a partner outside the engagement.
Safeguards for familiarity: rotate the engagement partner and senior staff, and use an independent quality review of the audit.
Fallback: if the threats cannot be reduced to an acceptable level, the firm should decline the valuation work or withdraw from the audit.

Answer: There is a self-review threat from the valuation and a familiarity threat from long tenure and friendship. Use independent valuation or separate teams, rotate key staff and perform an independent quality review. If these fail, decline the non-audit work or withdraw.

Exam tips

Name the threat using the Code's exact category, then quote the fact from the scenario that creates it.
Do not list all five threats by default. Marks go to the ones the facts support, so two well-argued threats beat five thin ones.
Make safeguards specific to the scenario. Say who does what, such as the audit committee reviewing the judgement.
Link the ethics to the IFRS issue. SBR often combines a reporting problem with pressure to misreport.
End with a clear recommendation. This helps earn the professional skills marks for commercial acumen and communication.

Practice questions from Professional and ethical behaviour in corporate reporting

Ethical Threats and Safeguards in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Ethical Threats and Safeguards: frequently asked questions

What is the difference between a self-interest and a self-review threat?

A self-interest threat arises from your own financial or other interest, such as a bonus linked to profit. A self-review threat arises when you must evaluate work or judgements you or your firm made earlier. One is about reward, the other about checking your own work.

How do I identify ethical threats in the SBR exam?

Look for who is under pressure, who benefits and which figures are affected. Then match each fact to a threat category. Pay attention to bonuses, long relationships, instructions from senior people and tasks that involve reviewing your own work.

What counts as a safeguard?

A safeguard is an action that removes a threat or reduces it to an acceptable level. It may come from the profession, law or regulation, from the work environment, or from steps you take yourself. Examples are independent review, separate teams, audit committee oversight and rotation of staff.

What if safeguards cannot reduce the threat enough?

Then you must eliminate the circumstance that creates the threat, decline the engagement or withdraw. In an employment setting this may mean escalating the matter and, if it remains unresolved, resigning. You should seek advice and document what you did.