ACCA Strategic Professional · Strategic Business Reporting (International) · Professional and ethical behaviour in corporate reporting
Mira, a professional accountant, is the finance director of Altair Co. The chief executive asks her to omit a material impairment loss from the draft financial statements so that a bank covenant is not breached. Mira realises that complying would mislead the bank. Which fundamental principle is most directly threatened by the request?
Integrity is the principle most directly threatened. It requires accountants to be straightforward and honest and not to be associated with materially misleading information. Leaving out a known impairment to avoid breaching a covenant would mislead the bank, so it conflicts with integrity.
- AIntegrityCorrect
- BProfessional competence and due care
- CConfidentiality
- DProfessional behaviour only in relation to advertising
Explanation
Integrity requires straightforward and honest dealing and not being associated with information that is materially false or misleading. Omitting a known impairment to mislead a lender breaches that principle. Competence and due care concerns knowledge and diligence, and confidentiality is not at issue because nothing is being disclosed.
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