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

Priya, a financial controller, is asked by the finance director to delay recognising a known inventory write-down until after the year end so that the bonus target is met. Which category of threat to the fundamental principles does this situation most directly represent?

This is a self-interest threat, because a financial incentive tied to reported results could influence Priya's judgement on timing of the inventory write-down. It threatens integrity and objectivity, and it is not familiarity, advocacy or self-review, which involve different relationships.

  1. ASelf-interest threat arising from a financial incentive linked to resultsCorrect
  2. BFamiliarity threat arising from a long relationship with the director
  3. CAdvocacy threat arising from promoting the employer's position
  4. DSelf-review threat arising from evaluating her own earlier work

Explanation

The bonus target gives a financial interest in the reported result, which is a self-interest threat. Intimidation may also be present through pressure from the director, but the bonus link makes self-interest the most direct category. Familiarity, advocacy and self-review do not describe the facts given.

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