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Fundamentals of Ethics - Corporate Governance and Business Law Questions and Answers

Question 1

Which of the following is INCORRECT regarding the differences between a general partnership and a company limited by shares?

(i) Both a partnership and a company are formed by registration with the Registrar of Companies.

(ii) All partners are agents of the firm and all directors are agents of the company.

(iii) All partners are fully liable for the firm’s debts and the company is fully liable for its own debts.

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(i) and (iii) only

D.

(iii) only

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Question 2

Self regulation is based upon:

Options:

A.

Trust

B.

Compliance

C.

Rules

D.

Professional bodies

Question 3

You are happy to be held accountable for your actions and hope that others can trust and depend upon you. Which TWO of the personal qualities identified by the CIMA Code of Ethics does this demonstrate?

Options:

A.

Respect

B.

Responsibility

C.

Reliability

D.

Timeliness

Question 4

Which TWO of the following are true of the CIMA Code of Ethics?

Options:

A.

It covers every possible dilemma that an accountant might face

B.

It is based on values rather than compliance

C.

It is a financial requirement of accountants

D.

It establishes the fundamental principles of professional ethics for professional accountants

Question 5

Why should accountants be up-to-date with developments in the profession?Choose TWO options.

Options:

A.

To ensure that clients or employers receive a competent professional service

B.

To avoid accusations of negligence

C.

To ensure successful career development

D.

To earn the respect of their colleagues

Question 6

You are the financial controller of SB Company, responsible for directing the budgeting process For the current year, you were instrumental in gaming approval of a particular manager's budget without modification. As a token of appreciation, the manager has given you a gift voucher for a local restaurant In considering whether or not to accept the gift, you should refer to which of the following fundamental ethical principles?

Options:

A.

Professional competence

B.

Credibility

C.

Integrity

D.

Professional behavior

Question 7

Danny holds 1%, Edward 2% and Fozia 3% of the issued share capital of Vee Ltd. Which of these shareholders, acting alone or together, hold the minimum percentage to entitle them to require the company to circulate a written statement of their views to all those entitled to receive notice of the forthcoming annual general meeting?     

Options:

A.

Fozia alone.

B.

Danny and Edward.

C.

Edward and Fozia.

D.

Danny and Fozia.

Question 8

IFAC member firms or bodies:

Options:

A.

Are entitled to use the IFAC Code of Ethics as an optional approach for their own organization

B.

Must, by law, adhere to the IFAC Code of Ethics

C.

Must prosecute any individual who fails to adhere to any part of the IFAC Code of Ethics

D.

Must not apply less stringent standards than those stated in the IFAC Code of Ethics

Question 9

You work for an accountancy firm and discover that a member of an assurance team has a significant conflict of interest. You take CIMA's Code of Ethics with you when you alert your board of directors as to why this is an important issue, but the board decides that the conflict of interest is not important. This is an example of tension between:

Options:

A.

Corporate and professional values

B.

Corporate and societal values

C.

Societal and personal values

D.

All of the above

Question 10

Exe Ltd was registered in 1980 and has an objects clause in its Memorandum of Association. What is the current status of Exe Ltd's objects clause?

Options:

A.

The objects clause will be treated as if it remains in the Memorandum of Association.

B.

The objects clause will be treated as if it is a provision in the Articles of Association.

C.

Exe Ltd will be treated as if it has no objects clause.

D.

The objects clause will be treated as if it only applies to Exe Ltd's directors.

Question 11

Wye has borrowed £10,000 from Exe and the loan has now become repayable in full.  Exe has received a cheque from Wye for £9,000 stated to be “in full and final settlement of the loan.” What is the position if Exe cashes the cheque?

(i) Exe will have accepted £9,000 in full and final settlement and will not be able to claim the other £1,000 from Wye.

(ii) Exe is legally entitled to cash the cheque and pursue Wye for the balance of £1,000.

(iii) Exe will have accepted £9,000, but at law payment of less than the amount due cannot satisfy the full debt. 

Options:

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(ii) and (iii) only

Question 12

The UK Corporate Governance Code is primarily directed at which type of business organization?

Options:

A.

All limited liability business organizations

B.

All business organizations

C.

All private companies

D.

All listed public companies

Question 13

Which ONE of the following provides an example of circumstances that may create self-review threats for a professional accountant in public practice?

Options:

A.

The discovery of a significant error during a re-evaluation of the work of the professional accountant in public practice

B.

Reporting on the operation of financial systems after being involved in their design or implementation

C.

A member of the assurance team being, or having recently been, a director or officer of that client

D.

All of the above

Question 14

Which of the following groups is a non-financial as opposed to a financial stakeholder of a company?

Options:

A.

Competitors

B.

Shareholders

C.

Customers

D.

Suppliers

Question 15

Which of the following is incorrect in relation to Shari'ah law?

Options:

A.

Islamic law provides for matters spiritual and physical

B.

Eating pork is prohibited

C.

Criticism of the prophet Mohammad is accepted

D.

Apostasy is similar to the law of treason in the UK

Question 16

Being able to be trusted by others to be dependable reflects the personal quality identified by the CIMA Code of Ethics as:

Options:

A.

Traditionalism

B.

Reliability

C.

Respect

D.

Transparency

Question 17

Which of the following contracts might be specifically enforceable?

Options:

A.

A has contracted to sell his house to B but has changed his mind and no longer wishes to sell it.

B.

C has contracted to buy a new Ford motor car but the garage is now refusing to honor the contract.

C.

D has contracted to purchase a number of tins of fruit for her business but the seller has now stated that he no longer wishes to proceed with the contract.

D.

E has contracted to sing at a concert organized by F, but E has withdrawn as he has received a more lucrative offer from G.

Question 18

Which of the following is incorrect?

Options:

A.

Subject to the company's Articles of Association, shareholder approval is not required to enable the company to borrow money.

B.

Subject to the company's Articles of Association, shareholder approval is not required to authorise the issue of shares direct to one person for a non-cash consideration.

C.

A company's Articles cannot provide that the Articles are unalterable.

D.

The Articles of Association may be altered by special resolution.

Question 19

Badger has just been offered a job after completing a series of long interviews.

Which of the following would legally form the employment contract between him and his employer:

Options:

A.

A handshake

B.

A signed formal document

C.

A verbal declaration

D.

Any of the above

Question 20

The Auditing Practices Board has an objective of establishing ethical standards in relation to which aspects of the work of external auditors and those providing assurance services?

Options:

A.

Transparency, competitiveness and value

B.

Independence, objectivity and competitiveness

C.

Transparency, value and integrity

D.

Independence, objectivity and integrity

Question 21

In relation to registering a company limited by shares, which of the following is correct?

Options:

A.

If the promoters fail to submit Articles of Association to the Registrar of Companies, the company cannot be registered.

B.

If the promoters fail to submit Articles of Association to the Registrar of Companies, the provisions of Table A automatically apply.

C.

If the promoters fail to submit Articles of Association to the Registrar of Companies, the documents will be returned to the promoters with a request for Articles to be submitted.

D.

If the promoters fail to submit Articles of Association to the Registrar of Companies, the company will be registered but will have no Articles of Association applicable to it.

Question 22

What is the public function of all accountants?

Options:

A.

To provide truthful and independent accounts of finances

B.

To give financial judgments to owners and shareholders

C.

To do a job and go home

D.

To represent the life-cycle of accounts

Question 23

Timmy has just taken over as the managing director of a well-known manufacturing company.

He really wants to do a good job an ensure that the company maintains its positive reputation.

Baring in mind the five key principles of corporate governance, which of the following should Timmy do to ensure he does a good job?

Select ALL that apply.

Options:

A.

Ensure that the company's board are all experienced and knowledgable about the company and the manufacturing industry.

B.

Ensure that she duly holds AGMs so that any relevant issues can be discussed.

C.

Ensure the company discloses both financial and non-financial information during its annual report.

D.

Ensure the company discloses financial information only during its annual report.

E.

Ensure that an AGM is held during each financial quarter so that any issues that have risen during the last three months are brought to attention.

F.

Ensure that the company's board is as small as possible - a big board makes the decision-making process far too complicated.

Question 24

Which of the following statements is correct in relation to the ability of a company to contract?

Options:

A.

If a company has restricted the ability of its directors to contact and the directors ignore the restrictions, then the outsiders may not enforce the contract.

B.

The shareholders of a company have the ability to enter into a contract on behalf of the company, irrespective of any restrictions on the directors.

C.

If a company wishes to restrict the ability of its directors to enter into particular contracts it may do so by placing restrictions on the directors in its

articles of association

D.

If the shareholders learn that the directors are about to ignore the restrictions placed upon their ability to contract by the company the shareholders are unable to prevent the directors from proceeding

Question 25

T, a Sales Representative of E plc, made an appointment to see you in the hope of persuading you to place a substantial order with E plc. During your discussions, T suggested that you could qualify for a cash bonus in the event of an order being placed.

 

Which of the following is correct? 

(i) Placing an order in these circumstances will place you in breach of your employment and professional obligations.

(ii) If the goods are what your company requires and are priced competitively, you are acting correctly in placing an order and qualifying for the cash bonus.

(iii) You have been placed in a conflict of interest situation and you should not proceed to place an order.

Options:

A.

(i) only

B.

(i) and (iii) only

C.

(ii) only

D.

(iii) only

Question 26

The majority of developed countries require publicly quoted companies and large companies to produce annual financial statements which are then audited by an external auditor.

Which of the following statements regarding the requirement for external audit is Incorrect?

Options:

A.

Independent external audit gives confidence in the financial statements which is required as the directors have incentives to manipulate the financial statements presented to the shareholders

B.

As the directors are responsible for the day-to-day management of the company, they hold more detailed information which is resolved by the presentation of financial statements to the shareholders and this needs to be guaranteed by independent external audit.

C.

Independent external audit gives confidence in the financial statements by including the auditor's opinion on whether or not they show a true and fair view.

D.

As the directors are responsible for the day-to-day management of the company, they hold more detailed information which is resolved by the presentation of financial statements to the shareholders and there is a need for this to be assured by independent external audit

Question 27

There are several different schools of ethics. Which of the following best represents the ethical approach adopted by the accountancy profession?

Options:

A.

People have a duty to comply with a set of universal principles that apply irrespective of the consequences of their actions

B.

The guiding principle of conduct should be the greatest happiness or benefit of the greatest number.

C.

People should act in their own best interests and an action is only right if it benefits the individual undertaking that action

D.

Virtues such as charity and justice are dispositions to act in ways that benefit both the person possessing them, and society as a whole

Question 28

Which of the following is one of the fundamental principles identified in the CIMA Code of Ethics?

Options:

A.

Professional conscience and due care

B.

Professional consideration and due care

C.

Professional cooperation and due care

D.

Professional competence and due care

Question 29

In the UK, the body responsible for taking an appropriate role in the development of statutes, regulations and accounting standards which affect the conduct of auditing and assurance services, both domestically and internationally is:

Options:

A.

The Professional Oversight Board for Accountancy

B.

The International Federation of Accountants

C.

The Auditing Practices Board

D.

The Financial Review Board

Question 30

Which of the following is correct? 

(i) A decision of the Supreme Court is binding on all lower courts which are called upon to decide a case based on similar material facts.

(ii) If there is a conflict between European Law and English law, European Law prevails.

(iii) Parliament may delegate authority to the government to make law.

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) and (iii) only

D.

(i), (ii) and (iii).

Question 31

Which of the following are listed among the IFAC's drivers for sustainable organisational success?

Select ALL that apply.

Options:

A.

Customer and stakeholder focus

B.

Effective leadership and strategy

C.

Integrated governance, risk and control

D.

Innovation and adaptability

E.

Financial management

F.

People and talent management

G.

Operational excellence

Question 32

Which of the following is CORRECT?

(i) A company registered today may restrict its ability to contract by including a provision to that effect in its articles of association.

(ii) A company which was registered before the Companies Act 2006 came into force may pass a special resolution to remove its objects clause from its memorandum of association.

(iii) If the directors ignore any restriction on the company’s ability to contract they may be sued for breach of duty by the company.

Options:

A.

(i) only

B.

(ii) only

C.

(i) and (iii) only

D.

(i), (ii) and (iii)

Question 33

Which of the following must an internal audit satisfy in order to be deemed independent? Select ALL that apply.

Options:

A.

The head of the audit must report to a high level within the organisation.

B.

The internal audit activity must be free from interference.

C.

The head of the internal audit must communicate and interact directly with the board of directors.

D.

Any problems identified during the audit should be reported.

E.

Action plans should be negotiated with management in order to address any identified problems.

Question 34

Which of the following statements is incorrect?

Options:

A.

A person who signs a contract is deemed to have read it.

B.

A person is assumed to know of a term of which he has been given reasonable notice at or before the time of the contract.

C.

A person seeking to rely upon an onerous clause must show that he has taken sufficient steps to bring the clause to the other party's attention.

D.

A person cannot be bound by an onerous clause.

Question 35

Which of the following is correct?

i. A company intending to issue new shares for cash must first offer them to the existing shareholders.

ii. A company may dispense with the requirement to offer new shares to existing shareholders by passing a special resolution.

iii. A company issuing shares for a non-cash consideration is not required to offer the shares to the existing members first.

Options:

A.

(i) only

B.

(ii) only

C.

(ii) and (iii) only

D.

(i), (ii) and (iii)

Question 36

In a situation where a professional accountant needs to choose in whose interest he or she is to behave and act, which of the following interests should he or she put first?

Options:

A.

Employer's interest

B.

Client's interest

C.

CIMA's interest

D.

Public interest

Question 37

You are the manager of the finance function of a large engineering company According to IFAC's drivers of sustainable corporate success, which of the following would be a method by which you could improve the value of your department to the company?

Options:

A.

Providing ethical leadership which focuses on minimizing environmental costs sustainably.

B.

Providing ethical and strategic leadership which focuses on sustainable value creation.

C.

Providing strategic leadership which sustains the maximization of short term value.

D.

Providing sustainable ethical and strategic leadership which focuses on operating profit.

Question 38

The CIMA Code of Ethics relates to:

Options:

A.

Professional accountants in public practice and business

B.

Professional accountants in public practice only

C.

Professional accountants in business only

D.

Professional accountants in the third sector only

Question 39

Kane is a management accountant for business in the City. When looking through the company's latest financial reports he finds that company has been paying far less tax than it should be.

After consulting the company's management, Kane discovers that the company had been deliberately paying less tax and are not interested in taking action to rectify it.

As Kane has done all he can to try and solve the issue himself, it's clear that he now needs to take steps to disassociate himself from the misleading information.

How might he do this?

Select ALL that apply.

Options:

A.

Resign from the company.

B.

Consider getting legal advice.

C.

Determine whether he should report the issue.

D.

Destroy all documents that contain information regarding the company's tax avoidance.

E.

Manipulate the company's accounts so that the right amount of tax is paid.

Question 40

R, S and T are the only shareholders in RST Ltd each holding 5,000 ordinary £1 shares. R is the only director of the company. The articles of association of RST contain the following provisions:

1. R is to be a director of RST Ltd for life.

2. In the event of any resolution to dismiss R by ordinary resolution his votes shall count three times.

Which of the following is CORRECT?

(i) Provision 1 is void as a director cannot be appointed for a period exceeding 3 years.

(ii) Provision 2 is valid and R may outvote any proposed resolution to dismiss him.

(iii) Provisions 1 and 2 are both unenforceable by R as they are not ordinary membership rights.

Options:

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(i) and (iii) only

Question 41

Zed Bank plc has agreed to allow Exe Ltd an overdraft of £50,000 subject to a fixed and floating charge over almost all of the company's assets. In addition, the directors of Exe Ltd have been required to personally guarantee the overdraft.

 

Which of the following is correct? 

(i) The directors could face bankruptcy if they are called upon to honour the guarantee.

(ii) In this case the directors do not enjoy limited liability as they are liable on the guarantee if the company cannot pay.

(iii) The directors could only be required to honor the guarantee if the company's assets proved insufficient to meet the overdraft.

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(iii) only

D.

(i), (ii) and (iii)

Question 42

How many fundamental principles are identified by the CIMA Code of Ethics?

Options:

A.

Three

B.

Four

C.

Five

D.

Six

Question 43

Which of the following is INCORRECT in relation to a claim for wrongful dismissal?

Options:

A.

A claim for wrongful dismissal is barred after 3 months.

B.

There is no requirement for a qualifying period of continuous employment.

C.

Damages for wrongful dismissal may be awarded by an employment tribunal.

D.

Evidence of serious misconduct discovered after the employment has ceased is admissible as part of the employers' defence.

Question 44

Which THREE of the following are disadvantages of rules-based approaches to ethical standards?

Rules-based approaches:

Options:

A.

are inflexible and expensive

B.

motivate compliance through value and judgment

C.

are subject to precise definitions of wording and hence become contentious

D.

have subjective standards which may cause confusion.

E.

require objective enforcement by an independent party.

F.

are inconsistently applied due to the need for judgment.

Question 45

Articles of association regulate the relationship between:

Options:

A.

the company and its directors

B.

the company and its customers

C.

the company and its members

D.

the company and its creditors

Question 46

An external auditor has concluded that the financial statements of a company fairly reflect the financial position of a company. The report which the auditor issues will include which of the following?

1. Details of the company's directors

2. Details of managements' responsibilities.

3. Details of the company's performance.

Options:

A.

1 and 3 only

B.

1,2 and 3

C.

2 only

D.

1 and 2 only

Question 47

Wye Ltd has ordered goods from ABC plc and the directors of Wye Ltd have guaranteed that Wye Ltd will pay the agreed sum within one month of the delivery of the goods.

 

Which of the following is correct? 

(i) The contract is between Wye Ltd and ABC plc and the directors cannot be forced to pay the amount due in any circumstances.

(ii) A contract of guarantee is only enforceable if it is evidenced in writing.

(iii) The directors of Wye Ltd can be forced to honor the guarantee in the event of Wye Ltd not paying the amount due.

Options:

A.

(i) only

B.

(ii) only

C.

(i) and (ii) only

D.

(ii) and (iii) only

Question 48

Which of the following is NOT one of the main requirements of the UK Corporate Governance Code?

Options:

A.

The separation of the roles of Chairman and Chief Executive

B.

The appointment of independent non-executive directors to the Board

C.

The establishment of a Risk Committee

D.

The appointment of a competent Company Secretary

Question 49

Which of the following is incorrect in relation to a reduction of capital by a private company?

Options:

A.

The company must pass a special resolution to authorize the reduction of capital.

B.

The reduction must be approved by the court.

C.

It is not necessary for the company’s Articles of Association to authorize a reduction of capital.

D.

The directors must make a solvency statement.

Question 50

Which of the following is correct? 

(i) All courts below the Supreme Court may refer a case involving European Law to the European Court of Justice for a preliminary ruling.

(ii) The Supreme Court must refer a case involving European Law to the European Court of Justice for a preliminary ruling.

(iii) An English court is not bound to give effect to a preliminary ruling of the European Court of Justice.

Options:

A.

(i) and (ii) only

B.

(ii) and (iii) only

C.

(iii) only

D.

(i) and (iii) only

Question 51

Which of the following are TWO reasons why new legislation might be introduced in response to corporate scandals?

Options:

A.

To prevent this type of unethical behavior by making it illegal

B.

To punish individuals for adhering to codes of ethics

C.

To encourage companies to make their own decisions about ethical matters

D.

To enforce minimum standards of behavior

Question 52

CIMA's Code of Ethics would be violated if a professional accountant accepted a fee for work which is:

Options:

A.

fixed by a company's ethics committee

B.

based on a quotation fixed in advance of the work being earned out

C.

payable once a specified finding has been attained

D.

based on a price quotation submitted in competitive bidding

Question 53

Which of the following statements is correct in relation to the civil law?

Options:

A.

All civil cases commence in the County Court.

B.

A breach of the civil law does not enable an injured party to claim compensation.

C.

A person may be prosecuted for a breach of the civil law.

D.

A tort is a civil wrong.

Question 54

ABC Accountants has taken out an advert in its local paper to promote its services.  Mr B, an account manager, is uncomfortable, as the advert says that ABC is expert in charitable tax issues, and he knows that none of the partners have that expertise. However, Mr B does not want to be thought of as a 'trouble maker' by bringing the matter up with his manager. Which TWO things should Mr B do?

Options:

A.

Seek guidance from CIMA's Code of Ethics

B.

Seek guidance from his line-manager

C.

Do nothing

D.

Speak to the local paper

Question 55

Which of the 'fundamental principles' of CIMA's Code of Ethics is defined as follows?

 

"A professional accountant should comply with the relevant laws and regulations and should avoid any action that discredits the profession"

Options:

A.

Integrity

B.

Objectivity

C.

Professional competence and due care

D.

Professional behavior

Question 56

On 1st October X Ltd wrote to Y Ltd offering to sell a machine at a price of £5,000. The letter stated that Y Ltd must give X Ltd “notice in writing” of its acceptance of the offer by 8th October. Y Ltd posted its acceptance on 5th October and this reached X Ltd on 7th October. In the meantime X Ltd sent a letter to Y Ltd on 4th October revoking its offer, and this reached Y Ltd on 8th October.

 

Which of the following is correct?

Options:

A.

There is no contract between X Ltd and Y Ltd because the offer was withdrawn on 4th October when the revocation was sent to Y Ltd.

B.

There is no contract between X Ltd and Y Ltd because the offer was withdrawn on 8th October when the revocation was received by Y Ltd.

C.

X Ltd and Y Ltd contracted on 5th October.

D.

X Ltd and Y Ltd contracted on 7th October.

Question 57

A manufacturing company has a policy of only buying raw materials which are produced within a 100 kilometer radius of its factory. This is an example of what aspect of CSR?

Options:

A.

Quality management

B.

Environmental impact reporting

C.

Supply chain management

D.

Brand management

Question 58

L is a senior management accountant in a large and respected firm. He has found out that two of the partners of the firm are working unethically for clients who operate on 'the wrong side of the law'.  L would like to draw this matter to the attention of the third partner, but he is concerned that he will either lose his job, or, if the scandal gets out, the firm will lose its reputation and clients as a result.  He decides to do nothing.  Is this an unethical thing to do?

Options:

A.

Yes - it is the ethical duty of an accountant not to cover anything up

B.

Yes - it is unethical to work for a firm like that

C.

No - he is protecting the reputation of the firm

D.

No - he is protecting his own job and the jobs of everyone in the firm

Question 59

Compliance is

Options:

A.

Doing the right thing because it is the right thing to do

B.

Doing the right thing because you have to

C.

A way of building trust

D.

A matter of judgment

Question 60

Which of the following are examples of an invitation to treat? Select ALL that apply.

Options:

A.

Goods on display in a shop window.

B.

A billboard advertisement

C.

Goods on display on a supermarket shelf.

D.

A street vendor who offers a passerby a bunch of bananas for £1.

E.

A man who offers to sell his car for £1500 to a potential buyer.

Question 61

Which of the following is correct?

(i) The provisions of the Memorandum of Association do not form a contract between the members and the company.

(ii) The provisions of the Articles of Association form a contract between the members and the company.

(iii)      One member may sue another directly on the provisions in the Articles of Association which contain ordinary membership rights.

Options:

A.

(i) only

B.

(ii) only

C.

(i) and (ii) only

D.

(ii) and (iii) only

Question 62

Which of the following is a civil action? 

i. An action by a local authority against a restaurant for selling impure food.

ii. An action by a taxpayer against Her Majesty's Revenue and Customs (“HMRC”) in relation to an expenses claim which has been refused by the Inspector of Taxes.

iii. An action by Exe Ltd against Zed Ltd for supplying equipment which was found to be dangerous.

Options:

A.

(i) only

B.

(ii) only

C.

(i) and (ii) only

D.

(i) and (iii) only

Question 63

Which of the following cases of dismissal are likely to be deemed automatically fair by an employment tribunal?

Options:

A.

Tom - A 75-year-old firefighter whose boss made him retire because of the physical nature of the job.

B.

Nigel - A security guard who had been dismissed for drinking on the job.

C.

Sara - An accountant who was dismissed for lying about her qualifications during her initial interview.

D.

Bob - An employee at a biscuit factory who was dismissed because the company they worked for wanted to save money despite having no debts.

E.

Anita - An employee at an IT firm who was dismissed by her boss because she is a graduate who doesn't have much experience.

Question 64

B agreed in his contract that he would not work for a competitor of Gee Ltd for a period of 12 months after leaving the company's employment. On leaving Gee Ltd, B worked for Zed Ltd, a competitor of Gee Ltd. If the restriction in B's contract with Gee Ltd should be found to be reasonable, which of the following remedies is Gee Ltd entitled to? 

(i) A decree of specific performance forcing B to comply with his contract with Gee Ltd.

(ii) Damages in respect of any loss caused by B's breach of contract.

(iii) An injunction to stop B working for Zed Ltd. 

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) and (iii) only

D.

(i), (ii) and (iii)

Question 65

Which of the following is entitled to initiate court action on behalf of a company? 

(i) The board.

(ii) The majority shareholders.

(iii) All the shareholders.

Options:

A.

(i) only

B.

(i) or (ii) only

C.

(i) or (iii) only

D.

(i), (ii) or (iii)

Question 66

You work for an airline company and discover a series of regular payments made to a lobbying group that campaigns to allow people freedom to fly as and when they choose without being taxed for contributing to global warming. The group's website includes specific commentary that claims to 'expose the myth of global warming'. Neither your company nor the lobbying group (which describes itself as 'independent') mention the financial link between your organizations. Is this an ethical issue and why?

Options:

A.

Yes - the lobbying group appears to be funded at least in part by your company so it is not independent and is therefore misleading people about its status

B.

Maybe - depending on whether the lobbying group is funded by other airlines as well as your company

C.

No - companies are entitled to fund any groups that they choose, particularly if it is in their financial interest. Neither party has done anything unethical

D.

No - there is unlikely to be any connection between the payments and the group's aims. After all, companies regularly fund Non-Government Organizations (NGOs) and other types of organization

Question 67

Mr X's wife is gravely ill.  He accepts money from a client to falsify some accounts. The client is a contractor, being paid by the Government to build a bridge over a river. The accounts now state that more expensive materials were used to build the bridge. The money helps Mr X pay for his wife's medical treatment. Is this an example of a 'victimless crime'?

Options:

A.

No. The contractor is being paid to build a bridge with tax payers' money.  If it is built with poor quality materials it may collapse, wasting money, and potentially causing an accident

B.

Yes. Mr X used the money to get help for his wife. The bridge was built anyway

C.

Yes. Mr X needed the money to help his wife - family is more important

D.

Yes. Mr X has a duty to do as his client asked

Question 68

Which of the following is correct in relation to international relations?

(i) International regulations are voluntarily entered into by commercial and professional bodies to standardize practices and procedure to make it easier to enter into international trading agreements.

(ii) International regulations which have been agreed by the professional bodies of different states are only binding on the members of those bodies or those who choose to adopt them.

(iii) International regulations may attain the force of law by being adopted by the legislatures of individual states

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) only

D.

(i), (ii) and (iii)

Question 69

When might an ethical dilemma occur?

Options:

A.

When the boundaries between right and wrong are unclear

B.

When the code of ethics does not specify what action to take

C.

When an individual is under pressure to do something that does not feel right

D.

All of the above

Question 70

Why are the principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior “fundamental”?

Options:

A.

Because they are the foundations of reasoning and professional practice

B.

Because they are the foundations of human rights

C.

Because they are the foundations of corporate responsibility

D.

Because they are the foundations of management accounting

Question 71

lohn works as a management accountant for a law firm. He only got the job because he lied about his qualifications: he told the interviewers that he the required accountancy qualifications to do the job when he actually

didn't.

Now John's boss has found that John lied during the interview. Which of the following will almost certainly happen as a result?

Select ALL that apply.

Options:

A.

John will lose his employer's trust.

B.

John will lose his job.

C.

John will face criminal proceedings.

D.

John will face civil proceedings.

E.

John will be expelled from the professional accountancy organisations he is a member of.

F.

John will have problems finding new employment.

Question 72

Which of the following is INCORRECT in relation to the Unfair Terms in Consumer Contracts Regulations 1999?

Options:

A.

The regulations only apply to standard form contracts.

B.

The regulations only apply to exemption clauses.

C.

The regulations only apply to consumer contracts entered into by a human being and do not apply to limited companies.

D.

Whether or not a clause is written in plain English is a factor which may be taken into account in deciding whether the term is unfair.   

Question 73

P is an accountant working in a business Which of the following circumstances might create a self-interest threat for P in her professional role?

Options:

A.

A client is threatening P's dismissal over a disagreement about the review of accounting policies

B.

P is concerned over her employment security

C.

P is required to review data after previously being involved in its preparation

D.

The company is being threatened by litigation

Question 74

In the UK, the body responsible for reviewing the regulatory activities of the professional accountancy bodies is:

Options:

A.

The Professional Oversight Board for Accountancy

B.

The International Federation of Accountants

C.

The Financial Reporting Council

D.

The Financial Review Board

Question 75

Which of the following describes the aim of corporate governance initiatives?

Options:

A.

To remove shareholder responsibility for the conduct of the company.

B.

To reduce the burden of regulation on all companies to increase shareholder wealth

C.

To enable shareholders to reduce their involvement in the governance of the company

D.

To ensure that shareholders may have confidence that the company is well run

Question 76

Which of the following is normally not an implied term of a contract of employment?

Options:

A.

The duty to provide work.

B.

The duty to obey the employer's lawful instructions.

C.

The duty to maintain mutual trust and confidence.

D.

The duty not to disclose confidential information.    

Question 77

Which of the following is correctly stated to be an advantage of carrying on business via a company limited by shares? 

(i) The liability of the company is limited.

(ii) In general the directors are not liable for the debts of the company.

(iii) The liability of the shareholders is limited.  

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) and (iii) only

D.

(iii) only

Question 78

S is management accountant for a small retail company. S has discovered a possible fraud in the purchasing department. The manager of that department has told S that he is aware of the fraud and will 'deal with it'.

 

Which ONE of the following would it be appropriate for S to do?

Options:

A.

Nothing

B.

Advise a director of the company

C.

Ask for confirmation in writing from the manager

D.

Bring the matter to the attention of the police

E.

Ask for advice from the company's external auditors

Question 79

Which ONE of the following resolutions is no longer legally effective?

Options:

A.

An elective resolution

B.

A special resolution

C.

An ordinary resolution

D.

A written resolution

Question 80

Which of the following is incorrect?

Options:

A.

All courts below the Supreme Court  may refer a case involving European Law to the European Court of Justice for a preliminary ruling.

B.

Supreme Court must refer a case involving European Law to the European Court of Justice for a preliminary ruling.

C.

An English court is not bound to give effect to a preliminary ruling of the European Court of Justice.

D.

A preliminary ruling of the European Court of Justice is sent back to the Court which referred the question and must be given effect by that court.

Question 81

Corporate governance codes may either be rules-based or principles-based

Which of the following statements correctly describes a rules-based approach to corporate governance?

Options:

A.

A rules-based approach requires that a company complies with the rules or explains why it has not.

B.

A rules-based approach instils the code into law but leaves the sanctions for non-compliance to be decided and enforced by the shareholders.

C.

A rules-based approach instils the code into law but encourages compliance with the spirit of the law.

D.

A rules-based approach instils the code into law with appropriate penalties for transgression.

Question 82

Regarding auditor remuneration, a self-interest threat to professional competence and due care is created if

Options:

A.

a gift from a client is accepted

B.

the competitive fee quoted did not recognize the complexity of the assignment

C.

the auditor accepts a referral of a new client from an existing client

D.

a professional accountant in public practice solicits new work through advertising or other forms of marketing

Question 83

Which of the following is INCORRECT in relation to Shari'ah law?

i. Shari'ah law is intended to provide for a person's spiritual well-being but is not concerned with secular matters.

ii. The Sunnah is one of the primary sources of Shar'iah law.

iii. The salat (daily prayers) is one of the Five Pillars of Islam.    

Options:

A.

(i) only

B.

(ii) only

C.

(i) and (ii) only

D.

(iii) only

Question 84

Which THREE of the following may be external stakeholders in the activities of a nuclear power station?

Options:

A.

The government

B.

Finance providers

C.

Employees

D.

Environmental pressure groups

E.

Suppliers

F.

Local residents

Question 85

You work for a company that designs and manufactures children's toys. Which of the following is NOT an example of social responsibility that your company might choose to address?

Options:

A.

The use of chemicals in manufacturing

B.

The welfare of workers who assemble the company's products

C.

The environmental impact of transporting toys from the country of manufacture to the country of sale

D.

Whether the recommended retail price of a particular product provides sufficient margin after the unit cost of production is taken into account

Question 86

Adam, Brian, Charles and David each held 25% of the issued share capital of ABCD Ltd. Adam has recently issued further shares to himself in order to increase his voting power. Which of the following is incorrect?

Options:

A.

The share issue is automatically invalid.

B.

The shareholders may ratify the share issue by ordinary resolution.

C.

The shareholders may challenge the validity of the share issue using Section 994 of the Companies Act 2006, on the ground that the issue is "unfairly prejudicial to the interests of the shareholders".

D.

The company may proceed against Adam for breach of fiduciary duty.

Question 87

Which of the following is correct?

(i) A contract for the sale of land must be in writing.

(ii) A consumer credit agreement must be in writing.

(iii) A contract of employment must be in writing.

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(i) and (iii) only

D.

(i), (ii) and (iii)

Question 88

An auditor would trace copies of sales invoices lo shipping documents in order to check for which of the following errors?

Options:

A.

Goods which have been invoiced have not been sent to customers

B.

Goods which were sent to customers have not been recorded in the individual customer's ledger account

C.

Goods which have been invoiced have not been recorded in the sales ledger.

D.

Goods sent to customers have not been invoiced

Question 89

Independence of mind allows a professional accountant to:

Options:

A.

Act with integrity

B.

Exercise objectivity

C.

Exercise professional skepticism

D.

All of the above

Question 90

Wye Ltd is considering appointing Anne as a director of the company. Which of the following is incorrect? 

(i) If Anne is an un-discharged bankrupt, she cannot act as a company director.

(ii) If Anne is the subject of a disqualification order, she cannot act as a company director.

(iii) If Anne has already been appointed a director of another company, she cannot also act as a director of Wye Ltd.

Options:

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(ii) and (iii) only

Question 91

Which of the following type of committee is NOT required by the UK Combined Code?

Options:

A.

Investment committee

B.

Audit committee

C.

Remuneration committee

D.

Nominations committee

Question 92

Why does life-long learning require commitment? Choose TWO options.

Options:

A.

Rapid advances in technology

B.

Evolving regulations

C.

Career progression

D.

Computer virus-protection

Question 93

You work for a company that is constructing a major football stadium. The day that the stadium is finished, large cracks appear in the supporting walls. It turns out that your company's purchasing director bought cement from a new and inexperienced company. You find out that the cement supplier was no cheaper than the other suppliers who had bid for the contract but that the son of your purchasing director happens to run the cement company. Is this an ethical issue and why?

Options:

A.

Yes - the cement supplier clearly knew that it was providing faulty materials

B.

Yes - your purchasing director has had a conflict of interest in this matter

C.

No - there is no evidence to show that the company knew that the cement was faulty

D.

No - the cement supplier was clearly chosen on the basis of value for money rather than personal connections

Question 94

Miss B is working closely with Mr L to deliver an important report on the efficiency of Mr L's department.  They have had to work late together several times, and last night they went out to dinner afterwards.  Miss B is starting to think she may have feelings for Mr L. Could her independence be called into question?

Options:

A.

Yes, her feelings could be influencing her independence of mind

B.

No, she is not actually dating Mr L so her independence of appearance is not compromised

C.

No, provided she does not act on her feelings and continues to be professional

D.

Yes, having dinner with a work colleague can affect her independence of appearance

Question 95

'Remuneration' is one of the main principles in the Corporate Governance Code. Which of the following is NOT best practice under the 'Remuneration' principle?

Options:

A.

Remuneration should be sufficient to attract, retain and motivate directors of the quality required to run the company successfully, but should not be excessive

B.

Remuneration should be structured in order to link a significant proportion of the rewards to corporate and individual performance

C.

There should be a formal and transparent procedure for developing policy on executive remuneration

D.

The board of directors are able to set the remuneration of non-executive directors

Question 96

DGH is a company operating in the oil and gas industry, which is heavily regulated. The government is considering introducing a new law which is likely to result in a dramatic cut in profitability for DGH.

Which of the following is NOT a legitimate method for DGH to influence government policy in its own best interests?

Options:

A.

Employing lobbyists to put DGH's case to ministers or civil servants.

B.

Offering financial incentives to public officials to use their influence on DGH's behalf

C.

Attempting to influence public opinion in order to put pressure on the legislative agenda

D.

Inviting government ministers to attend the next board meeting of DGH to allow the directors to put forward their view

Question 97

Which of the following is CORRECT in relation to a Limited Liability Partnership (“LLP”)?

(i) An LLP is formed by registration with the Registrar of Companies

(ii) Unlike the articles of a company the internal rules of an LLP are not available for public inspection

(iii) An LLP is liable to pay corporation tax on its profits

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) and (iii) only

D.

(i), (ii) and (iii)

Question 98

In which of the following situations has a contract of employment arisen?

Options:

A.

A verbal offer of work is made to S for the possibility of duties at a specified pay rate but the employer makes it explicit that, as the need for the services is not yet certain S is free to work elsewhere

B.

A written offer of work is made to R which specifies the services required but omits the pay rate for the job. This is not accepted by R either in writing or verbally and R does not turn up for work

C.

A verbal offer of work is made to P at a given pay rate per hour for specified services The offer is not accepted by P either verbally or in writing but P turns up for work and performs the duties identified in the offer.

D.

A verbal offer of work is made to Q at a given pay rate for specified services. The offer is not accepted by Q either verbally or in writing and Q does not turn up for work

Question 99

Which of the following is CORRECT in relation to the Sarbanes-Oxley Act passed in the United States of America in 2002? 

i. The Act sought to protect investors by improving the accuracy of corporate disclosure and reporting procedures and increasing corporate openness.

ii. The Sarbanes-Oxley Act 2002 was passed in response to the high-profile Enron and WorldCom financial scandals.

iii. The Act provides that all auditors of public companies must register with the Public Company Accounting Oversight Board.

Options:

A.

(i) and (ii) only

B.

(i) and (iii) only

C.

(ii) and (iii) only

D.

(i), (ii) and (iii)

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