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BUAW Integrated Workbook STUDENT 2022-23

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Course Assessment Plan 2025-26 - L3 DAY - Copy

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4 BUSINESS STRUCTURES Practice questions

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BUAW Integrated Workbook STUDENT 2022-23 Chapter 7

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BUAW Integrated Workbook TUTOR 2022-23 Chapter 4

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4 BUSINESS STRUCTURES Practice questions

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BUAW Integrated Workbook TUTOR 2022-23 Chapter 2

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2 CONFLICT OF INTEREST - Practice questions

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BUAW Integrated Workbook STUDENT 2022-23 Chapter 13 Data protection, information security and cybersecurity

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13 INFORMATION AND EFFECTIVE COMMUNICATION TYU

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13 INFORMATION AND EFFECTIVE COMMUNICATION Practice questions

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BUAW Integrated Workbook TUTOR 2022-23 Chapter 13

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BUAW Integrated Workbook TUTOR 2022-23 Chapter 11

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AAT Level 3 Diploma in Accounting qualification specification

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BUAW Integrated Workbook TUTOR 2022-23 Chapter 7

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BUAW Integrated Workbook STUDENT 2022-23 Chapter 8

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BUAW Integrated Workbook TUTOR 2022-23 Chapter 8

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8 MICROECONOMIC ENVIRONEMENT Practice questions

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BUAW Integrated Workbook STUDENT 2022-23 Chapter 9

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BUAW Integrated Workbook TUTOR 2022-23 Chapter 9

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BUAW Integrated Workbook STUDENT 2022-23 Chapter 3

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BUAW Integrated Workbook TUTOR 2022-23 Chapter 3

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BUAW Integrated Workbook STUDENT 2022-23 Chapter 12

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BUAW Integrated Workbook TUTOR 2022-23 Chapter 12

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12 TECHNOLOGY AND DATA SECURITY RISKS TYU

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12 TECHNOLOGY AND DATA SECURITY RISKS Practice questions

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📘 Revision Notes: Organisational Structure & Governance

1. Types of Organisational Structure

Entrepreneurial

Features: Built around the owner-manager (typical in small businesses).

✅ Advantages: Fast decisions, market responsive, goal congruence, good control, close workforce bond.

❌ Disadvantages: No career paths, dependent on manager’s skill, poor at handling growth/diversification.

Functional / Departmental

Features: Groups staff by similar tasks (marketing, finance, HR, etc.).

✅ Advantages: Economies of scale, standardisation, career opportunities, specialists comfortable.

❌ Disadvantages: Slow decisions, conflict between functions, empire building, poor diversification.

Divisional

Features: Split by product, geography, or customer type. Each has its own functions.

✅ Advantages: Growth potential, clear responsibility, general manager training, top management free for strategy.

❌ Disadvantages: Duplication, loss of control, cost allocation issues, lack of goal congruence, specialists isolated.

Matrix

Features: Combination of functional & divisional. Staff report to two managers (e.g. function + product).

✅ Advantages: Flexible, teamwork, customer focus, combines strengths of both structures.

❌ Disadvantages: Dual authority → conflict, time-consuming meetings, high admin costs, diluted authority.

2. Span of Control

Definition: Number of subordinates a manager directly controls.

Tall structure: Many levels, narrow span. → Clear career path, close supervision, slower decisions.

Flat structure: Few levels, wide span. → Faster decisions, more autonomy, less promotion opportunities.

Influenced by: work type, staff skill level, location.

3. Governance

Definition: Authority structures, rules, and processes guiding decision-making, resource allocation, and priorities.

Governance factors:

Specialisation (division of roles)

Standardisation (rules/procedures)

Formalisation (documented instructions)

Centralisation (top-heavy decisions)

Chain of command (levels of hierarchy)

Span of control (narrow or wide)

4. Centralisation vs Decentralisation

Centralisation

Decisions kept at the top.

✅ Advantages: Goal congruence, reduced training costs, consistency.

❌ Disadvantages: Slower responses, demotivating, overload for senior managers.

Decentralisation

Decisions pushed down to lower levels.

✅ Advantages: Quicker decisions, local expertise, staff motivation, frees senior managers.

❌ Disadvantages: Loss of control, risk of poor local decisions, duplication, higher costs.

5. Levels of Strategy (Anthony’s Hierarchy)

Strategic (Corporate): Long-term, whole organisation focus.

Tactical (Business/Managerial): Medium-term, departmental/division resource use.

Operational (Functional): Short-term, day-to-day practical tasks.

6. Link Between Structure & Governance

Entrepreneurial: Low specialisation, low formalisation, highly centralised, flat structure.

Divisional: High specialisation & formalisation, decentralised, tall structure.

Matrix: Narrow span, flexible, decentralised, often tall.

✅ Exam Tip:

Entrepreneurial = small, fast, personal.

Functional = efficiency, specialists.

Divisional = growth, duplication.

Matrix = teamwork, but conflict.

Tall vs Flat = career path vs quick response.

Centralisation = control, Decentralisation = flexibility.

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📘 Revision Notes: Legal Framework for Companies & Partnerships

1. Authorities & Legislation

Authorities companies are accountable to:

Companies House (UK) – filing requirements.

Tax authorities (HMRC) – annual tax returns.

Regulators (e.g. FCA, Charities Commission, OFGEM).

Companies Act 2006 (CA 2006):

Requires companies to prepare financial statements that give a true and fair view.

“True and fair” → must follow accounting standards, provide enough information, follow accepted practice, no material misstatements.

Retention of records: usually 7 years.

Responsibility: Directors are legally responsible for preparing financial statements.

2. Directors

Definition: Anyone fulfilling the role, regardless of title.

Every company: at least 1 director.

Public company: at least 2 directors.

Must be a natural person.

Types of Directors:

Executive director – full-time, specific role (e.g. Marketing Director).

Non-executive director – part-time, brings external expertise, monitors executives.

Managing Director (MD) – runs day-to-day business.

Chairman – ensures proper procedure in meetings.

Alternate director – stands in for another director.

Shadow director – gives instructions directors usually follow (but not just professional advice).

Appointment & Removal:

Appointed by existing directors or shareholders (ordinary resolution).

Removed by resolution, disqualification, resignation, retirement, or death.

General Duties (CA 2006):

Act within powers (company constitution).

Promote success of the company.

Exercise independent judgment.

Exercise reasonable care, skill & diligence.

Avoid conflicts of interest.

Not accept benefits from third parties.

Declare interest in transactions.

Directors’ Powers & Controls:

Shareholders delegate day-to-day running, but some actions need shareholder approval:

Long service contracts (2+ years).

Substantial property transactions.

Loans to directors.

Payments for loss of office.

3. Shareholders

Rights:

Receive annual accounts & reports.

Require & attend general meetings.

Receive dividends.

Inspect company info & directors’ service contracts.

Vote on company matters.

Be issued a share certificate.

Duties:

Approve constitution changes.

Approve financial statements.

Declare dividends.

Approve winding up of the company.

4. Partnerships (Unlimited Liability Partnerships)

Definition:

Business run by two or more people with a view to profit.

Not a separate legal entity → partners are personally liable for debts.

Liability is “joint and several” (a third party can sue all partners or just one).

Key Features:

Unlimited liability for debts.

Don’t need to file accounts publicly.

Partners can withdraw capital freely.

Best suited for low insolvency risk businesses.

Partnership Agreement (not legally required but recommended):

Sets out: profit sharing, partners’ authority, dispute resolution.

Without it → Partnership Act 1890 applies (profits shared equally).

5. Goodwill in Partnerships

Definition: Value of reputation, customer base, market position, etc.

Calculated as fair value of net assets – book value of net assets.

When new partner joins: goodwill belongs to old partners.

New partner usually contributes capital; retiring partner withdraws capital + share of goodwill.

6. Changes in Partnership

New partner: only liable for debts after joining.

Retiring partner: remains liable for debts before retirement unless:

Notice of retirement is given.

Novation agreement – third party agrees to transfer liability to remaining partners.

Indemnity agreement – continuing partners reimburse retiring partner for claims after retirement.

✅ Exam Tip:

Companies Act 2006 = true & fair financial statements.

Directors = duties under CA 2006, powers controlled by shareholder approval.

Shareholders = rights (info, dividends, meetings) & duties (approve key company changes).

Partnerships = unlimited liability unless LLP, joint and several liability, goodwill issues when partners change.

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1. Data Protection (GDPR)

Principles (GDPR, 2018)

Personal data must be:

Fair, lawful, transparent

For specified purposes (purpose limitation)

Adequate, relevant, limited to what is necessary

Accurate & up to date

Kept no longer than necessary (storage limitation)

Securely handled

Accountability – organisations must show compliance

Breaches & Penalties

Report breach to supervisory authority within 72 hrs (where feasible)

Inform individuals if their rights/freedoms are at risk

Keep records of all breaches (even if not reported externally)

Max fines:

EU: €20m or 4% of annual global turnover (whichever higher)

UK: £17.5m or 4% of annual global turnover

Data Subject Rights

Individuals have the right to:

Be informed about use of data

Access personal data

Correct incorrect data

Erase data (“right to be forgotten”)

Restrict processing

Data portability (transfer data to another provider)

Object to certain processing

2. Information Security

Protecting data from risks such as:

Physical risks (e.g. fire, hardware damage)

Human risks (e.g. error, misuse, theft)

Main risks:

Physical damage

Human damage

Operational problems

Data corruption

Data theft

Countermeasures (examples)

Fire → Off-site back-ups

Viruses → Anti-virus & firewalls

Software bugs → Thorough testing

3. Cybersecurity

Definition

Protection of internet-connected systems (hardware, software, data) from cyberattacks.

Common Cyberattack Risks

Malware: Viruses, worms, trojans – damage or control systems remotely

Phishing: Fake emails/websites tricking users into giving info or installing malware

Denial of Service (DoS): Overloading a system with traffic, making it unavailable

Man in the Middle: Attacker intercepts communication (e.g. fake Wi-Fi login page)

4. Key Takeaways

GDPR: Protects individuals; serious fines for breaches.

Information Security: Prevents risks to data; requires safeguards.

Cybersecurity: Protects systems from online attacks; staff awareness crucial.

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1. What is Money Laundering?

Process of converting criminally obtained money/assets into “clean” money/assets.

Also covers funding terrorism.

3 Stages of Money Laundering:

1. Placement – Criminal money first enters financial system.

2. Layering – Passing funds through complex transactions to disguise origins.

3. Integration – Reintroducing funds into legitimate economy (“clean”).

Terrorist Financing

Raising, possessing, or dealing with property, knowing/suspecting it is for terrorism.

Conviction = up to 14 years prison and/or unlimited fine.

2. Money Laundering Offences

Acquiring/possessing/using criminal property.

Concealing/disguising/transferring/removing criminal property.

Failure to disclose suspicion or knowledge.

Tipping off (telling a suspect that they are under investigation).

3. Failure to Report

Must report suspicions to MLRO (Money Laundering Reporting Officer) or directly to FIU/NCA if no MLRO.

Failure = criminal offence.

Confidentiality is not a defence.

Senior staff may be liable if they neglect responsibilities.

4. Money Laundering Regulations (2017)

Firms must have:

MLRO appointed.

Internal reporting procedures.

Suspicious Activity Reports (SARs) to FIU/NCA.

Staff training on AML rules.

Independent audit of AML processes.

Customer Due Diligence (CDD) (normal, enhanced, simplified).

Record keeping and data protection systems.

5. Suspicious Activity Reports (SARs)

Must include:

Name, address, DOB, nationality of suspect.

ID documents/references.

Nature of activities raising suspicion.

Location of laundered property / other linked parties.

6. Tipping Off

Telling a suspect that they’re being investigated.

Penalty: Max 2 years prison and/or unlimited fine.

7. Customer Due Diligence (CDD)

When required:

New business relationship.

Occasional transaction ≥ £8,361 (10,000 euros approx).

Suspicion of ML/terrorist financing.

Doubts about prior ID.

Ongoing checks on existing clients.

Types:

Standard CDD – Verify client’s identity, beneficial owners, business purpose.

Enhanced CDD – For higher risk clients (extra checks, closer monitoring).

Simplified CDD – For lower risk clients.

If CDD not possible → must not act, may need SAR.

8. Whistleblowing

Disclosure of wrongdoing (e.g. illegality, abuse, risk to public safety).

Can be internal (within organisation) or external (e.g. press).

Protected by Public Interest Disclosure Act 1998 (PIDA) – prevents dismissal if acting in good faith.

9. Key Takeaways

No de minimis: no amount is too small to ignore.

AML offences are serious criminal offences.

Accountants must be vigilant – failure to act carries penalties.

Strong CDD & reporting procedures protect businesses and professionals.

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10 THE CONCEPTUAL FRAMEWORK Practice questions

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BUAW Integrated Workbook STUDENT 2022-23 Chapter 10

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BUAW Integrated Workbook TUTOR 2022-23 Chapter 10

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Chapter 7: External Analysis – The PESTLE Model

What is External Analysis

External analysis means looking at the outside environment in which an organisation operates. It helps understand opportunities and threats.

It’s part of strategic planning so businesses can respond to changes (regulations, market, economy, etc.).

How to Use PESTLE in Practice

Scanning & Monitoring: Constantly watch for external changes (legislation, economic indicators, social trends).

Impact & Likelihood: Not all external factors are equally important. Estimate how likely a change is, and what its impact would be.

Scenario Planning: Think about what might happen under different external conditions (best case, worst case, moderate).

Strategy & Response: Once you’ve identified key PESTLE factors, develop strategic responses: adapt products, enter/exit markets, adjust pricing, change operations, invest in technology, etc.

Potential Exam / Assessment Areas

Define PESTLE; list and explain each factor.

Given a business scenario, identify PESTLE factors affecting it and explain how they are opportunities or threats.

Compare the effect of different PESTLE factors.

Use PESTLE analysis to support decision making or recommendations (e.g. should a business expand into a country or change product lines).

Key Definitions to Know

Opportunity vs Threat (from external environment).

Legislation / regulation.

Innovation.

Consumer trends / demographics.

Environmental sustainability.

Useful Tips & Common Mistakes

Don’t confuse legal and political: political is more about government policy and stability; legal is actual laws in force.

Context matters: PESTLE factors vary by industry and geography. What is a big legal risk in one country might be negligible elsewhere.

Be specific in examples: instead of “regulation”, specify “UK data protection laws (GDPR)” or “rise in minimum wage”.

Avoid too many generic points: focus on the most relevant to the business in the scenario.

How Chapter 7 Links with Other Chapters

Ties into Chapter 8: The microeconomic environment — PESTLE gives the macro view.

Also relates to Risk and risk management (Chapter 6) — external factors are often sources of risk.

And Technology / sustainability / legal framework in other chapters can overlap.

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Chapter 8: The Micro-Economic Environment (AAT Level 3 BUAW)

Key Concepts & Definitions

Market: place where buyers and sellers exchange goods or services.

Demand: the quantity consumers are willing and able to buy at a certain price.

Law of demand: as price ↑, demand ↓ (and vice versa).

Supply: the quantity producers are willing and able to sell at a certain price.

Law of supply: as price ↑, supply ↑ (and vice versa).

Equilibrium price & quantity: where demand = supply (no surplus or shortage).

Factors Causing Shifts in Demand & Supply

Demand Shifters

Income (↑ income → more demand for normal goods; less for inferior goods).

Price of substitutes (if substitute ↑ in price, demand shifts to this good).

Price of complementary goods (if complement ↑, demand falls for this good).

Consumer tastes, preferences, fashions.

Population size and demographics.

Expectations about future prices or availability.

Supply Shifters

Costs of production (raw materials, wages, energy).

Technological advances (often increase supply).

Government policies (taxes reduce supply, subsidies increase it).

Price/availability of inputs.

Joint supply (when goods are produced together).

Producers’ expectations of future prices.

Types of Goods

Normal goods: demand rises when income rises.

Inferior goods: demand falls when income rises.

Necessities: demand remains steady regardless of income.

Luxuries: demand grows strongly with rising income.

Competition & Market Structures

Competition level: number of sellers, ease of entry, how products are differentiated.

Barriers to entry: things that make it hard for new firms to enter (e.g. high costs, patents, strong brands).

Product differentiation: making goods/services distinct through quality, branding, features, or service.

Price and Output Effects

Demand ↑ → Price ↑, Quantity ↑

Demand ↓ → Price ↓, Quantity ↓

Supply ↑ → Price ↓, Quantity ↑

Supply ↓ → Price ↑, Quantity ↓

If both shift at once → outcome depends on which shift is stronger.

Elasticity (if assessed)

Price elasticity of demand (PED): sensitivity of demand to price changes.

Income elasticity of demand (YED): sensitivity of demand to income changes.

Cross-price elasticity (XED): effect on demand for one good when price of another changes.

Why This Matters for Business

Helps set prices intelligently.

Forecasts changes in sales and costs.

Guides production, stock levels, and staffing.

Identifies profit risks if input prices rise.

Shapes strategy: whether to enter a market, differentiate products, or adjust costs.

Common Exam/Assessment Areas

Apply demand/supply shifts to real-life scenarios.

Identify normal vs inferior goods.

Analyse the effect of competition and barriers to entry.

Calculate or interpret elasticity.

Recommend strategies based on changes in market conditions.

Key Definitions to Know

Market

Demand vs Supply

Equilibrium price/quantity

Substitutes and complements

Normal vs Inferior goods

Necessities vs Luxuries

Barriers to entry

Product differentiation

Tips & Common Mistakes

Distinguish shift of the curve vs movement along the curve.

Use concrete examples (e.g. petrol, fast fashion, coffee).

Think about both supply and demand in exam scenarios.

“Inferior” is context-specific (e.g. instant noodles vs branded pasta).

Link market forces back to business decisions.

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Supply Graphs (The Basics)

1. What is supply?
Supply means how much of a product or service a business is willing to sell at different prices.

2. Supply Graph Layout:

X-axis (bottom) → Quantity (how many units are supplied).

Y-axis (side) → Price (how much it costs).

3. The Supply Curve:

Usually slopes upwards (bottom left to top right).

This is because when the price is higher, businesses want to sell more (it’s worth their effort).

4. Why supply increases with price:

Higher price = more profit → businesses produce more.

Lower price = less profit → businesses produce less.

Shifts in the Supply Curve

The curve doesn’t always stay still; it can shift left or right.

Shift to the right (more supply at every price):
→ E.g. cheaper production costs, better technology, more sellers in the market.

Shift to the left (less supply at every price):
→ E.g. higher costs, bad weather (for crops), new taxes, fewer sellers.

Key Takeaway

Supply curve = upward slope.

Higher price → more supplied.

Outside factors can shift the curve left (less) or right (more).

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What is Sustainability?

Meeting the needs of the present without compromising the ability of future generations to meet their own needs.

Balances economic growth, social responsibility, and environmental protection.

Increasingly important in business strategy due to regulation, consumer expectations, and long-term survival.

The Three Pillars of Sustainability

1. Economic Sustainability

Businesses must remain profitable to survive.

Profit should be earned responsibly and reinvested for long-term stability.

Focus on efficiency, innovation, and avoiding waste.

2. Social Sustainability

Impact on people: employees, customers, communities, and society as a whole.

Includes fair pay, safe working conditions, diversity and inclusion, and ethical practices.

Also covers wider responsibility (supporting local communities, avoiding exploitation).

3. Environmental Sustainability

Reducing the negative impact on the planet.

Efficient use of resources, reducing carbon footprint, limiting waste and pollution.

Protecting biodiversity and considering climate change risks.

The Triple Bottom Line (TBL)

Expands business focus from just profit to 3 Ps:

Profit – financial performance.

People – social responsibility.

Planet – environmental responsibility.

A framework for measuring sustainability performance.

Why Sustainability Matters

Regulation: growing legal requirements (emissions, recycling, reporting).

Consumer expectations: customers increasingly prefer ethical, green businesses.

Cost savings: energy efficiency and waste reduction lower costs.

Reputation & brand: sustainable companies attract talent, investors, and loyal customers.

Risk management: reduces exposure to future environmental, legal, or social risks.

Access to finance: many investors favour ESG (environmental, social, governance) compliant businesses.

Examples of Sustainable Business Practices

Using renewable energy (solar, wind, hydro).

Reducing packaging, especially plastics.

Designing products for durability and recycling.

Encouraging remote working to cut travel emissions.

Sourcing raw materials ethically and sustainably.

Measuring and reporting on carbon footprint.

Sustainability and Business Awareness

Businesses should set sustainability objectives and report progress.

Aligns with risk management (environmental and reputational risks).

Links with PESTLE analysis:

Political: green legislation, carbon taxes.

Economic: cost savings from efficiency.

Social: consumer demand for ethical practices.

Technological: innovations in green energy.

Legal: compliance with sustainability laws.

Environmental: climate change pressures.

Common Exam/Assessment Areas

Define sustainability and the three pillars.

Explain the triple bottom line (profit, people, planet).

Give examples of sustainable practices.

Analyse why sustainability is important for businesses.

Apply sustainability issues to case studies (e.g. how a business can improve long-term viability).

Key Terms to Know

Sustainability

Triple Bottom Line (TBL)

Carbon footprint

ESG (Environmental, Social, Governance)

Renewable resources

Corporate Social Responsibility (CSR)

Tips & Common Mistakes

Don’t confuse profitability with sustainability – a business needs both, but sustainability is broader.

Remember sustainability is about long-term survival.

Use practical examples (e.g. supermarkets reducing plastic bags).

Don’t only focus on the environment – cover economic and social pillars too.

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📘 Revision Notes – BUAW Integrated Workbook, Chapter 3: Stakeholders

✅ Key Learning Outcomes

Understand what stakeholders are and why they matter.

Identify internal vs. external stakeholders.

Recognise different stakeholder objectives.

Understand potential conflicts of interest between stakeholders.

Appreciate the importance of balancing stakeholder needs in decision-making.

🔑 Core Concepts

1. What Are Stakeholders?

Individuals or groups with an interest in, or influence over, a business.

Can be affected by business decisions.

2. Types of Stakeholders

Internal Stakeholders (within the organisation):

Owners/Shareholders – want profit, return on investment, business growth.

Managers – aim for efficiency, career progression, meeting targets.

Employees – want job security, fair pay, safe working conditions.

External Stakeholders (outside the organisation):

Customers – want quality products at fair prices.

Suppliers – want reliable orders and prompt payment.

Government – seeks tax revenue, regulation compliance, employment.

Local Community – concerned with jobs, environmental impact.

Pressure Groups – influence ethical/environmental practices.

Banks/Investors – seek repayment, stability, low risk.

3. Stakeholder Objectives

Different stakeholders have different, sometimes competing, objectives.

Example:

Shareholders want higher profits → might mean cutting costs.

Employees want higher wages → increases costs.

4. Conflict of Interests

Common conflicts:

Employees vs. Shareholders (wages vs. profit).

Customers vs. Managers (low prices vs. higher profit margins).

Community vs. Business (jobs vs. environmental impact).

5. Balancing Stakeholder Needs

Businesses must make trade-offs.

Strategies:

Negotiation – compromise between parties.

Corporate Social Responsibility (CSR) – balancing profit with social good.

Stakeholder Engagement – communication to reduce conflict.

📝 Exam Tips

Be ready to list stakeholders and explain their interests.

Use real-life examples (e.g., Tesco balancing profit with community impact).

For analysis questions, always show how one stakeholder group is affected vs another.

Remember: “Conflict” is key – explain why not all needs can be met at once.

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📘 Revision Notes – Kaplan: Technology Affecting Business and Finance

✅ Key Learning Outcomes

Understand how technology influences business models and finance.

Recognise benefits and risks of technology adoption.

Explore the role of big data, AI, cloud computing, and automation.

Understand cybersecurity and ethical implications.

🔑 Core Concepts

1. Technology in Business

E-commerce – online platforms expand markets, 24/7 availability.

Digital communication – email, video calls, instant messaging improve efficiency.

Social media – brand awareness, customer engagement, reputation management.

Remote working – enabled by cloud and collaboration tools.

2. Technology in Finance

Accounting software (e.g., Xero, QuickBooks, Sage): automates bookkeeping.

Enterprise Resource Planning (ERP): integrates finance with operations.

AI & Machine Learning: fraud detection, predictive analysis.

Blockchain: secure transactions, cryptocurrencies, audit trails.

FinTech: mobile payments, digital banking, crowdfunding.

3. Big Data & Analytics

Businesses collect and analyse large datasets to:

Predict consumer behaviour.

Improve decision-making.

Identify cost-saving opportunities.

Finance teams use data for budgeting, forecasting, risk management.

4. Automation & Robotics

Replaces repetitive manual tasks (e.g., invoice processing, payroll).

Frees staff for higher-value analysis and decision-making.

Reduces human error but may cause job displacement.

5. Cloud Computing

Stores data and software online, accessible from anywhere.

Benefits: scalability, lower costs, collaboration.

Risks: reliance on internet connection, potential data breaches.

6. Cybersecurity

Growing threat due to digital dependency.

Risks: hacking, phishing, data theft.

Protection: firewalls, encryption, staff training, compliance (e.g., GDPR).

7. Ethical & Social Implications

Data privacy concerns.

Responsibility to avoid bias in AI.

Digital divide (some groups excluded).

Pressure to balance efficiency with fairness.

📝 Exam Tips

Use examples (e.g., Tesco using big data for customer loyalty schemes, Monzo as FinTech).

Be ready to weigh advantages vs. risks.

Link technology to business performance and finance accuracy.

Highlight ethical issues when discussing AI, automation, or data use.

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📘 Revision Notes – Chapter 10: Professional Ethics in Accounting & Business

🔹 Definition of Ethics

Ethics = Moral principles that govern behaviour (“doing the right thing”).

Concerned with morality (right vs wrong) and how to act in given situations.

Business ethics = applying ethical principles to business problems.

Influences on ethics:

Regulations & codes of ethics

Corporate culture

Social pressure

Legislation

🔹 Why Ethics Matter

✅ Protects public interest
✅ Avoids fines/discipline
✅ Improves reputation & attracts customers
✅ Creates effective workforce
✅ Reduces risks & costs

❌ May increase sourcing costs
❌ Lost profits from refusing unethical trade
❌ Possible management time “wasted”

🔹 Fundamental Principles (IFAC Code of Ethics)

1. Integrity – be honest, fair, truthful.

2. Objectivity – avoid bias, conflicts of interest, undue influence.

3. Professional competence & due care – maintain up-to-date knowledge & act diligently.

4. Confidentiality – protect information, don’t misuse it.

5. Professional behaviour – follow laws & regulations, avoid discrediting the profession.

🔹 Threats to Ethical Behaviour

1. Self-interest threat – personal/financial conflict (e.g. fear of losing client).

2. Self-review threat – reviewing own past work (e.g. auditing accounts you prepared).

3. Advocacy threat – promoting client’s position too strongly, losing objectivity.

4. Familiarity/trust threat – over-sympathy due to close relationships.

5. Intimidation threat – pressured by threats or dominance.

🔹 Safeguards

By profession/regulation: CPD, exams, professional standards.

By workplace: policies on gifts, ethics codes, whistleblowing, internal controls.

🔹 Resolving Ethical Conflicts

Step 1 – Clarify: Gather full facts & documents.
Step 2 – Analyse:

Laws broken?

Which principles affected?
Step 3 – Act:

Internal escalation first (manager, policies, ethics committee).

External escalation if unresolved (auditors, AAT, regulators).

If necessary → resign.

🔹 Example Scenarios

Example 1 – Frankie (misclassification of expenses):

Internal: challenge FD, check justification.

External: auditors, AAT, resign if unresolved.

Wrong action: posting journal just because FD is senior.

Example 2 – Sushil (told to falsify accounts):

Threat = Intimidation.

Action = Refuse, explain illegality, escalate if needed.

🔹 Summary Checklist

Principles: Integrity, Objectivity, Competence, Confidentiality, Behaviour.

Threats: Self-interest, Self-review, Advocacy, Familiarity, Intimidation.

Safeguards: Profession-based & workplace-based.

Process: Clarify → Analyse → Act (internal → external → resign).