## **Learning Outcomes**

After reading this article, you will be able to explain how ethical principles—integrity, objectivity, and confidentiality—apply to financial transactions. You will understand why these values are necessary in bookkeeping and basic internal control, and how they help build trust, decrease fraud risk, and ensure compliance for ACCA FA1 exam purposes.

## **ACCA Recording Financial Transactions (FA1) Syllabus**

For ACCA Recording Financial Transactions (FA1), you are required to understand the importance of ethical behavior and internal controls in accounting processes. You should be able to:

- Explain the ethical principles of integrity, objectivity, and confidentiality.
- Recognize how these principles apply to financial transactions and accounting data processing.
- Identify simple internal controls used to protect the business from errors and fraud.
- Understand how ethical conduct supports accurate documentation and financial reporting.
- Appreciate the risks when ethical standards are not followed or controls are missing.

## **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 ethical principle requires an accountant to be truthful and avoid misleading others?
   a) Confidentiality  
   b) Integrity  
   c) Objectivity  
   d) Competence

2. A bookkeeper is offered a small gift by a supplier to process their invoice more quickly. Which ethical principle is most at risk if the bookkeeper accepts the gift?

3. Why is confidentiality important when handling payroll and employee records?

4. Name one simple internal control used to help prevent fraud in the petty cash process.

## **Introduction**

Ethical principles and basic internal controls are essential in every financial role. As an ACCA FA1 student, you are expected to understand how accountants should behave when managing transactions and data. A good reputation for accuracy and honesty depends on applying the right professional values and following correct internal procedures within the accounting system.

In this article, we will explain the meaning of _integrity_, _objectivity_, and _confidentiality_ in accounting. We will also show their link to effective internal controls, providing practical examples to strengthen exam understanding.

> **Key Term: integrity**
> Acting honestly and straightforwardly in all professional and business relationships, without lying or misleading others.
>
> **Key Term: objectivity**
> Not allowing bias, conflicts of interest, or undue influence to override professional judgments.
>
> **Key Term: confidentiality**
> Keeping information acquired in the course of work secret, not revealing it to unauthorized parties.

## **ETHICAL PRINCIPLES IN ACCOUNTING**

Ethical behavior ensures trust in financial records. The most important principles for ACCA bookkeeping are integrity, objectivity, and confidentiality.

### Integrity

Integrity is about being honest in all record keeping. This means you must not manipulate figures, conceal errors, or provide false information to management, clients, or authorities.

> **Key Term: integrity**
> Acting honestly and truthfully in all professional matters, and never deliberately misleading others.
>
> **Key Term: professional ethics**
> The set of moral principles and rules of conduct that guide those working in a profession.

### Objectivity

Objectivity requires making decisions and recording transactions without bias or improper influence. Bookkeepers and finance staff must avoid situations where personal interests or outside pressure could affect their professional judgment—such as processing a friend's payment more quickly or ignoring errors to benefit a manager.

### Confidentiality

Confidentiality involves protecting sensitive business information. Employees dealing with payroll, supplier data, or customer transactions must not share details with unauthorized people. Only those with a need to know for business reasons should have access. Even within the business, you should limit the information disclosed.

> **Key Term: confidentiality**
> Not sharing information about clients, transactions, or employees with unauthorized third parties.

## **BASIC INTERNAL CONTROL AND ETHICS**

Internal controls are procedures and systems designed to reduce risks of fraud, theft, and errors. Ethical conduct supports and strengthens internal control. Examples include:

- Requiring approval or dual signatures before processing payments.
- Reconciling bank or petty cash balances regularly.
- Storing payroll and financial data securely.
- Dividing responsibilities so no one person controls a whole process (segregation of duties).

If ethical standards are ignored, or controls are weak, businesses may experience loss, unreliable records, or even legal action.

> **Key Term: internal control**
> Procedures, processes, and checks that help safeguard assets and ensure accurate financial records.

### **Worked Example 1.1**

**Scenario:**  
Marta processes supplier invoices. She is asked by a friend who works for a supplier to approve a payment before the invoice has been properly checked and authorized. What are the ethical and control considerations?

> **Answer:**  
> Marta's objectivity is at risk if she lets personal friendship influence her actions. She should follow the internal control procedure: only make payments after full approval. Acting otherwise could breach both objectivity and the business's payment controls.

### **Worked Example 1.2**

**Scenario:**  
A payroll clerk finds out sensitive information about a colleague's salary and discusses it with others in the office.

> **Answer:**  
> This breaches confidentiality. Payroll information should only be accessed and discussed by those authorized. Sharing it could damage trust and may lead to disciplinary action.

### **Exam Warning**

> Many errors in ACCA exams come from confusing integrity (honesty) with objectivity (being unbiased). Always consider: Is this about telling the truth, or about resisting bias and pressure?

### **Revision Tip**

> Relate each ethical principle to a simple workplace example when revising—this helps you remember and apply them in both exam questions and real work.

## **Summary**

Ethical behavior and internal controls prevent fraud and errors. The principles of integrity, objectivity, and confidentiality are essential for reliable, fair financial reporting. Internal controls support these values by requiring approval, segregation of duties, and security of information. Both are tested regularly in the ACCA FA1 exam and used daily in accounting roles.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- The importance of integrity, objectivity, and confidentiality in accounting.
- How ethical principles support reliable transaction recording and reporting.
- The link between ethics and basic internal control.
- Examples of simple controls used in bookkeeping.
- The risks when ethics or controls are missing.

## **Key Terms and Concepts**

- integrity
- objectivity
- confidentiality
- professional ethics
- internal control

Ethics and basic internal control - Integrity, objectivity, and confidentiality