## **Learning Outcomes**

After reading this article, you will be able to explain the role of professional ethics and scepticism in performance management, identify threats to data reliability, and evaluate assurance needs in the context of providing and using management information. You will also learn how to exercise professional judgement when assessing data quality and responding to uncertainty in ACCA APM exam scenarios.

## **ACCA Advanced Performance Management (APM) Syllabus**

For ACCA Advanced Performance Management (APM), you are required to understand how ethical behaviour and sceptical judgement support effective performance management. In particular, you should focus your revision on:

- The importance of professional ethics for management accountants and the threats to ethical behaviour in performance measurement
- The meaning and application of professional scepticism in evaluating management data and information
- Identifying, assessing, and responding to issues of data reliability and accuracy in performance management
- Determining when assurance procedures may be necessary to support strategic or operational decisions
- Exercising judgement when confronted with uncertainty or incomplete information

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. Which of the following best reflects professional scepticism in performance management?  
   a) Always assuming management's reports are accurate  
   b) Questioning the accuracy and sources of management data  
   c) Ignoring anomalies in operational performance  
   d) Accepting data at face value

2. True or false? If an accountant suspects data in a KPI report is unreliable but is pressured to submit it, professional ethics require them to escalate the matter.

3. Define "assurance" in the context of management information.

4. Give two examples of circumstances where a performance report may require additional assurance before being used for strategic decisions.

5. List one threat each to the reliability of management data from (a) human behaviour and (b) technical systems.

## **Introduction**

Professional ethics and scepticism are essential to effective performance management. Management accountants are trusted to provide information and advice that influence decisions at all organisational levels. To do this, they must demonstrate ethical behaviour and maintain a questioning attitude—especially when working with data that will be used for measuring and controlling performance.

Inaccurate, biased, or unreliable data can negatively impact decisions and potentially lead to unethical outcomes. Those preparing and using management information should always remain sceptical, check data reliability, and determine when extra assurance is needed.

> **Key Term: professional ethics**  
> The application of ethical principles and standards—such as integrity, objectivity, confidentiality, and professional competence—to actions and decision-making in a business setting.

## **ETHICS IN PERFORMANCE MANAGEMENT**

Ethical challenges often emerge when measuring and reporting performance. Management accountants must not only comply with formal codes of ethics but must also avoid behaviour that could mislead, omit essential facts, or create bias in performance information.

Unethical actions may include manipulating budgets or reports to secure rewards, hiding poor performance, or succumbing to pressure from managers to present misleading data. Speak up and take action if you believe integrity or objectivity is being threatened.

> **Key Term: objectivity**  
> The obligation to present information impartially and without undue influence from personal interests or those of others.
>
> **Key Term: integrity**  
> Being straightforward and honest in all professional and business relationships.

## **PROFESSIONAL SCEPTICISM AND DATA RELIABILITY**

Professional scepticism requires management accountants to approach information with an enquiring mind. You should not automatically trust reports or data—especially if there are reasons to doubt their reliability or if there are incentives for someone to misreport.

### What is Data Reliability?

Reliable data is accurate, complete, up to date, and representative of the true circumstances of operations or performance. Data may be unreliable due to errors, manipulation, incompetence, bias, technical faults, or weaknesses in data collection processes.

### Applying Scepticism

When reviewing management information:

- Check that data sources, calculations, and assumptions are clearly identified
- Consider whether any figures look unusual, inconsistent, or too good to be true
- Challenge information if there is evidence of manipulation or bias
- Ask for supporting documentation or evidence if significant data is presented without explanation

> **Key Term: professional scepticism**  
> The attitude of questioning information and remaining alert to circumstances that may indicate error, fraud, or bias in management data.

## **ASSURANCE NEEDS IN PERFORMANCE MANAGEMENT**

Assurance in management information means taking steps to independently verify the completeness, accuracy, and fairness of reports or calculations before they are relied upon for significant decisions.

Not all management information requires the highest level of assurance. Greater assurance is needed when:

- The decision is high-value or high-risk (e.g., investment, acquisition, major performance bonus)
- There are known weaknesses in data collection or reporting processes
- Incentives exist for staff to misreport or manipulate information
- The information will be used externally or scrutinised by other stakeholders

External assurance may be achieved through internal audit review, data validation procedures, or independent external review.

> **Key Term: assurance**  
> Independent evidence-gathering to provide confidence that information is complete, accurate, and fairly presented.

## **EXERCISING JUDGEMENT AND RESPONDING TO UNCERTAINTY**

Where data is incomplete, ambiguous, or open to subjective interpretation, management accountants must use judgement. This includes:

- Disclosing any limitations in the data or analysis
- Explaining assumptions made and their potential impact
- Requesting additional information or assurance if needed
- Refusing to sign-off or use information believed to be materially unreliable

### **Worked Example 1.1**

**Scenario:**  
A divisional manager has an incentive to overstate short-term sales figures because his bonus is tied to quarterly revenue. The accountant preparing the division’s performance report notices that reported sales have increased sharply, with no parallel increase in production or customer orders. The manager insists the figures are correct.

> **Answer:**  
> The accountant should exercise scepticism and assess data reliability. Evidence of unusual activity and incentive to manipulate exist. Further investigation and supporting documentation are required before the report is finalised. If concerns persist, escalation to senior management or internal audit may be appropriate; professional ethics require refusal to sign off unverified figures.

### **Worked Example 1.2**

**Scenario:**  
A company is considering awarding a major contract based on a supplier performance report. The data has been quickly collected using new software, which has not been tested for errors. The performance manager is asked whether the report can be relied upon as a basis for awarding the contract.

> **Answer:**  
> The manager should request assurance on data accuracy before relying on the report. An independent check of source data, verification of calculations, or a software audit should be performed. If critical decisions depend on the report, extra assurance is necessary to avoid making choices based on flawed or incomplete data.

### **Exam Warning**

> In ACCA APM questions, be prepared to identify threats to data reliability, demonstrate sceptical analysis, and recommend assurance actions. Marks are awarded for questioning information and recommending robust steps—not for simply trusting the scenario or taking figures at face value.

### **Revision Tip**

> Remember: Challenging information does not mean being negative—it means applying professional scepticism to ensure decisions are based on sound, reliable data.

## **Summary**

Professional ethics and scepticism are central to effective performance management. Management accountants must be vigilant for threats to data reliability and willing to seek assurance when necessary—especially where information will affect strategic decisions or when motivation exists for misreporting. Judgement and ethical action protect both the accountant and the organisation.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- Explain the significance of professional ethics in performance management reporting
- Define and apply professional scepticism to management information
- Identify factors that threaten the reliability of management data
- Distinguish when and how additional assurance may be required
- Demonstrate sound judgement when confronted with uncertainty, incomplete, or suspect information

## **Key Terms and Concepts**

- professional ethics
- objectivity
- integrity
- professional scepticism
- assurance

Professional ethics and scepticism in PM - Scepticism data reliability and assurance needs