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CIMA BA4 Fundamentals of Ethics - Corporate Governance and Business Law Exam Practice Test

Demo: 99 questions
Total 661 questions

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

Question 1

Which parties of a company form the agent/principal relationship?

Options:

A.

Directors and shareholders

B.

Directors and the business

C.

Directors and the board

D.

Shareholders and the board

E.

Shareholders and the business

F.

The board and the business

Question 2

Which of the following are primary sources of Shari'ah law?

(i) The Sunnah

(ii) The Qur'an

(iii) Rules agreed unanimously by the disciples of Mohammad

Options:

A.

(i) only

B.

(i) and (iii) only

C.

(ii) and (iii) only

D.

(i), (ii) and (iii)

Question 3

Which of the following statements is correct in relation to private and public companies limited by shares?

Options:

A.

A private and public company are required to hold an AGM

B.

A public company cannot commence trading until it has satisfied minimum share capital requirements

C.

A public company is required to have at least one director

D.

A private company must have a qualified company secretary

Question 4

According to CIMA, what is accountability?

Options:

A.

Being responsible to someone and for something or action

B.

Being able to explain the actions that one has taken

C.

An important aspect of the profession and of leadership in the wider business environment

D.

All of the above

Question 5

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 6

Which of the following statements refer to the Sarbanes-Oxley Act?

Options:

A.

Known as Sarbox or SOX

B.

Rules-based approach

C.

Only applies to the US

D.

Established in 1992

E.

Adherence is not compulsory

Question 7

Which of the following will NOT as a general rule amount to consideration?

Options:

A.

A promise to carry out an existing contract.

B.

A promise to pay the amount due at an early date.

C.

A promise to do more than was originally agreed.

D.

A promise to do an act in return for payment.

Question 8

The holders of a certain minimum percentage of a company's issued share capital are entitled to require the company to circulate a written statement to those entitled to receive notice of the next annual general meeting. What is that minimum percentage?

Options:

A.

5%.

B.

10%.

C.

15%.

D.

20%.

Question 9

You work for a pharmaceutical company and have discovered a series of substantial and unpublicized gifts to specific university departments. You investigate further and find that all of the university departments published research into your company's products within a year of receiving the gift. Every piece of research is favorable to your company and none identifies any financial link with your organization. Is this an ethical issue and why?

Options:

A.

Yes - you are acting unethically by investigating your own company

B.

Yes - the universities should at least state that they have received a large donation from a company whose products are involved in research trials

C.

No - companies regularly fund university research projects and this is not an ethical issue

D.

No - the donations are a gift and you can be sure that they are therefore not linked with the research

Question 10

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.

Question 11

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 12

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.

Question 13

Matty dreams of owning his own business but can't be bothered to follow the steps involved in setting one up.

What should he do?

Options:

A.

Purchase an off the shelf company.

B.

Set one up anyway but only complete the most important steps.

C.

Walk away from his dream - the only way he can own his own business is by following the steps involved in setting one up.

D.

Become a sole trader.

Question 14

Exe Ltd includes the following provisions in its Articles of Association. If Exe Ltd acted in breach of these clauses, identify which would not be enforceable against the company as a breach of contract.

Options:

A.

Shareholders shall be paid dividends in cash.

B.

All shareholders are entitled to attend and vote at general meetings of the company.

C.

Tom (a shareholder) shall be the company's managing director for life.

D.

Shareholders wishing to sell their shares shall offer them to the company which will purchase them at a fair price as determined by the auditors.

Question 15

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

Options:

A.

An LLP, like a company limited by shares, is a separate legal entity.

B.

Outsiders contract with the LLP and not with the partners, just as outsiders would contract with the company and not the directors or shareholders of the company.

C.

An LLP must have “designated members” which are the LLP equivalent of the board of directors of a private company.

D.

In return for Limited liability, an LLP, like a company, is required to submit an annual return.

Question 16

In the event of a breach of contract, what is the purpose of damages?

(i) To punish the contract breaker.

(ii) To compensate the innocent party.

(iii) To ensure that the innocent party makes a profit.

Options:

A.

(i) only

B.

(ii) only

C.

(i) and (iii) only

D.

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

Question 17

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 18

Which of the following describes a principles-based approach to ethical standards in an organisation?

The objective behind the approach is to:

Options:

A.

detect ethical non-compliance It motivates through fear and its standards are implicit

B.

prevent ethical non-compliance It motivates through values and its standards are explicit

C.

detect ethical non-compliance It focuses on the development of discipline and obedience and its standards are explicit

D.

prevent ethical non-compliance It focuses on the development and application of individual judgment and standards are implicit

Question 19

Which of the following would be paid last by a company which had been placed  in insolvent liquidation?

Options:

A.

Outstanding loan capital and interest due to the holder of an unsecured debenture.

B.

Share capital invested by the shareholders.

C.

Fees owed to the directors

D.

Unpaid employees' wages

Question 20

A company's board of directors is faced with an ethical dilemma. The directors decide to adopt a utilitarian approach to coming up with a solution Therefore, they will take action based on which of the following approaches?

Options:

A.

They will do whatever results in the greatest amount of good for the greatest number of people affected by the action

B.

They will base their decision on previous consequences and results from past actions in similar situations

C.

They will ensure that the result of their action will maximise profits for the company shareholders

D.

They will focus on the intrinsic goodness or value of their action

Question 21

SuperSole eventually decides to outsource its internal audit.

Which of the following are benefits it might experience from doing so?

Select ALL that apply.

Options:

A.

Flexibility to increase or reduce in size

B.

Readily available expertise

C.

Lower costs

D.

More independent auditing process

E.

Less time taken

F.

Less risk of confidential information leaking

Question 22

Which of the following statements is correct? 

(i) To succeed in the tort of negligence, a claimant must show that the defendant owed him a duty of care.

(ii) To succeed in the tort of negligence, the defendant must have broken a duty to take care.

(iii) To succeed in the tort of negligence, it is necessary to show that the claimant suffered loss or harm as a result of the defendant's breach of duty.

Options:

A.

(i) and (ii) only  

B.

(ii) and (iii) only

C.

(i) and (iii) only

D.

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

Question 23

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

Question 24

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

Question 25

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 26

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 27

Which of the following are guilty of skimming? Select ALL that apply.

Options:

A.

Barry - An accountant for a large law firm who sometimes redirects incoming company funds to his own private account.

B.

Gina - A senior manager at an investment firm who often redirects company funds to a fake account that she's created.

C.

Simon - An owner of a medium-sized business who sometimes understates his company's profits by a small amount in order to pay less tax.

D.

Phil - An owner of a large business who often understates his company's profits by huge amounts in order to pay significantly less tax.

Question 28

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

Options:

A.

Customer

B.

Employee

C.

Government

D.

Competitor

Question 29

The primary role of internal audit within an organisation is to:

Options:

A.

serve as the investigative arm of the board

B.

serve as an independent, objective assurance and consulting activity that adds value to operations

C.

carry out assignments to assist in the attainment of more efficient operations

D.

assist the external auditor in order to reduce external audit fees

Question 30

Which ONE of the following was NOT a recommendation of the Cadbury Committee Report 1992?

Options:

A.

Independent non-executive directors should be appointed to the boards of listed companies

B.

An audit committee consisting of a majority of non-executive directors should be established to oversee the company's finances

C.

Executive directors should not be offered service contracts for more than five years unless approved by the shareholders in a general meeting

D.

The remuneration packages of executive directors should be agreed by a remuneration committee wholly or mainly comprising non-executive directors

Question 31

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

 

"A professional accountant should act diligently and in accordance with applicable technical and professional standards"

Options:

A.

Integrity

B.

Objectivity

C.

Professional competence and due care

D.

Professional behavior

Question 32

Which of the following would comply with best practice in accordance with the UK Corporate Governance Code in relation to Board conduct?

Options:

A.

The Board of SSS a public company limited by shares, consists of four executive directors and five non-executive directors. The Board is headed by Mr I who is both CEO and Chairman The non-executive directors do challenge the strategic direction of the company and their opinions are considered and acted upon

B.

The Board of TSD, a public company limited by shares, consists of four executive directors and three non-executive directors. The Chairman, Mr C is the brother of the CEO Miss K The board meets ten times a year The board meetings are dominated by the siblings but the final decision is generally taken by the CEO

C.

The Board of END, a public company limited by shares, consists of four executive and five non-executive directors. The Board is headed by its Chairman, Miss A and the CEO is Miss B. The board has developed clear divisions of responsibility and consequently only meets in full once a year to approve the financial statements

D.

The Board of DDE, a public company limited by shares, consists of four executive and five non-executive directors The Board is headed by its Chairman Mr A and the CEO is Mr H. The board meets ten times a year. The non-executive directors do challenge the strategic direction of the company and their opinions are considered and acted upon

Question 33

Jo is employed as management accountant of a large retailer. Jo has been asked to call a supplier and promise settlement of their account 'next week'. Jo is aware that her employer will definitely not have sufficient funds available to make the payment. 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

Question 34

Anne, Bill, Chris and Diane are the only directors of ABCD Ltd. Bill is the Chairman of the board and has a casting vote. A board meeting was called to consider a proposal to enter into a contract with EFG Ltd. Which of the following is INCORRECT?

Options:

A.

The board has validly resolved to contract with EFG Ltd if any three of the directors vote in favor

B.

As Bill is the Chairman, the board cannot validly resolve to contract with EFG Ltd without Bill's consent

C.

The proposal is lost if only two of Anne, Chris and Diane vote in favor

D.

If Bill and one other director votes in favor, Bill can use his casting vote to carry the proposal

Question 35

According to the CIMA Code of Ethics, a professional accountant should not be associated with reports, returns, communications or other information where they believe that the information:

Options:

A.

Contains a materially false or misleading statement

B.

Contains statements or information furnished recklessly

C.

Omits or obscures information required to be included where such omission or obscurity would be misleading

D.

All of the above

Question 36

You work for a clothing retailer. Which of the following corporate issues is NOT related to ethics or social responsibility?

Options:

A.

Sweatshop labor

B.

Whether your clothes appeal to your target markets

C.

Knowingly selling fake versions of this season's high profile designer clothes

D.

The use of natural or organic material in your clothes

Question 37

C has just set up her own practice and things are going well. She is also a single parent, so is reliant upon her income to pay her bills and support her family.  One of her uncles recommends a new client to her. This client wants C to provide an accountant's report in support of his mortgage application. He insists there is no need for her to see the full details of his income.  He suggests that C's uncle would be most displeased if she did not help him, and that she may potentially lose other potential clients.

This is a tension between C's:

Options:

A.

Personal and Professional values

B.

Corporate and Professional values

C.

Societal and Professional values

D.

Personal and Societal values

Question 38

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 39

Which of the following statements is incorrect in relation to written resolutions?

Options:

A.

Written resolutions may only be passed by private companies.

B.

In most cases, a written resolution may be used instead of holding a general meeting.

C.

A written resolution can be used in place of an ordinary or special resolution.

D.

A written resolution is only valid when it has been signed by all those who were entitled to attend and vote at company meetings.

Question 40

A business has been registered under the name ABC Ltd. Which of the following types of business organization must this be?

Options:

A.

A partnership.

B.

A public limited company.

C.

A private limited company.

D.

Either a private limited company or a public limited company.

Question 41

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 42

Which of the following statements is correct regarding dismissal?

Options:

A.

An employee who has been unfairly dismissed may claim compensation

B.

An employee who has been dismissed because of membership of a trade union has been wrongfully dismissed

C.

An employee who has been wrongfully dismissed may claim damages and reinstatement

D.

An employee who is dismissed without the correct notice has been unfairly dismissed

Question 43

Members of the accountancy profession are expected to demonstrate certain personal qualities and virtues such as 'respect'

Which of the following is an example of the demonstration of the virtue of respect?

Options:

A.

An accountant politely turns down a request to help produce a business plan for a friend who wants to start up a new company which will be a rival firm to their current employer.

B.

When deciding whether or not to move production of a particular product from one site to another, employers listen to the views of a wide range of employees, including those on the factory floor

C.

For several weeks before going on annual vacation, an accountant doubles her normal working hours to ensure that she meets the deadline for the preparation of a set of management accounts.

D.

An accountant agrees to accept calculations provided by his manager relating to a new project, despite having misgivings as to their accuracy. The manager has several years more experience of such projects than him

Question 44

In relation to contractual performance, which of the following is incorrect?

Options:

A.

A person who has substantially performed the contract is entitled to the contract price less so much as is necessary to repair the defects.

B.

If one party is prevented from performing the contract by the other party, he or she may claim compensation on a "quantum meruit" basis.

C.

A person who has carried out part of the contract is always entitled to a part of the contract price.

D.

A person who has carried out all of his contractual obligations is entitled to all of the contract price.

Question 45

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 46

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 47

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.

Question 48

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

Options:

A.

Customer

B.

CIMA

C.

Government

D.

Media

Question 49

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

Options:

A.

Customer

B.

Media

C.

Employee

D.

Government

Question 50

Which of the following is incorrect in relation to the remedy of liquidated damages?

Options:

A.

A liquidated damages clause will be void if it amounts to a penalty clause.

B.

A liquidated damages clause will apply where it is a genuine attempt to pre-estimate the loss caused by a breach of contract.

C.

If a liquidated damages clause is held to be void, the innocent party cannot claim on a quantum meruit basis.

D.

If a liquidated damages clause is found to be reasonable, the amount specified must be claimed, even if it is less than the actual loss caused by the breach.

Question 51

Which ONE of the following most accurately describes corporate governance?

Options:

A.

It is a code of best practice which instructs directors of listed companies how to maximise profits for the benefit of shareholders

B.

It is a body of law, morals and ethics designed to ensure that the shareholders of listed companies are treated fairly by the board

C.

It is the body of rules and ethics primarily concerned with the effective control, business efficacy and accountability of the management of public-listed companies for the benefit of stakeholders

D.

It is the set of rules contained in the constitution of listed companies which governs the relationship between the board and the shareholders

Question 52

Which of the following accountants have breached CIMA's ethical principle of professional behaviour: Select ALL that apply.

Options:

A.

Kara - Recently got a new job as a management account by lying about the number of accountancy qualifications she has.

B.

Mike - Posted a series of disparaging tweets about a rival external auditing firm.

C.

Tim - Told his friends at the pub how much money one of his clients had made in the last financial quarter.

D.

Sara - Accepted an offer of a free week's stay at a hotel she was due to audit.

E.

Dave - Most recent set of financial reports were found to contain inaccuracies because he didn't check them when he was finished.

Question 53

You work for an oil company and your company is negotiating a contract with the government of another country. During the course of the negotiations, your managing director has run up a very substantial expenses bill for entertaining personnel from the country's government. This scenario suggests which TWO of the following ethical issues?

Options:

A.

Harassment

B.

Data protection

C.

Gifts and hospitality

D.

Bribery and corruption

Question 54

Miss K is a newly qualified accountant working in a highly respected local accountancy firm headed by Mr R, who is a pillar of the community.  One night, Miss K is at an out of town bar with friends, when she spots Mr R with Mrs E, a client of the firm. It is obvious they are having a secret affair. Is this an ethical issue?

Options:

A.

Yes, Mr R is involved in a potential conflict of interest by having an affair with a client

B.

No, what Mr R and Mrs E do in their own personal time is nobody else's business

C.

Yes, as professional accountants, Miss K and Mr R should not be drinking alcohol

D.

No, Miss K knows nothing about Mr R's private life, and may be mistaken about the affair

Question 55

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.

Question 56

B has been employed by Wye Ltd for 10 years. His contract of employment states that, if either Wye Ltd or B wishes to terminate the contract, each party must give the statutory minimum period of notice.

 

Which of the following statements is correct?

Options:

A.

Both B and Wye Ltd are entitled to 10 weeks' notice.

B.

B is entitled to 10 weeks' notice but Wye Ltd is entitled to only 1 week's notice.

C.

B is entitled to 1 month's notice and Wye Ltd is entitled to 10 weeks' notice.

D.

Both B and Wye Ltd are entitled to 1 week's notice.

Question 57

Listed companies must comply with the Corporate Governance Code If they do not, which of the following penalties will apply?

Options:

A.

No formal penalty

B.

Penalty under the Corporate Governance Code

C.

Criminal penalty

D.

Civil penalty

Question 58

Which ONE of the following might NOT be the consequence of unethical behavior by a professional body?

Options:

A.

Loss of reputation

B.

Loss of Chartered Institute status

C.

Undermined credibility

D.

Systematic widespread fraud

Question 59

Lotl is a well-known supermarket chain that has recently come under fire for not encouraging diversity within the organisation.

Because of this, it has been making efforts to make the business more diverse.

Which of the following are ways Lotl might do this?

Select ALL that apply.

Options:

A.

Encourage people from all backgrounds and cultures to apply for vacancies.

B.

Ensure that it offers equal opportunities to both able-bodied and disabled people.

C.

Ensure that the company has an even split of male and female employees at all levels.

D.

Import and sell food from all over the world.

E.

Ensure that their in-store signs are written in at least five different languages.

Question 60

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

Question 61

Which of the following CANNOT be carried out by a simple contract? 

Options:

A.

A contract for the sale of a motor car.

B.

A contract of employment.

C.

A contract for the sale of land.

D.

A contract for the provision of services.

Question 62

Which of the following may cause a director to be disqualified from acting as a director under the Company Directors Disqualification Act 1986? 

(i) Persistent default by the director in complying with the filing requirements under the Companies Acts.

(ii) Causing a company to continue to trade at a time when the director ought to know that insolvency is inevitable.

(iii) Carrying on business with intent to defraud creditors.

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) only

D.

(i), (ii) and (iii)

Question 63

Which of the following statements is incorrect?

Options:

A.

A term will be implied into a contract wherever a court considers that it would be reasonable to do so.

B.

A term may be implied into a contract on the basis of previous dealings between the parties.

C.

A term may be implied into a contract by statute.

D.

A term may be implied into a contract on the basis of a trade custom.

Question 64

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

Question 65

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 Managing Director

B.

The appointment of competent accountants in the finance function

C.

The establishment of an audit committee

D.

The reporting to shareholders of risks and internal controls

Question 66

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)

Question 67

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

Question 68

Which of the following is correct?

Options:

A.

An ordinary resolution may be passed by 50% plus 1 of the shareholders who are present and voting in favor of the proposal either in person or by proxy.

B.

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

C.

An ordinary resolution may only be passed by 51% of all the company's shareholders voting in favor of the proposal either in person or by proxy.

D.

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

Question 69

Which of the following statements is correct in relation to the "maintenance of capital" principle?

Options:

A.

A company cannot use its share capital which must be set aside as a fund for creditors.

B.

In general, a company can use its share capital for any reason whatsoever, as long as it ensures that there is sufficient remaining to meet the company's debts.

C.

In general, a company is not able to freely return its share capital to its members.

D.

A company cannot use its share capital, and may only return it to its members with the permission of the court.

Question 70

Which THREE of the following are examples of a fraudulent action against a company?

Options:

A.

The omission of an invoice from the purchase ledger due to it being mis-filed in the petty cash invoices.

B.

The theft of cash from the cash till by an employee.

C.

The loss on the sales of a car due to its accumulated depreciation on the day of sale being too low as a consequence of a depreciation policy of 25%

D.

The selection of an incorrect accounting policy by the management team whereby sales of goods are recognised on the day that the order is placed despite the company policy of a three day cooling off period

E.

The sending of a bogus invoice to another company

F.

The misallocation of a transaction against the incorrect account code in the general ledger

Question 71

Which of the following is correct in relation to the UK Corporate Governance Code?

(i) The Code gives rise to a disclosure requirement

(ii) Breach of the Code gives rise to criminal penalties

(iii) Breach of the Code gives rise to civil liability

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) and (iii) only

D.

(iii) only

Question 72

Which of the following statements is correct?

Options:

A.

The Articles of Association of a private company limited by shares may be altered by ordinary resolution.

B.

The Articles of Association of a private company limited by shares may be altered by a written ordinary resolution.

C.

The Articles of Association of a private company limited by shares may be altered by a special resolution.

D.

The Articles of Association of a private company limited by shares may be altered by a board resolution.

Question 73

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 74

Which of the following are situations involving familiarity threats? Select ALL that apply.

Options:

A.

Steve - A business manager who hires his 18-year-old son for a managerial level job.

B.

Kay - A department manager who doesn 't reprimand one of her team members for doing a job wrong because they are friends.

C.

Angela - Has worked on the production line for the past seven years.

D.

Steve - Conducts monthly reviews of his team's performance (the team hasn't changed for the past five years).

E.

Bryan - Has worked as an accountant for the past ten years. He always makes sure he is up-to-date with changes in the industry.

Question 75

Which of the following is not valid consideration?

Options:

A.

Payment to be made upon delivery of the goods.

B.

Payment handed over at the time of the contract.

C.

Past consideration.

D.

A promise to make an early repayment of a debt.

Question 76

If a professional accountant believes that he or she will not be able to comply with all the legal frameworks, regulations and standards for business in a particular circumstance, what does he or she have a duty to do? Please select TWO of the following:

Options:

A.

Obey the law

B.

Disregard conflicting standards

C.

Act in the interests of his or her employer

D.

Raise his or her concerns by speaking up

Question 77

Your boss knows that you will always strive to deliver a project on time and on budget. Which TWO of the personal qualities identified by the CIMA Code of Ethics does this demonstrate?

Options:

A.

Reliability

B.

Courtesy

C.

Timeliness

D.

Respect

Question 78

Which of the following need to be proved in order for there to be a misrepresentation? Select ALL that apply.

Options:

A.

A false representation of the facts.

B.

Made by one party to the other before any contract is made.

C.

An inducement to mislead one party into entering the contract.

D.

Distortion of facts.

E.

More than two parties were involved.

F.

There was at least one witness when the misrepresentation occurred.

Question 79

Which of the following statements is incorrect in relation to a public company limited by shares?

Options:

A.

The company must have at least one director.

B.

The company must have at least one shareholder.

C.

The company must have issued at least £50,000 of shares.

D.

The company must ensure that its company secretary is properly qualified whereas a private company need not have a company secretary.

Question 80

Zed plc contracted to build an apartment block for Exe Ltd. Which of the following would provide Zed with a valid excuse not to proceed with the contract?

(i) A key employee who was to manage the project has resigned.

(ii) The price of the materials to be used by Zed plc have increased to such an extent that the building can only be completed at a loss to Zed plc.

(iii) Planning permission has been refused.  

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(i) and (iii) only

D.

(iii) only

Question 81

In the UK, the body responsible for promoting confidence in corporate reporting and governance 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 82

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.    

Question 83

As stated in the CIMA Code of Ethics, the two key attributes of independence used in connection with the assurance engagement are:

Options:

A.

Independence of belief and in appearance

B.

Independence of mind and in belief

C.

Independence of mind and in appearance

D.

Independence of mind and in diligence

Question 84

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

Question 85

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 86

Which of the following is NOT a correct distinction between shares and debentures?

Options:

A.

If a company is in insolvent liquidation debenture holders are paid in priority to shareholders.

B.

Unlike dividends, debenture interest must be paid, even if a company is trading at a loss.

C.

Both share and debenture holders are members of the company and entitled to vote.

D.

Debenture interest is deductible from gross profit in order to determine taxable profit. Dividends are profits.

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

Which ONE of the following is not included in the CIMA Code of Ethics list of client issues that could threaten compliance with the fundamental principles?

Options:

A.

Client involvement in illegal activities (such as money laundering)

B.

Dishonesty

C.

Questionable financial reporting practices

D.

A client having an objectionable personality

Question 89

Which of the following are the TWO main differences between the structure and function of company boards in Germany and the UK?

Options:

A.

In Germany, boards often have a two-tier structure, wheras in the UK they are normally unitary.

B.

In Germany, employees are usually represented on the board, whereas in the UK they are not.

C.

In Germany, the board reports on corporate governance issues, whereas in the UK it does not.

D.

In Germany, boards are responsible for both management and governance, whereas in the UK they are responsible only for one or the other.

Question 90

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

Question 91

You work for a chain of restaurants. The head chef of your flagship restaurant raises questions about the inclusion of highly endangered species of fish on the restaurant's menu. Is it an ethical issue and why?

Options:

A.

Yes - because it could deny customers the choice of certain types of fish

B.

Yes - because it relates to the environmental issue of overfishing and depletion of fish stocks

C.

No - because it will cost the restaurant money to source alternative produce

D.

No - because business cannot be accountable for environmental issues

Question 92

Cameron runs his own chain of ice cream shops. However, his business recently accrued a lot of debt due to a sharp rise in the price of milk, and he is now forced to shut the whole operation down.

Who is liable for the debt?

Options:

A.

Cameron

B.

Cameron's business

C.

Cameron's employees

D.

Cameron and his employees

E.

No one

Question 93

Michael is conducting a social and environmental audit on a chemicals factory. Which of the following should he review?

Options:

A.

Emissions levels and the procedures the factory has in place to manage them.

B.

Wastage levels and the procedures the company has in place to manage them.

C.

Recycling targets and procedures.

D.

Adherence to health and safety procedures.

E.

Operational efficiency.

F.

Suitability of the project plan, and project management process.

G.

Adherence to rules and procedures.

Question 94

Ethical dilemmas can arise where there is tension between:

Options:

A.

Societal and professional values

B.

Professional and corporate values

C.

Corporate and personal values

D.

All of the above

Question 95

Which of the following is correct if a promoter orders goods or services on behalf of a company limited by shares which is not yet registered?

(i) The promoter is personally liable for the order.

(ii) The promoter and the company are jointly liable for the order.

(iii) If the company ratifies the order after its registration, the company is liable and the promoter's liability for the order ceases. 

Options:

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(i) and (iii) only

Question 96

Which of the following are fundamental characteristics of useful information? Select ALL that apply.

Options:

A.

Relevance

B.

Faithful representation

C.

Understandability

D.

Verifiability

E.

Comparability

F.

Timeliness

Question 97

Steve manages the accounts for a large software company. He's good at his job, though it has recently emerged that he is going through quite a messy divorce.

Why should the company's senior management be most concerned?

Options:

A.

Because Steve could be motivated to steal from the company.

B.

Because Steve might not work as hard.

C.

Because there is a risk Steve could get aggressive with other employees within the company.

D.

Because Steve might start to be untruthful and not disclose information that he should.

Question 98

According to the UK Corporate Governance Code, who is responsible for setting the company's values and standards?

Options:

A.

The Chairman

B.

The Board

C.

The Managing Director

D.

The shareholders

Question 99

Which of the following statements is correct?

(i) As a general rule the acceptance of an offer is only effective when it has been communicated to the offeror.

(ii) A person must know of an offer before he or she can accept it.

(iii) A request for further information has the effect of destroying the original offer.

Options:

A.

(i) and (ii).

B.

(ii) and (iii).

C.

(i) and (iii).

D.

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

Demo: 99 questions
Total 661 questions