Skip to content

ACCA Strategic Professional · Advanced Audit and Assurance (International) · Code of Ethics for Professional Accountants

Mercer Associates audits Kestrel Ltd. Partner Ana learns that the firm's tax department is about to advise Falcon Ltd, a competitor of Kestrel, on a bid to acquire a company that Kestrel also intends to acquire. Both clients are unaware of each other's interests. What is the most appropriate first response under the IESBA Code?

The firm should identify and evaluate the conflict, then apply safeguards such as separate teams and information barriers, and disclose the position to the clients and seek consent where appropriate. It must decline if the threats cannot be reduced to an acceptable level. Revealing one client's plans to the other would breach confidentiality.

  1. ADecline to act for Falcon without any further consideration, because competing interests always prohibit acting
  2. BProceed for both, as confidentiality duties remove any conflict
  3. CIdentify the conflict, evaluate threats, and apply safeguards such as separate teams and information barriers, with disclosure and consent from the clients where appropriateCorrect
  4. DTell Falcon about Kestrel's acquisition plans so that Falcon can make an informed decision

Explanation

The Code requires a firm to identify and evaluate conflicts of interest, and address threats through safeguards such as separate engagement teams, information barriers, and disclosure with consent. If the threat cannot be reduced to an acceptable level, the firm must decline. Disclosing Kestrel's plans without consent breaches confidentiality, and an automatic refusal is not what the Code mandates.

Did you get it right without looking?

One question tells you little. A timed set on Code of Ethics for Professional Accountants shows your real accuracy, how long you take and where you lose marks.

Practise Code of Ethics for Professional AccountantsFree diagnostic mock

More Code of Ethics for Professional Accountants questions