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Fundamentals of Ethics, Corporate Governance and Business Law

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Question # 1

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E has contracted to sing at a concert organized by F, but E has withdrawn as he has received a more lucrative offer from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

Discussion 0
Question # 2

Paul has been held personally liable to contribute to the assets of P Ltd as a result of his "fraudulent trading" under Section 213 of the Insolvency Act 1986. The court is about to disqualify Paul from acting as a director. What is the maximum period for which he may be disqualified?

Options:

A.  

No maximum.

B.  

5 years.

C.  

10 years.      

D.  

15 years.

Discussion 0
Question # 3

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

Discussion 0
Question # 4

Which of the following statements apply to multinational corporations? Select ALL that apply.

Options:

A.  

Financial statements will need to be prepared in different ways in different countries.

B.  

The company's investors will find it difficult to interpret and compare results.

C.  

Expanding into new markets will be more difficult due to potential bureaucracy.

D.  

Administrative burden and compliance costs will be reduced.

E.  

Assessment of other companies will be easier to do.

Discussion 0
Question # 5

Which of the following is incorrect?     

Options:

A.  

A ratio decidendi of the Supreme Court is binding on the Court of Appeal.

B.  

The Supreme Court is bound by a previous House of Lords ratio decidendi.

C.  

A ratio decidendi of the Court of Appeal is binding on the High Court.

D.  

A ratio decidendi of the Supreme Court is binding on the High Court.

Discussion 0
Question # 6

Which of the following is INCORRECT in relation to business names?

Options:

A.  

The business name of a private company limited by shares must end in “Limited” or “Ltd”.

B.  

Both public and private companies may use a business name.

C.  

If a business name is used, the name of the proprietor must be stated on business correspondence and at the premises where the business is carried on.

D.  

If a business name is used which is the same or very similar to that of an existing business, an action in the tort of passing off may be brought by the existing business.

Discussion 0
Question # 7

What has been the root of the majority of recent corporate scandals?

Options:

A.  

Misapplication or ignoring of ethical values

B.  

Misapplication or ignoring of accounting principles

C.  

Misapplication or ignoring of regulations

D.  

Misapplication or ignoring of human rights

Discussion 0
Question # 8

Which THREE of the following statements are correct in relation to the essential elements of a contract?

Options:

A.  

A conditional offer cannot be accepted until the condition has been satisfied

B.  

A revocation of an offer is only valid when it is received by the offeree, unless it is sent by post in which case it is valid as soon as it is posted

C.  

Even if the parties are fully in agreement, the agreement will be unenforceable unless at least one of the parties has provided consideration

D.  

A request for further information in relation to an offer has the effect of cancelling the offer

E.  

If an offer is rejected it can only be revived by the person who made the offer

F.  

Once an offer has been made it does not exist forever but will lapse after a reasonable time

Discussion 0
Question # 9

Zed Ltd was incorporated in 2010 and has chosen to use the standard Model Articles of Association.  The company is considering appointing Max as a director of the company.

 

Which of the following is incorrect?

(i) Max cannot be a director of the company unless he holds shares in the company.

(ii) Max cannot be a director of the company if he is an undischarged bankrupt.

(iii) Max cannot be a director of the company if he is subject to a disqualification order.

Options:

A.  

(i) only

B.  

(i) and (ii) only

C.  

(ii) only

D.  

(ii) and (iii) only

Discussion 0
Question # 10

Bill is conducting an audit on a furniture manufacturer. There doesn't appear to be any major issues with the company and its finances. However, Bill has noticed that the company has adopted a new set of accounting

standards unusually early.

What should Bill do?

Options:

A.  

Document this finding in an 'emphasis of matter' statement

B.  

Issue a modified audit report as he is satisfied the elements examined.

C.  

Issue a modified audit report as he is unsatisfied with the elements examined.

D.  

Issue an adverse opinion due to concerns raised during the audit.

Discussion 0
Question # 11

Which TWO of the following are examples of safeguards that may increase the likelihood of identifying or deterring unethical behavior?

Options:

A.  

Effective, well publicized complaints systems operating by the employing organization, the profession or a regulator

B.  

A company policy stating that ethics is discretionary and it is for individuals to decide on their standards of behavior

C.  

An explicitly stated duty to report breaches of ethical requirements

D.  

Leadership of an organization that establishes the expectation that members of an assurance team will act solely in their employer's interest

Discussion 0
Question # 12

F knows from preparing the accounts that the company she works for is going to have to make redundancies due to the recession.  She also knows that, despite the recession, the Managing Director continues to enjoy lavish perks and even uses a private jet. What should she do?

Options:

A.  

Do nothing: Professionally, Mrs F is bound to respect the confidentiality of the information she has received

B.  

Go to the press: Mrs F has a duty to report this in the public interest and the interest of the staff who will be made redundant

C.  

Resign: F cannot carry on working at a company which is so unethical

D.  

Leak the information: that way F's conscience will be clear but the information won't be traced back to her

Discussion 0
Question # 13

Natthapong's toilet won't flush, so he hires a plumber to come over and fix it.

He tells the plumber what the problem is, and the plumber agrees to fix it.

However, once the builder supposedly finishes the job, Natthapong finds that it still won't flush.

Is he able to terminate the contract?

Options:

A.  

Yes - The plumber did not fix the toilet and so the offer cannot be accepted.

B.  

Yes - He is able to terminate the contract at any time, even if the plumber did fix the toilet.

C.  

No - Once he's offered the plumber the job he is unable to terminate the contract.

D.  

No - Even if the plumber hasn't fixed the toilet he has still given up his time and effort and should therefore be paid.

Discussion 0
Question # 14

Charles is one of the three directors of Cee Ltd. The company has recently agreed to purchase Charles' house at its market value of £250,000. Which of the following is correct?

Options:

A.  

The purchase is unlawful as a company cannot contract with one of its own directors.

B.  

Charles need not formally disclose his interest as he is in a minority on the board.

C.  

The purchase must be approved by the shareholders passing an ordinary resolution.

D.  

Charles is not entitled to vote as a shareholder to approve the purchase.

Discussion 0
Question # 15

You have been asked to be involved in negotiations for the potential acquisition of another company. It so happens that your spouse is on the board of directors of that company. This affects the CIMA Code of Ethics fundamental principle of:

Options:

A.  

Objectivity

B.  

Professional competence and due care

C.  

Transparency

D.  

Reliability

Discussion 0
Question # 16

Complying with relevant laws and legislations demonstrates part of which CIMA Code of Ethics fundamental principle?

Options:

A.  

Integrity

B.  

Objectivity

C.  

Responsibility

D.  

Professional behavior

Discussion 0
Question # 17

ABC Ltd has resolved to purchase the business of ST Ltd for £500,000. ABC Ltd is to pay ST Ltd for the business by issuing ordinary £1 shares rather than cash. As the market value of ABC Ltd's shares is £5 per share, ABC Ltd is to issue to ST Ltd 100,000 ordinary £1 shares. Which of the following is incorrect?

Options:

A.  

The issue is lawful as ABC Ltd may issue its shares for a non-cash consideration.

B.  

The issue is lawful because ABC Ltd does not need to first offer the new shares to its existing members.

C.  

The issue is only lawful if the directors have the necessary authority to issue the shares.

D.  

The issue is only lawful if ABC Ltd arranges to have the business valued by the company's auditor.

Discussion 0
Question # 18

Being accountable for one's actions and decisions reflects the personal quality identified by the CIMA Code of Ethics as:

Options:

A.  

Responsibility

B.  

Reliability

C.  

Respect

D.  

Reserve

Discussion 0
Question # 19

In relation to business names which of the following is CORRECT?

(i) Any business may trade under a business name.

(ii) If a business name is used the name of the owner of the business must be disclosed.

(iii) The business name of a private limited company must end with the word “Limited” or “Ltd”.

Options:

A.  

(i) only

B.  

(i) and (ii) only

C.  

(ii) only

D.  

(i) and (iii) only

Discussion 0
Question # 20

Which of the following is a common law remedy?

Options:

A.  

Damages

B.  

An injunction

C.  

Specific performance

D.  

Rescission

Discussion 0
Question # 21

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)

Discussion 0
Question # 22

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

Discussion 0
Question # 23

Which of the following is NOT a 'financial stakeholder' of an organization?

Options:

A.  

Customer

B.  

Employee

C.  

Government

D.  

Competitor

Discussion 0
Question # 24

In 2011 Exe Bank plc granted a loan of £200,000 to Wye Ltd secured by a fixed charge over the company's land and a floating charge over all the company's other assets. Wye Ltd remains solvent but has now failed to meet its monthly repayments for three months.

 

Which of the following options are available to Exe Bank plc?

(i) Sue Wye Ltd for breach of contract.

(ii) Appoint an administrator

(iii) Petition for the compulsory winding up of Wye Ltd.

Options:

A.  

(i) only

B.  

(ii) only

C.  

(i) and (ii) only

D.  

(i), (ii) and (iii)

Discussion 0
Question # 25

Working late one evening, you see a colleague copying information on to series of CD Roms. He tells you that software is too expensive for him to afford for his home computer but that he needs the software for his own personal use and in case he might take work home at some point. Is this an ethical issue and why?

Options:

A.  

Yes - unauthorized reproduction would be regarded by the manufacturer as software piracy

B.  

Maybe - depending on whether he uses the software for personal or business use

C.  

Maybe - depending on whether his income is really insufficient to cover the cost of software purchase

D.  

No - one additional copy of the software makes no difference to the manufacturer, so this is not an ethical issue

Discussion 0
Question # 26

Which of the following are not owed duties by the directors? 

(i) The company as whole.

(ii) Individual shareholders.

(iii) All the present and future shareholders.

Options:

A.  

(i) and (ii) only

B.  

(ii) only

C.  

(ii) and (iii) only

D.  

(iii) only

Discussion 0
Question # 27

An internal auditor discovered evidence of a fraud earned out by an employee who worked in the accounting department. The auditor concluded that the fraud had been possible because of unsatisfactory segregation of duties in the department.

Poor segregation between which of the following duties would provide the best opportunity for this type of fraud to occur?

Options:

A.  

Issuing both sales invoices and purchase invoices.

B.  

Issuing sates invoices, and recording payments to suppliers in the ledger.

C.  

Receiving payments from customers, and recording them in the ledger

D.  

Receiving purchase invoices, and banking payments from customers.

Discussion 0
Question # 28

What is an essential quality for a professional accountant?

Options:

A.  

Ethical acumen

B.  

Emotional intelligence

C.  

Emotional sensitivity

D.  

Listening skills

Discussion 0
Question # 29

Zed plc wishes to issue £500,000 of shares on terms that the holders will receive a dividend before the other shareholders and they will be bought back by the company in 12 months' time. Which of the following best describes these shares?

Options:

A.  

Ordinary shares

B.  

Redeemable ordinary shares

C.  

Preference shares

D.  

Redeemable preference shares

Discussion 0
Question # 30

A Ltd is under contract to manufacture machinery for B Ltd for £200,000. Which of the following is a valid excuse for A Ltd failing to complete the contract on time?

Options:

A.  

A Ltd's factory was flooded.

B.  

A Ltd had taken on too many orders and had to give priority to its regular customers.

C.  

A Ltd's employees went out on strike.

D.  

A number of A Ltd's key workers were absent through illness.

Discussion 0
Question # 31

Which of the following is NOT a 'financial stakeholder' of an organization?

Options:

A.  

Customer

B.  

Media

C.  

Employee

D.  

Government

Discussion 0
Question # 32

Internal audit is considered best practice but is not required by law Which of the following does NOT describe a benefit of internal audit to the board of directors?

Options:

A.  

The internal audit function can help the audit committee have confidence in the fraud prevention systems within the company

B.  

The internal audit function can provide independent assurance of the financial policies applied to the financial statements

C.  

The internal audit function can report back to the audit committee if controls are not as effective as they should be

D.  

The internal audit function can help the audit committee to discharge their responsibilities for the ongoing monitoring of the risk in the company

Discussion 0
Question # 33

Demonstrating an attitude of esteem, deference, regard or admiration of others reflects the personal quality identified by the CIMA Code of Ethics as:

Options:

A.  

Responsiveness

B.  

Reliability

C.  

Reverence

D.  

Respect

Discussion 0
Question # 34

Which of the following can consideration take the form of?

Options:

A.  

Money + Goods + Services

B.  

Money

C.  

Goods

D.  

Services

E.  

Money + Goods

F.  

Money + Services

Discussion 0
Question # 35

Which of the following is NOT an advantage of establishing a company by purchasing “off the shelf”?

(i) The company is already registered so that in general business may be commenced more quickly.

(ii) The purchase off the shelf company can be cheaper than registration of a new company.

(iii) The articles of association are tailor-made to the requirements of the purchaser.

Options:

A.  

(i) only

B.  

(i) and (ii) only

C.  

(ii) and (iii) only

D.  

(iii) only

Discussion 0
Question # 36

Which of the following is correct in relation to a company's ability to have a restricted objects clause in its constitution?

(i) A company may restrict its objects in its constitution

(ii) Any clause restricting the company's objects should be included in the company's articles of association

(iii) The shareholders may pass a special resolution to alter the company's constitution by including a clause which restricts the company's objects

Options:

A.  

(i) only

B.  

(ii) only

C.  

(i) and (ii) only

D.  

(i), (ii) and (iii)

Discussion 0
Question # 37

Jo is employed as management accountant of a large retailer. Jo has been asked to dismiss one of her colleagues for 'misconduct', but she is aware that the colleague has done nothing wrong and that her employer is trying to avoid paying any redundancy settlement. If Jo accepts the request, which of the following 'fundamental principles' of CIMA's Code of Ethics will be compromised?

Options:

A.  

Integrity

B.  

Objectivity

C.  

Confidentiality

D.  

Professional behavior

Discussion 0
Question # 38

The body responsible for reviewing the accountancy profession worldwide 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

Discussion 0
Question # 39

An investigation has been launched against Company G, a supermarket, after suspicions were raised about its treatment of certain employees.

It was later found that Company G were guilty of direct discrimination.

Which of the following are the ways in which Company G were found to be directly discriminating?

Select ALL that apply.

Options:

A.  

Only offering pay rises to female employees if they were under a certain weight.

B.  

Rejecting job applications if the applicant had a foreign-sounding name.

C.  

Only offering senior managerial roles to male employees.

D.  

Making it company policy that no one over 65 could be hired.

E.  

Having a rule that no one under 5ft tall could be hired.

Discussion 0
Question # 40

AD company has recently appointed you as the head of their internal audit department and the head of the risk management committee. The internal audit department consists of a team of ten full time staff and other finance and IT staff are appointed into the internal audit team on an ad hoc basis as required. The rail time staff are all qualified accountants, some with CIMA and some with other professional bodies.

The company prefers to keep the full time staff complement to ten to manage the costs and the team have told you that they are often under considerable pressure to perform their operational and financial audit work and feel short staffed. The team therefore relies on the support of key members of the finance department and IT department, who are experts in their areas

You were appointed to the role by the audit committee and have been given authority to investigate all aspects of the business.

From your initial understanding of the internal audit function which TWO statements describe the strengths of the department?

Options:

A.  

There is no limitation on the scope of the department's work

B.  

The department has no operational responsibilities

C.  

The appointment process of the head of internal audit reduces the opportunity for management bias

D.  

The department is sufficiently resourced both financially and in terms of qualified, experienced staff.

E.  

The department is independent and objective.

Discussion 0
Question # 41

T is a senior accountant, but knows he needs to update himself on recent changes in accounting practice. He has been too busy; his manager is off sick and T is taking responsibility for his work load. T decides to let his CPD slide.  Another year won't matter.  Is this an ethical issue?

Options:

A.  

Yes. T has a duty to maintain his professional knowledge

B.  

No. T has a contractual duty to his employer; he can't take time off for CPD at this time

C.  

Yes. T should not be doing two people's work

D.  

No. T is an experienced accountant and doesn't need training

Discussion 0
Question # 42

Who should check that a company's financial statements provide a true and fair view of its financial performance?

Options:

A.  

The auditor and the company

B.  

The auditor

C.  

The company

D.  

Shareholders

E.  

The auditor and shareholders

F.  

The company and shareholders

Discussion 0
Question # 43

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

Discussion 0
Question # 44

Which of the following is correct?

Options:

A.  

A special resolution may be passed by 51% of the shareholders who are present voting in favor of the proposal either in person or by proxy.

B.  

A special resolution may be passed by 75% of the shareholders who are present voting in favor of the proposal either in person or by proxy.

C.  

A special resolution may only be passed by 75% of all the company's shareholders voting in favor of the proposal either in person or by proxy.

D.  

A special resolution may only be passed by all the company's shareholders voting in favor of the proposal either in person or by proxy.

Discussion 0
Question # 45

The Articles of Association of Dee Ltd state that the company has power to borrow money and that the directors have authority to borrow up to £200,000 on behalf of the company. The board has resolved to purchase a piece of land for £300,000.  The Midwest Bank plc has agreed to make a loan of £250,000 to Dee Ltd to acquire the land. Which of the following statements is correct?

Options:

A.  

The loan is void as Dee Ltd has acted ultra virus.

B.  

As the directors have exceeded their authority, the bank cannot enforce the loan against Dee Ltd.

C.  

As the directors have resolved to obtain the loan they have acted in accordance with the company's constitution.

D.  

The loan is ultra virus the directors who will be personally liable for any loss caused to the company, unless their actions are ratified by the shareholders.

Discussion 0
Question # 46

Which of the following is correct?

Options:

A.  

A contract is frustrated when something happens, after it has been entered into, which renders the contract more difficult to perform.

B.  

A contract is frustrated when something happens, after it has been entered into, which renders the contract impossible to perform.

C.  

A contract is frustrated when a party expressly agrees to manufacture and supply goods and then discovers that they will be far more expensive to produce than they thought at the time of the contract.

D.  

A contract is frustrated if it is impossible to perform at the time that it is made.

Discussion 0
Question # 47

Which of the following is the responsibility of the Chairman, according to the UK Corporate Governance Code?

Options:

A.  

Authorizing major investments

B.  

Controlling the workings of the Board

C.  

Operational control

D.  

Carrying out the policies of the Board

Discussion 0
Question # 48

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.

Discussion 0
Question # 49

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

Discussion 0
Question # 50

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

Discussion 0
Question # 51

When preparing financial statements, you are extremely careful not to omit relevant information, mislead readers or misstate facts. This demonstrates the CIMA Code of Ethics fundamental principle of:

Options:

A.  

Professional behavior

B.  

Confidentiality

C.  

Objectivity

D.  

Integrity

Discussion 0
Question # 52

As a member of the audit team of a large company, J has discovered that one of his close friends is in a part of the business which is going to be sold off, and his friend is likely to face redundancy. What should he do?

Options:

A.  

Do nothing: professionally, J is bound to respect the confidentiality of the information he has received

B.  

Tell his friend: he has an obligation to his friendship

C.  

Leak the information: that way he can let his friend know, but the information won't be traced back to J  

D.  

Resign: J can't carry on working at the company whilst he is personally compromised

Discussion 0
Question # 53

Which of the following is correct in relation to damages?

(i) The victim of a breach of contract may claim damages in respect of losses caused by the breach which were within the contemplation of the contract breaker.

(ii) As a general rule damages cannot be claimed for annoyance and inconvenience caused by the breach of contract.

(iii) Where there is a breach of contract, damages are available to the innocent party as of right.

Options:

A.  

(i) only

B.  

(i), (ii) and (iii)

C.  

(ii) only

D.  

(ii) and (iii) only

Discussion 0
Question # 54

Which of the following does not apply to a private company which is about to declare a dividend?

Options:

A.  

There must be profits available for distribution as a dividend.

B.  

The company must have accumulated realized profits.

C.  

The company's net assets must equal the total of called up share capital plus un-distributable reserves.

D.  

The company must take account of accumulated realized losses.

Discussion 0
Question # 55

Which of the following need NOT be submitted in order to register a private company limited by shares?

(i) Articles of association

(ii) The name of the company secretary

(iii) A statement of share capital

Options:

A.  

(i) only

B.  

(i) and (ii) only

C.  

(ii) only

D.  

(ii) and (iii) only

Discussion 0
Question # 56

Who is entitled to sue the directors for a breach of statutory duty?

Options:

A.  

The board.

B.  

Any shareholder.

C.  

The company.

D.  

The holders of the majority of the company's shares.

Discussion 0
Question # 57

Which of the following countries does not have a written constitution?

Options:

A.  

The United Kingdom

B.  

Poland

C.  

Germany

D.  

Italy

Discussion 0
Question # 58

CIMA's report on 'Practical Proposals to Improve Corporate Governance Disclosure' explores a range of ideas Which of the following statements is correct?

Options:

A.  

In focusing on improving corporate governance disclosure the skills, experiences and personalities of the board should explain how the board ensures robust decision-making

B.  

In focusing on improving corporate governance disclosure the board activities should be linked into key aspects of the corporate performance and strategic development to enable users to evaluate the effectiveness of the board

C.  

In focusing on improving corporate governance disclosure the information provided should be standardised to enable shareholders to compare performance with other companies.

D.  

In focusing on improving corporate governance disclosure the board should evaluate its own effectiveness by focusing on how its actions have improved profit.

Discussion 0
Question # 59

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.

Discussion 0
Question # 60

Which of the following is incorrect in relation to a company registered after the Companies Act 2006 was fully in force?

Options:

A.  

The company is to be treated as if it has unlimited objects.

B.  

The company may choose to restrict its objects by including provisions to that effect in its Articles of Association.

C.  

The company will not be able to place any restrictions on its objects clause.

D.  

If the company has restrictions on its objects they may be amended by special resolution.

Discussion 0
Question # 61

Which of the following is incorrect?

(i) All contracts must be in writing.

(ii) A contract to sell land must be in writing.

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

Options:

A.  

(i) only

B.  

(i) and (iii) only

C.  

(ii) and (iii) only

D.  

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

Discussion 0
Question # 62

How can a company help employees make the right decision when faced with a difficult situation?

Options:

A.  

Offer guiding values and principles to underpin decision-making

B.  

Threaten them with disciplinary procedures

C.  

Give them a rule book

D.  

Have a strong rules-based culture

Discussion 0
Question # 63

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)

Discussion 0
Question # 64

Which of the following governs all public sector employees?

Options:

A.  

The Seven Principles of Public Sector Participation

B.  

The Seven Principles of Public Enterprise

C.  

The Seven Principles of Public Life

D.  

The Seven Principles of Public Private Partnership

Discussion 0
Question # 65

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

Discussion 0
Question # 66

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

Discussion 0
Question # 67

Zed plc has appointed Wye and Co (accountants) as auditors of the company. If the audit is carried out negligently which of the following are entitled to claim against the auditors?

Options:

A.  

Zed plc only

B.  

Zed plc and the directors of Zed plc.

C.  

Zed plc, its directors and shareholders.

D.  

Zed plc, its directors and shareholders and any other person who has suffered loss as a result of the negligent audit.    

Discussion 0
Question # 68

One of your colleagues has just been poached by a competitor. You have reason to suspect that he has provided his new employer with sensitive information about your company that could disadvantage your employer. This affects the CIMA Code of Ethics fundamental principle of:

Options:

A.  

Responsibility

B.  

Respect

C.  

Confidentiality

D.  

Cooperation

Discussion 0
Question # 69

Which of the following is an 'interest stakeholder' in an organization?

Options:

A.  

Customer

B.  

Employee

C.  

Government

D.  

Competitor

Discussion 0
Question # 70

Which of the following is INCORRECT?

Options:

A.  

Individual directors cannot contract on behalf of the company unless they are authorized by the board.

B.  

The board is the agent of the company.

C.  

If the company has appointed a managing director, he or she is able to contract on behalf of the company.

D.  

The board is appointed to act as the agent of the shareholders.

Discussion 0
Question # 71

Which of the following requires the approval of 75% of all the company's shareholders who are entitled to vote?

Options:

A.  

A written special resolution

B.  

A special resolution

C.  

A written ordinary resolution

D.  

An ordinary resolution

Discussion 0
Question # 72

Which of the following is NOT normally a stakeholder of an organization?

Options:

A.  

Customer

B.  

CIMA

C.  

Government

D.  

Media

Discussion 0
Question # 73

Which of the following is INCORRECT in relation to directors' duties?

Options:

A.  

Directors owe a duty to promote the success of the company.

B.  

Directors' duties are codified in the UK Corporate Governance Code.

C.  

Directors must act in accordance with the company's constitution.

D.  

Directors' duties are owed to the shareholders as a whole.

Discussion 0
Question # 74

How does CIMA support its members in their continual personal improvement?

Options:

A.  

Through the CIMA Professional Development Framework

B.  

Through the CIMA Code of Ethics

C.  

Through the IFAC Code of Ethics

D.  

Through the CIMA Public Duty Framework

Discussion 0
Question # 75

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

Discussion 0
Question # 76

Anne was induced to enter into a contract with Benny by his negligent misrepresentation. Which of the following is correct?

(i) Anne has a remedy against Benny in the tort of negligence.

(ii) Anne has a remedy against Benny under the Misrepresentation Act 1967.

(iii) Anne has a remedy in the tort of deceit. 

Options:

A.  

(i) only

B.  

(i) and (ii) only

C.  

(ii) and (iii) only

D.  

(i), (ii) and (iii)

Discussion 0
Question # 77

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

Discussion 0
Question # 78

Which of the following resolutions of a private company limited by shares CANNOT be effected by using the written resolution procedure?

(i) An ordinary resolution to dismiss a director.

(ii) A special resolution to misapply statutory pre-emption rights in relation to a new issue of shares.

(iii) An alteration of the articles of association.

Options:

A.  

(i) only

B.  

(i) and (ii) only

C.  

(ii) only

D.  

(iii) only

Discussion 0
Question # 79

The code of ethics of the professional body to which M belongs is very clear about the importance of non-discrimination on the grounds of race, gender, sexual orientation and religion. But, because of her particular religious convictions, M believes that homosexuality is wrong. This is an example of a tension between:

Options:

A.  

Corporate and professional values

B.  

Personal and professional values

C.  

Societal and professional values

D.  

Personal and corporate values

Discussion 0
Question # 80

Which of the following is NOT one of the fundamental principles of CIMA's Code of Ethics?

Options:

A.  

Integrity

B.  

Respect

C.  

Objectivity

D.  

Confidentiality

Discussion 0
Question # 81

B Ltd has an issued share capital of 1,000 ordinary £1 shares. The board of B Ltd has resolved to alter the company's articles of association. Which of the following is correct? 

(i) The articles may be altered by board resolution.

(ii) The articles may be altered by a written resolution of the shareholders.  

(iii) The articles may be altered by a special resolution of the directors.

Options:

A.  

(i) only

B.  

(ii) only

C.  

(iii) only

D.  

(ii) and (iii) only

Discussion 0
Question # 82

Which of the following identifies criminal as opposed to civil proceedings? 

Options:

A.  

The case was heard by the Supreme Court.

B.  

The case was proved beyond reasonable doubt.

C.  

The case was brought by a claimant.

D.  

The case resulted in an award of damages.

Discussion 0
Question # 83

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

Discussion 0
Question # 84

Which of the following statements is incorrect in relation to the revised derivative action under section 260 of the Companies Act 2006? 

(i) The action may be brought by a single shareholder.

(ii) The action may be brought in relation to an act of negligence by the directors.

(iii) The action cannot be brought in respect of a proposed act by the directors.

Options:

A.  

(i) only

B.  

(ii) only

C.  

(iii) only

D.  

(ii) and (iii) only

Discussion 0
Question # 85

C sued D in the tort of negligence in order to recover compensation for injuries suffered as a result of D breaking his duty of care to

C.  

For what injuries can C claim compensation?

Options:

A.  

All reasonably foreseeable injuries caused by

D.  

B.  

All injuries caused by

D.  

C.  

All injuries which were a direct consequence of D's actions.

D.  

All physical but not psychiatric injuries caused by

D.  

Discussion 0
Question # 86

In relation to offers, which of the following statements is correct?

Options:

A.  

An offer to sell goods can be made to the whole world

B.  

Statements made in early negotiations cannot amount to offers.

C.  

Goods displayed on a supermarket shelf are deemed to be offers to sell

D.  

An item displayed in a shop window with a price tag is an offer to sell

Discussion 0
Question # 87

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

Discussion 0
Question # 88

Company X has a good CSR record, and ensures that its employees enjoy safe working conditions, reasonable work hours and are paid fairly Company Y is known to employ child laborers in the countries in which it operates, where the practice is not illegal Company X has entered into a point business partnership with Company Y to carry out a specific project. In order to comply with the OECD Guidelines, what best describes Company X's responsibilities?

Options:

A.  

Company X would only have a duty to try to stop Company Y from employing child labour if it was illegal in the countries concerned

B.  

Company X does not have any responsibilities, as its own record is good and it is not employing any children

C.  

It should ensure that it does not inadvertently use any of Company Y^s child workers in carrying out its own work on the project

D.  

It should attempt to persuade Company Y of its ethical responsibilities to stop employing children.

Discussion 0
Question # 89

Which ONE of the following statements is correct?

Options:

A.  

Just because everyone bends the rules in practice does not mean they should do so

B.  

Everyone bends the rules so it is good practice to do so for the benefit of clients

C.  

Just because there are rules does not mean they should be adhered to by everyone

D.  

Bending the rules is not the same as breaking them

Discussion 0
Question # 90

A business that behaves ethically may experience which of the following benefits; Select ALL that apply.

Options:

A.  

Little or no legal action

B.  

Improved reputation

C.  

Improved staff morale

D.  

Competitive advantage

E.  

Increased market penetration

F.  

Higher productivity levels

G.  

Increased profits

Discussion 0
Question # 91

A company is considering having an external audit. It knows the benefits of doing so, though is unsure of the disadvantages.

Which of the following are reasons why the company might not want to have an external audit?

Select ALL that apply.

Options:

A.  

It will take a long time.

B.  

It will cost a lot of money.

C.  

There is a risk of confidential information leaking.

D.  

Reputation with stakeholders will decrease.

E.  

Interests of shareholders and directors may become unaligned if they aren't already.

F.  

Shareholders may become concerned about the state of the company.

Discussion 0
Question # 92

Y is completing an internal audit work on the system to approve suppliers to JKL Company. Which of the following would NOT promote a sustainable approach to the company's relationship with it\suppliers?

Options:

A.  

Each supplier must comply with JKL's policy on limiting non-recyclable packaging to 10% of total packaging per contract

B.  

Haulage firms must demonstrate that they have a policy to reduce emissions from their fleet

C.  

Each year approval as a supplier to the company will only be granted if the prices paid to the supplier are reduced by 1%

D.  

Preference will be given to local suppliers over those located at a greater distance from the company

Discussion 0
Question # 93

N is a CIMA qualified accountant working within a complex and evolving organisation A new HR manager. Q, has been employed and has reviewed the salaries of the accounting team in order to reduce the expense to the company.

Q suggests that N's position could be outsourced to an accounting servicing company to save money. This outsourcing team does not employ professionally qualified accountants

N's finance director emphatically disagrees with Q's suggestion

Which THREE of the following are justifications for retaining N's services?

As a CIMA qualified accountant N

Options:

A.  

takes personal responsibility for ensuring that he is professionally competent to undertake work for the company

B.  

takes personal responsibility for ensuring that the information he provides is unbiased and unaffected by conflicts of interest

C.  

takes personal responsibility for ensuring that he is independent in his relationship with his employer.

D.  

takes personal responsibility for ensuring that he is straightforward and honest in his business dealings

E.  

takes personal responsibility for ensuring that his behavior complies only with that of his professional body and therefore the company can have confidence in his work and complain to his professional body if they are unhappy

F.  

takes personal responsibility for ensuring the accuracy and validity of the judgments of his directors in assessing the risk appetite of the company.

Discussion 0
Question # 94

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

Options:

A.  

The establishment of a risk committee

B.  

The separation of the roles of Chairman and Chief Executive

C.  

The identification of an independent director as primary shareholder contact

D.  

The appointment of independent non-executive directors to the Board

Discussion 0
Question # 95

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)

Discussion 0
Question # 96

Which of the following is correct in relation to corporate governance in the UK?

(i) If a listed public company in the UK fails to comply with the UK Corporate Governance Code, the company and the board may be prosecuted by the Financial Services Authority.

(ii) The duties of directors are codified in the Companies Act 2006 and breaches are enforceable by the company.

(iii) The ability of the majority of shareholders to dismiss a director for any reason whatsoever is the main sanction provided by the UK Corporate Governance Code.

Options:

A.  

(i) only

B.  

(ii) only

C.  

(i) and (ii) only

D.  

(ii) and (iii) only

Discussion 0
Question # 97

Terry and Taylor are music producers in the UK who have decided to go into business together. They set up their partnership as an LLP and call itjammin' Records. Unfortunately their company quickly fails due to having

large debts.

Who is liable for these debts?

Options:

A.  

Jammin' Records

B.  

Terry

C.  

Taylor

D.  

Terry and Taylor

E.  

Terry, Taylor and Jammin' Records

F.  

No one

Discussion 0
Question # 98

Avoiding any action that discredits the profession relates to which CIMA Code of Ethics fundamental principle?

Options:

A.  

Integrity

B.  

Objectivity

C.  

Professional competence and due care

D.  

Professional behavior

Discussion 0
Question # 99

How might an organization exercise ethical control over its staff? Select ALL that apply.

Options:

A.  

Ensure that hired employees have a strong set of moral values and principles that they take into account when making decisions.

B.  

Ensure than an organizational culture is developed and adhered to.

C.  

Ensure that the company has its own ethical code that is communicated and followed.

D.  

Ensure that all employees adhere to a rules-based approach.

E.  

Ensure that all employees adhere to a conceptual framework.

Discussion 0
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