Every set of financial statements is built by people, and people face pressure. A chief executive wants a bigger profit before a bank meeting. A finance director fears losing a job. A manager asks you to “adjust” one number. Ethics is the set of principles that tells an accountant what to do when the easy choice is the wrong one.
In the Strategic Business Reporting exam, ethics is not a separate subject. It appears inside scenario questions, and it is one of the most reliable places to pick up marks.
This topic explains the five fundamental principles of the Institute of Chartered Accountants of Nigeria (ICAN) code of ethics, the five threats to those principles, the steps an accountant should take under pressure, and the consequences of unethical behaviour. ICAN’s code follows the international code published by the International Federation of Accountants (IFAC), which is written by the International Ethics Standards Board for Accountants (IESBA).
The earlier topic covers the regulatory framework. The next topics cover the Conceptual Framework.
In 30 seconds
Ethics means doing the right thing even when no rule forces you to. An accountant follows five principles: integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Five threats can weaken them: self-interest, self-review, advocacy, familiarity and intimidation.
When pressured, the accountant explains the problem, refuses to take part, records the discussion, escalates to the audit committee or the board, takes advice from ICAN or a lawyer, and resigns if the problem is not fixed. Unethical behaviour harms the individual, the employer and the whole profession.
Key terms in plain English
| Term | What it means |
|---|---|
| Ethics | Principles of right and wrong conduct that go beyond what the law demands |
| Ethical dilemma | A situation where your duty to your employer, your client, the public or yourself pulls in different directions |
| Safeguard | An action or rule that removes a threat or reduces it to an acceptable level |
| Escalate | Take the problem to a more senior person or body, such as the audit committee |
| Whistleblowing | Reporting wrongdoing inside an organisation to someone with the power to act, inside or outside it |
| Audit committee | A committee of the board that oversees financial reporting and the external audit |
Syllabus check
This topic covers all four learning outcomes under Syllabus Area A, item 2, on ethical issues in strategic business reporting:
- 2(a) the professional accountant’s code of ethics as it applies to reporting: see the five principles;
- 2(b) ethical considerations and dilemmas in reporting: see threats and typical dilemmas;
- 2(c) assessing, recommending and justifying action in a scenario: see the response steps and the worked example;
- 2(d) the implications of not complying with the IESBA code: see consequences.
The syllabus is examined with a scenario, so you must apply the principles to the facts, not only list them.
The law behind the ethics: CAMA 2020
Ethics sits on top of the law. The Companies and Allied Matters Act 2020 (CAMA 2020) adds legal duties that back up the ethical principles.
| Section | What it says | Ethical link |
|---|---|---|
| s. 377 | The directors prepare the financial statements for each year | A director who pushes a false number breaches a legal duty as well as an ethical one |
| s. 405 | The chief executive officer (CEO) and chief financial officer (CFO) of a company that is not a small company certify that they are responsible for internal controls, and failure is an offence | The people applying pressure are personally exposed |
| s. 406 | It is an offence for an officer, director or insider to influence, coerce, manipulate or mislead the external auditor so as to make the statements misleading | Hiding a problem from the auditor is a crime, not only a lapse |
| s. 404(7)(a) | The audit committee checks that accounting and reporting policies follow legal requirements and agreed ethical practices | The audit committee is the natural place to escalate to |
The five fundamental principles
ICAN’s code gives five principles. Learn each one with its everyday meaning.
- Integrity. Be honest, open and fair. Do not be linked with a report or statement you believe contains a materially false or misleading statement, a statement made recklessly, or an omission that gives a false picture.
- Objectivity. Use your own independent judgement. Do not let bias, a conflict of interest or the influence of other people change your decision.
- Professional competence and due care. Keep your knowledge and skills up to date, work carefully and follow technical and professional standards, supported by continuing professional development.
- Confidentiality. Keep information from your work private. Disclose it only when you have permission or a legal or professional duty to do so, for example to report a fraud. Never use it for your own gain.
- Professional behaviour. Obey the law, and avoid conduct that would damage the reputation of the profession.
The five threats to the principles
A threat is something that could stop you applying a principle. If a threat is not clearly insignificant, you must put a safeguard in place.
| Threat | Meaning | Example in reporting | Safeguard |
|---|---|---|---|
| Self-interest | Your money or personal interest conflicts with your duty | A CFO whose bonus depends on profit overstates revenue | Independent review of key decisions, no financial stake in the employer, whistleblowing channel |
| Self-review | You must judge your own earlier work | The accountant who prepared the books also does the internal audit of them | Separate the roles, independent review by someone else |
| Advocacy | You promote a client or employer’s position so strongly that you lose objectivity | A CFO shows investors forecasts he knows are unrealistic | Make sure statements are accurate and balanced |
| Familiarity | A close relationship makes you too trusting or too soft | A controller does not report a fraud involving a close friend or a relative | Rotate roles, keep relatives away from your work, rules on gifts |
| Intimidation | You are frightened into giving way | The CEO threatens to dismiss you unless you change the figures | Clear reporting channels, protection for whistleblowers, ethical leadership |
What to do when you are under pressure
A good exam answer follows a clear sequence. The same steps apply whether you are a finance manager in a company or an accountant in practice.
- Establish the facts. What exactly is being asked, by whom, and is it wrong under the accounting standard?
- Identify the principle and the threat. Name them from the lists above.
- Raise it with the person. Explain calmly that you cannot support misleading information, and show them the rule.
- Refuse to take part. Do not prepare, approve or sign anything you believe is misleading.
- Record everything. Keep written notes of conversations and instructions. This protects you.
- Escalate. Go to the audit committee, the board or the compliance officer, using the organisation’s own procedure.
- Take advice. Ask ICAN for guidance, and get independent legal advice if needed.
- Resign if it is not resolved. Staying would make you part of the wrongdoing. Consider whether the law or the profession requires you to report to a regulator such as the Financial Reporting Council of Nigeria (FRC), and take legal advice first because confidentiality also applies.
Typical dilemmas in reporting
- Pressure to overstate revenue or understate liabilities to meet investor or bank expectations.
- Pressure to ignore a correction, for example treating leases as operating leases to keep liabilities low.
- Pressure to ignore a fall in the value of property so that profit looks better.
- Pressure to hide losses or problems from the external auditor.
- Pressure to sign a report to a lender that says the projections are good when they are not.
Consequences of unethical behaviour and of breaking the code
| Who is hit | Consequences |
|---|---|
| The accountant | Loss of reputation, loss of the job and difficulty finding another, disciplinary action by ICAN (reprimand, fine, suspension or removal from membership), civil claims, fines or imprisonment, repaying gains made, a ban from being a director, stress and lasting harm to a career |
| The employer or firm | Loss of clients, damages and compensation, regulatory action, and in extreme cases the end of the business. Partners in an audit firm can be banned or imprisoned |
| The profession and the public | Weaker public trust, loss of the value of the qualification, and financial loss to investors, lenders, employees and creditors who relied on the numbers |
Do not mix this up with the consequences of not following accounting standards, which are covered in the regulatory framework topic. Non-compliance with standards is about the reports and the company. Unethical behaviour is about the person and the profession. Examiners have noted that candidates confuse the two.
The rules in more depth
Why a deadline or a bonus is a threat, even without a wicked boss
Most reporting problems start with pressure that looks normal: a target, a deadline or a banking covenant. The code asks you to notice the threat early, when it is still small. A bonus linked to profit is a self-interest threat for the person who prepares the profit.
Confidentiality is not a shield for wrongdoing
You must keep client information private, but not if the law or the profession requires disclosure, for example a duty to report fraud. The accountant is not allowed to use confidentiality as an excuse to stay silent about a serious breach. Take legal advice before disclosing outside the organisation.
Escalate inside first
The normal path is to go up through the organisation (manager, finance director, audit committee, board) before going outside. Going to a regulator is a later step, used when internal routes fail or when the law demands it.
Integrity is more than telling the truth
It includes fair dealing and not being linked to a report that leaves out something important. Leaving out a fact can mislead as much as stating a falsehood.
Worked example: pressure to recognise all revenue now
Scenario. NaijaTech Plc signs a ₦2.5 billion contract to supply and install learning tablets in public schools. The contract sets staged delivery over 12 months with milestone payments. The CEO says a senior government official wants the full ₦2.5 billion shown as revenue in this quarter, and tells you to record it. By the quarter end, 25% of the work is complete and accepted by the customer. The figures are illustrative. Advise the financial reporting manager.
- The accounting point. Under International Financial Reporting Standard (IFRS) 15, Revenue from Contracts with Customers, revenue is recognised as the company satisfies its performance obligations, not when the contract is signed or when cash is promised. For a staged contract, revenue follows progress.
At 25% complete, revenue is 25% × ₦2,500 million = ₦625 million.
Recording ₦2,500 million would overstate revenue by ₦1,875 million. - The ethical issues. Pressure to recognise revenue too early, political influence on reporting, a risk to integrity and independence, and a risk of misleading shareholders, regulators and the stock market (the Nigerian Exchange Group, Nigerian Exchange Group (NGX)).
- Principles at risk. Integrity (not linked to false information), objectivity (resisting the CEO and the official), professional competence and due care (applying IFRS 15 correctly) and professional behaviour (obeying the law).
- Threats. Intimidation from the CEO and the official, and self-interest if the manager fears for his job.
- Action. Explain to the CEO that full recognition breaks IFRS 15 and could bring sanctions from the FRC and the NGX. Recommend recognising ₦625 million. If the CEO insists, escalate to the audit committee or the board and keep a written record. If it remains unresolved, take advice and consider resigning.
- CAMA 2020. The CEO and CFO certify the controls under section 405, and hiding the facts from the auditor would be an offence under section 406.
How to score full marks
- Use a fixed structure. Facts, accounting rule, ethical issues, principles, threats, action, conclusion. Examiners award marks for each block.
- Name the threat and give the reason. Write “intimidation threat, because the CEO threatened dismissal”, not only “intimidation”.
- Link each principle to the facts. Do not just define integrity. Say who must not be linked to what.
- Recommend action in order. Raise it, refuse, document, escalate, take advice, resign.
- Add the accounting standard. Many ethics questions also test a standard, such as IFRS 15 or International Accounting Standard (IAS) 19. Get the technical point right as well.
- Keep the two kinds of consequences apart. Non-compliance with standards is not the same as unethical behaviour.
Common mistakes in the exam
- Listing the principles without applying them to the scenario.
- Saying the accountant should simply obey the boss because the boss is more senior.
- Recommending an immediate report to the police or the press before using internal routes and taking advice.
- Forgetting to document the conversations.
- Missing the accounting error inside the ethical scenario.
- Writing “objectivity threat” as if it were one of the five threats. Objectivity is a principle that the five threats can weaken.
- Confusing the consequences of breaking accounting standards with the consequences of unethical conduct.
Quick revision
- Five principles: integrity, objectivity, professional competence and due care, confidentiality, professional behaviour.
- Five threats: self-interest, self-review, advocacy, familiarity, intimidation.
- Response: facts, raise, refuse, record, escalate, advice, resign.
- Consequences: personal, employer, profession.
- CAMA 2020: s. 377, s. 404(7)(a), s. 405, s. 406.
Practice questions
These are original questions written in the style of the ICAN exam. Try each one before you open the answer. Full model answers follow the written questions.
Recall check: multiple choice
The real ICAN paper has no multiple-choice section. These questions are for quick recall. The written questions that follow are closer to the exam.
Question 1. Which of the following is one of the five fundamental principles of ICAN’s code of ethics?
- Advocacy
- Familiarity
- Confidentiality
- Intimidation
Show the answer
C. The other three are threats. The five principles are integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.
Question 2. A finance manager whose bonus depends on reported profit is asked to prepare the profit figure. This is mainly a:
- Self-review threat
- Self-interest threat
- Advocacy threat
- Familiarity threat
Show the answer
B. Personal financial gain could cloud judgement.
Question 3. An accountant prepares the books and then performs the internal audit of the same books. The main threat is:
- Self-review
- Intimidation
- Familiarity
- Advocacy
Show the answer
A. He is reviewing his own work.
Question 4. A CEO threatens to dismiss the CFO unless revenue is changed. The threat is:
- Familiarity
- Self-review
- Intimidation
- Advocacy
Show the answer
C. Fear of consequences is pressing the CFO to give way.
Question 5. A controller does not report a fraud because the person involved is a close friend. The threat is:
- Familiarity
- Advocacy
- Self-review
- Intimidation
Show the answer
A. A close relationship weakens professional scepticism.
Question 6. Which of the following is the first sensible step when told to record a false figure?
- Resign immediately without speaking to anyone
- Explain to the person that the treatment is wrong and cannot be supported
- Report to the press
- Sign and keep a private note
Show the answer
B. Resignation comes after raising, refusing, documenting, escalating and taking advice.
Question 7. Confidential client information may be disclosed when:
- A friend asks for it
- There is a legal or professional duty to disclose it
- It would help the accountant’s own business
- The client is late in paying
Show the answer
B. It may also be disclosed with proper authority.
Question 8. Which section of the Companies and Allied Matters Act 2020 makes it an offence to influence, coerce, manipulate or mislead the external auditor?
- Section 377
- Section 405
- Section 406
- Section 394
Show the answer
C. Section 405 is the certification by the CEO and CFO.
Question 9. Which of the following is a consequence of unethical behaviour for the accountant?
- Disciplinary action by ICAN
- A larger audit committee
- Lower interest rates
- Higher dividend
Show the answer
A. It can range from reprimand to removal from membership.
Question 10. Under IFRS 15, a company that has completed 40% of a staged contract worth ₦500 million should recognise revenue of about:
- ₦500 million
- ₦250 million
- ₦200 million
- ₦0
Show the answer
C. Revenue follows progress: 40% × ₦500 million = ₦200 million (simplified, assuming one obligation satisfied over time).
Written questions
Question 11 (10 marks). Ayo is the new financial controller of Oakfield Ltd. He finds that revenue has been overstated by 15% to attract investors. The CFO tells him: “Adjust the figures as instructed, or your future here may be short.” (a) Identify and explain the ethical threats Ayo faces. (5 marks) (b) Recommend the actions Ayo should take. (5 marks)
Question 12 (20 marks). (a) State and explain the five fundamental principles of the ICAN code of ethics. (5 marks) (b) Explain the five threats to those principles, with one example of each. (5 marks) (c) Describe the steps an accountant should take when pressed to produce misleading financial information. (5 marks) (d) Discuss the consequences of unethical behaviour by a professional accountant. (5 marks)
Question 13 (10 marks). The managing director of Highlander Plc wants a bank loan and tells the bank that projected cash flows meet its lending criteria. They do not. The finance director, who has only just joined and says he cannot afford to lose his job, is asked to send the report. (a) Assess the ethical conflicts. (5 marks) (b) State the ethical principles that guide his response and what he should do. (5 marks)
Model answers
Show the model answer to Question 11
(a) Threats (5 marks). Self-interest: complying would protect Ayo’s job but cost his integrity. (1.5) Intimidation: the CFO’s threat about his future creates pressure to give way. (1.5) Advocacy: inflating revenue to attract investors would make Ayo help promote a misleading picture. (1) Objectivity is also at risk because pressure from senior management can bias judgement. (1)
(b) Actions (5 marks, any five at 1). Refuse to change the revenue and tell the CFO it breaks IFRS and professional ethics. Keep written records of all discussions. Escalate to the audit committee, the board or the compliance officer. Take advice from ICAN or independent legal advice. If the problem continues, resign.
Consider reporting the matter to a regulator such as the FRC, the Securities and Exchange Commission or the Corporate Affairs Commission, after taking legal advice.
Show the model answer to Question 12
(a) Principles (5 marks, 1 each). Integrity: honest, open and fair, and not linked to false or misleading information. Objectivity: independent judgement, free from bias, conflict of interest and undue influence. Professional competence and due care: keep skills up to date and follow standards. Confidentiality: keep information private unless there is authority or a legal or professional duty to disclose, and never use it for gain.
Professional behaviour: obey the law and avoid conduct that discredits the profession.
(b) Threats (5 marks, 1 each). Self-interest: a bonus linked to profit leads a CFO to overstate revenue. Self-review: an accountant who prepared the books also does the internal audit. Advocacy: a CFO presents unrealistic forecasts to investors. Familiarity: a controller does not report a fraud by a long-time friend. Intimidation: a CEO threatens dismissal unless figures are changed.
(c) Steps (5 marks, any five at 1). Establish the facts. Identify the principle and the threat. Raise the matter with the person and explain the standard. Refuse to prepare or approve misleading information. Keep written records. Escalate to the audit committee or board. Seek advice from ICAN or a lawyer. Resign if it is not resolved.
(d) Consequences (5 marks, any five at 1). Loss of reputation and public trust. Legal consequences such as litigation, fines or imprisonment. Loss of employment and future work. Disciplinary action by ICAN, from reprimand to expulsion. Financial loss to investors, lenders and employees. Loss of clients and possible closure of the firm. Repayment of gains made. A ban from being a director. Damage to the credibility of the whole profession.
Show the model answer to Question 13
(a) Conflicts (5 marks). Self-interest: he fears losing his job because of his financial commitments, which pressures him to manipulate information. (1.5) Intimidation: the managing director is pressing him to send a misleading projection. (1.5) Advocacy: a favourable report to win a loan would make him an advocate for misleading information. (1) Misrepresentation: false projections to a bank breach professional ethics and may amount to fraud. (1)
(b) Principles and response (5 marks). Integrity: he must not be linked to false information. (1) Objectivity: he must resist personal interest and the managing director’s pressure. (1) Professional competence and due care: projections must rest on realistic, supportable assumptions. (0.5) Professional behaviour: he must obey the law and protect the reputation of the profession.
(0.5) Response: decline to issue the misleading report, explain that it breaks ethical and legal requirements, give a factual projection, escalate to the audit committee or board if pressed, keep records, and consider resigning if it is not resolved. (2)
Pathfinder on ethical issues in reporting
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
The marking guide gives 4 marks for the ethical issues, 2 for applying International Financial Reporting Standard 15, 2 for the ICAN principles and 2 for the professional action. The worked example in this topic follows that split. Examiners reported that candidates could not apply the principles to the facts.
Revise first: Worked example: pressure to recognise all revenue now
The marking guide gives 3 marks for three ethical conflicts and 2 marks for two ethical principles. Name the threat, give the reason from the facts, and then name the principles and the response. Model answer 13 follows this.
Revise first: The five threats to the principles
Question 4(b)(ii) expects integrity, objectivity, professional competence and due care, professional behaviour and confidentiality applied to the CFO’s suggestion. Question 5(b) expects five consequences for the person, the employer and the profession. Do not mix these with the consequences of breaking accounting standards.
Revise first: Consequences of unethical behaviour
Source: ICAN Pathfinder, Strategic Business Reporting. Diets covered: May Diet, 2026 and November Diet, 2025.
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