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Let’s get technical: ethics

It’s vital you identify the different questions in the ethics papers, says Nick Craggs

July 2016

I wracked my brain thinking of a subject to focus on this month. I kept thinking, “do I dare try and get away with another tax one?” After much pondering, I thought “what is the one thing which AAT students dislike the most?” Instantly, I thought of the level 3 Professional Ethics unit. However, the thing that catches most people out the most in this exam is not the subject matter. It is how to answer the questions. Knowing what the question requires is just as important as knowing the five fundamental principles.
There are various types of questions which may come up, and you need to know how to tackle each one as they are all different.

The ‘state’ question
During your studies you may come across questions such as this: State if John, who is AAT qualified, can offer investment advice to his client Jack?
I really feel for the student who writes: “No, John cannot offer investment advice. Investment advice is one of the three restricted areas in accountancy. Being AAT qualified is not sufficient enough to be able to offer this service.”
The answer is really good. However, I then look at the model answers in our mock, and we are looking for: “No”.
That’s it. That is all that you need to write for this question. The question said “state if John can offer this service” and the answer is simply “no”. For a question which says ‘state’, we are looking for a short, to the point, answer.

The ‘explain’ question
The ‘explain’ question is the opposite end of the scale to a ‘state’ question. You may be asked to explain if someone can take a certain course of action; for example: Jane has never studied, nor worked, in tax. She has been asked by a prospective client if she can complete his tax return for him. Explain if Jane can complete the tax return for the client.
If your answer is ‘no’, you are not answering the question. The question asked you to explain if they could take a course of action. Therefore, you need to state if they can do something and then say why they can, or cannot, take that course of action.
A far better answer would be: “Jane cannot take on the client, as she does not have the necessary training or experience. As such, she would be in breach of the fundamental principle of professional competence and due care.”

The ‘threat’ question
You may well need to explain how someone’s fundamental principles are threatened. If you are asked which of Jane’s fundamental principles is threatened, due to the fact that she has played golf every Sunday for a number of years with a client, and your answer is: “Jane’s objectivity is threatened, because she has known the client for many years, and plays golf with them every Sunday and so lacks professional distance from the client.”
Now you are so close! You clearly know the fundamental principles, and can apply them correctly the different scenarios. However, you are not quite there. If the question asks how someone is threatened, there is obviously a threat, so you need to name the threat! Here, you will get credit for naming this as a “familiarity” threat.
How can you avoid this threat?
The different ways in which you can avoid ethical threats is one of the key subjects in this unit. The typical AAT student dives upon this, as they have an amazingly technical answer about separate accounting and auditing teams which they cannot wait to give the examiner to show how well prepared they are. However, they often overlook the easy option. If the scenario asks how you could avoid a threat to your fundamental ethical principles, you will always get credit for simply saying “I would refuse to do it” or “I would cease to act for the client”. If any act might threaten your fundamental principles, simply do not do it, and there is then no threat! A nice easy point!

The facts
However, there are certain things which you just have to learn. If you do not know these, you will struggle in this unit. You need to know the fundamental principles, they are, for want of a better word, fundamental. Likewise, the fundamental principles will be threatened, so you need to know the names of the threats. Learning these is only the first step though, you need to then apply these to various scenarios.
In the exam you will be told how many marks each question is worth. You can use this as a guide as to how much to write. The exam is hard enough as it is, so don’t make it harder for yourself by writing an essay to get one mark.
• Nick Craggs, First Intuition

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