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ACCA Applied Knowledge · Business and Technology · Fundamental principles of ethical behaviour

A finance manager's annual bonus depends largely on the company meeting a profit target. Close to the year end, she is asked to decide whether a doubtful receivable should be written off. Which threat does her bonus arrangement create?

The bonus creates a self-interest threat. Because her pay depends on reaching a profit target, her financial interest could improperly influence her judgement on writing off the doubtful receivable, tempting her to avoid a charge that would reduce profit.

  1. AIntimidation threat
  2. BAdvocacy threat
  3. CSelf-interest threatCorrect
  4. DFamiliarity threat

Explanation

A self-interest threat occurs when a financial or other interest could inappropriately influence judgement or behaviour. Her bonus rises if profit is higher, so she may be tempted not to write off the debt. Intimidation would need pressure from another person, which is not described.

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