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  • Exam Name: Fundamentals of Ethics, Corporate Governance and Business Law
  • Last Update: Jun 15, 2024
  • Questions and Answers: 661
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BA4 Practice Exam Questions with Answers Fundamentals of Ethics, Corporate Governance and Business Law Certification

Question # 6

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

A.

Professional conscience and due care

B.

Professional consideration and due care

C.

Professional cooperation and due care

D.

Professional competence and due care

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Question # 7

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

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

Full Access
Question # 8

Which ONE of the following is NOT a personal consequence of unethical behavior?

A.

Loss of reputation

B.

Loss of earnings

C.

Loss of job

D.

Loss of life

Full Access
Question # 9

Which of the following is correct in relation to loans to directors of a public company?

A.

A public company which provides a loan to one of its directors commits a criminal offence unless the loan is approved by the shareholders

B.

If a public company pays the debts of one of its directors on terms that the payment must be repaid by the director, the shareholders must approve the payment

C.

A public company cannot make loans to its directors

D.

A public company is not subject to any restrictions when making a loan to one of its directors

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Question # 10

A, B and C carry on business in a general partnership. A has proved an unsatisfactory partner in that he is continually absent from work for no justifiable reason. B and C wish to expel A from the partnership. Which of the following is CORRECT?

A.

As they constitute the majority B and C may vote to expel A.

B.

A can only be expelled if the partnership agreement of A, B and C contains an express expulsion clause.

C.

B and C may vote to expel A as the Partnership Act 1890 contains an express provision enabling the majority to expel a partner.

D.

It is always unlawful to expel a partner. If B and C wish to carry on business without A the business will have to be dissolved and re-commenced by B and C.

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Question # 11

Which ONE of the following most accurately describes corporate governance?

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

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Question # 12

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

A.

It covers every possible dilemma that an accountant might face

B.

It is based on values rather than compliance

C.

It is a financial requirement of accountants

D.

It establishes the fundamental principles of professional ethics for professional accountants

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Question # 13

Which of the following terms can be defined as follows?

 

"...the way an organization manages its relationships"

A.

Ethics

B.

Social responsibility

C.

Corporate governance

D.

Professional behavior

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Question # 14

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

A.

To ensure that clients or employers receive a competent professional service

B.

To avoid accusations of negligence

C.

To ensure successful career development

D.

To earn the respect of their colleagues

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Question # 15

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

A.

Whether advertisers are given more favorable editorial coverage than other companies that do not advertise in your company's magazines

B.

Whether the paper used for the magazines comes from sustainably managed forests or can be recycled

C.

Whether your company's magazines are more popular than competitor titles  

D.

Whether sales targets are so high that they implicitly encourage salespeople to ignore corporate values and principles

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Question # 16

Mr A sent an email to Mr B offering to sell him some goods for $1.000 Mr B replied by email stating I'll buy the goods Payment will be made over the next 4 weeks." Mr B has now discovered that Mr A has sold the goods to Mr C. Which of the following is correct?

A.

Mr A has acted in breach of contract as Mr B has accepted his offer

B.

Mr A was free to sell the goods to Mr C as communications by email are presumed to show that the parties did not intend to create legal relations

C.

Mr C has intervened in the contract of Mr A and Mr B and can be forced to return the goods for the benefit of Mr B

D.

Mr A was free to sell the goods to Mr C as Mr B's email amounted to a counter offer which rejected Mr A's offer

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Question # 17

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

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.

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Question # 18

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

A.

A partnership.

B.

A public limited company.

C.

A private limited company.

D.

Either a private limited company or a public limited company.

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Question # 19

Which of the following does NOT describe the responsibilities of the audit committee?

A.

The review of the internal audit programme and significant findings of the auditors. The review of the company's systems of internal control. The review of the company's system to facilitate whistle blowing

B.

The review of the company's financial statements and any interim reports produced. The review of the structure, size and composition of the board. The review of the company's internal control and risk management system

C.

The discussion with auditors on any significant matters that arose during the audit. The recommendations on the appointment and removal of auditors. The setting of the audit fee in discussion with the auditors.

D.

The review of the company's financial statements and any interim reports produced. The review of the company's systems of internal controls. The review of the audit report and any management letter provided by the external auditor

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Question # 20

In the UK, which organization that governs the accounting profession has taken the lead with respect to ethical considerations?

A.

The Accounting and Auditing Policy Committee

B.

The Financial Reporting Council

C.

The Financial Standards Accounting Board

D.

The International Accounting Standards Board

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Question # 21

Which of the following are benefits a company might gain from having NEDs on their audit committee? Select ALL that apply.

A.

Independent review of risk and reporting.

B.

Independence in dealing with auditors.

C.

They are fairly paid (not too high or low).

D.

New directors are fairly appointed.

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Question # 22

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

 

Which of the following is correct? 

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

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

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

A.

(i) only

B.

(i) and (iii) only

C.

(ii) only

D.

(iii) only

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Question # 23

Which of the following is incorrect?

A.

In order to register a company, promoters must include a Memorandum of Association in the documents submitted to the Register of Companies.

B.

A company cannot be registered with the same name as a company already on the register.

C.

For a company with a share capital, the application for registration must contain a statement of capital and initial shareholdings.

D.

The directors of a newly registered company cannot also act as directors of another company.

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Question # 24

A professional accountant's social responsibility relates to which TWO of the following?

A.

Acting in the interests of one's employer

B.

Seeking to maximize a company's shareholder return on investment

C.

Playing a role within global, local, professional or other communities

D.

Fulfilling public duty

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Question # 25

Which of the following is incorrect?

A.

A director may be removed from office for any reason by an ordinary resolution.

B.

A special resolution is needed to dismiss a director if the Articles of Association provide that he is to be a director for life.

C.

The company must be given 28 days' notice of a proposed resolution to dismiss a director.

D.

A director who is under threat of removal has the right to speak at the meeting, whether or not he is a member.

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Question # 26

Wye Ltd has an issued share capital of 500,000 ordinary 20p shares. The company wishes to consolidate its shares into 100,000 ordinary £1 shares. Which of the following is CORRECT?

(i) Wye Ltd must have the power to consolidate its share capital in its articles of association

(ii) Consolidation is lawful for a private company but not for a public company

(iii) The consolidation must be authorized by the shareholders of Wye Ltd passing an ordinary resolution

A.

(i) and (ii) only

B.

(i) and (iii) only

C.

(ii) and (iii) only

D.

(i), (ii) and (iii)

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Question # 27

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

A.

The duty to provide work.

B.

The duty to obey the employer's lawful instructions.

C.

The duty to maintain mutual trust and confidence.

D.

The duty not to disclose confidential information.    

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Question # 28

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

i. The case was heard by the Magistrates Court.

ii. The case was brought by a claimant.

iii. The case was proved on the balance of probabilities. 

A.

(i) only

B.

(ii) only

C.

(i) and (ii) only

D.

(ii) and (iii) only

Full Access
Question # 29

What is the rule in Foss v Harbottle (1843)?

A.

Where a wrong has been done to the company it is the company which should sue.

B.

Where a wrong has been done to the company it is the directors who should sue.

C.

Where a wrong has been done to the shareholders it is the company which should sue.

D.

Where a wrong has been done to the directors it is the company which should sue.

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Question # 30

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

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

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

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

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(ii) and (iii) only

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Question # 31

Paul is asked to work for a company that runs online casinos, but he has a deep seated conviction that gambling in any form is immoral. This dilemma is an example of a tension between:

A.

Societal and professional values

B.

Personal and corporate values

C.

Corporate and professional values

D.

None of the above

Full Access
Question # 32

What, according to CarlyFiorina, CEO of Hewlett Packard, is the spirit of a code of ethics:

A.

“It is doing the right thing when no-one is watching”

B.

“It is doing the right thing because everybody is watching”

C.

“It is doing the right thing because you have to”

D.

“It is doing the right thing, because it's for the best”

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Question # 33

AB Ltd contracted to deliver two desks and three filing cabinets to CD Ltd. On the day when delivery was due to take place AB Ltd did not have a vehicle with sufficient capacity to hold all the goods. As a result AB Ltd delivered the two desks only

 

Which of the following is correct?

A.

The contract between AB Ltd and CD Ltd is frustrated.

B.

CD Ltd is legally entitled to refuse delivery of the desks

C.

The failure to deliver the filing cabinets is a breach of a warranty which entitles CD Ltd to claim damages

D.

The delivery of the desks amounts to substantial performance of the contract and CD Ltd is obliged to pay the contract price less an amount for the defects in performance

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Question # 34

In assessing a compensation award for unfair dismissal, which of the following is incorrect?

A.

A basic award is calculated related to the alleged employee's conduct and circumstances of the case.

B.

A compensatory award may additionally be made.

C.

The award may be reduced if the employee's conduct contributed to the dismissal.

D.

Any award is subject to the statutory minimum sum identified.

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Question # 35

Being straightforward and honest in all professional and business relationships demonstrates the CIMA Code of Ethics fundamental principle of:

A.

Objectivity

B.

Transparency

C.

Confidentiality

D.

Integrity

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Question # 36

The UK Corporate Governance Code is primarily concerned with the effective control, business efficacy and accountability of the management of public listed companies for the benefit of which of the following?

A.

Shareholders

B.

Stakeholders

C.

Investors

D.

Employees

Full Access
Question # 37

According to CIMA, governance and social responsibility policies are:

A.

Not related to an organization's code of ethics

B.

In conflict with an organization's values

C.

Rooted in an organization's values and code of ethics

D.

Not related to each other

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Question # 38

Which of the following is an advantage of carrying on a business through the medium of a private company limited by shares?

A.

The ability to carry on business without holding an annual general meeting

B.

The fact that business can be earned on with a minimum of one company secretary.

C.

The ability to keep the articles of association private

D.

The fact that business can be carried on with a minimum of two directors

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Question # 39

A company's sales team has been told that all planned salary increases and bonuses will be stopped if any member of the team fails to achieve his or her sales target. The team achieves targets but management is surprised by the number of customers who contact the company to complain about aggressive or misleading sales practices. Is this an ethical issue and why?

A.

Yes - the sales team are entirely at fault and should be dismissed

B.

Yes - management has put the sales team under a lot of pressure and members of the team appear to have engaged in unethical sales practices

C.

No - meeting sales targets is a business, not an ethical issue

D.

No - the management has behaved unfairly so the way that the sales team has responded is justified

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Question # 40

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

A.

Corporate governance is primarily concerned with the ability to control the activities of board of directors of listed public limited companies.

B.

The majority of shares in listed public companies are usually held by the board so that independent shareholders have insufficient power to exercise control over the board.

C.

Listed public companies in the UK are required to disclose in their annual reports the extent to which they have complied with the requirements of corporate governance.

D.

The UK Corporate Governance Code contains codes of best practice which do not have the force of law.  

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Question # 41

V is an accountant for HIJ company. This large international jewelry manufacturer and retailer both mines, designs and sets and retails its gemstones It has significant mining operates in Country A and Country Z.

It has been a key player in the development of ethical employment mining practices especially in advanced safety policies and it received a United Nations award for action against Blood Diamonds It publishes a detailed CSR report which highlights how its approach to safety is a core business value and how its KPIs around employee turnover and accident have improved annually.

Vs company has recently appointed a new CEO who is taking an aggressive stance to improving profit margins and wants to reduce the expenditure on safety, a key aspect of the approach to ethical mining practices in HIJ company

Which THREE of the following statements would V use to support the continuation of the ethical policy in this new culture? The ethical treatment of the mining workforce

A.

increases productivity through fewer accidents and lower staff turnover

B.

reduces the risk of accidents and HIJ company's insurance premiums

C.

reflects HIJ company's core business values

D.

improves HIJ company's reputation and access to investment from a wider range of investors

E.

is the right thing to do

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Question # 42

If a claim for unfair dismissal is successful, which of the following orders can be made by an employment tribunal?

i. re-instatement

ii. re-engagement

iii. compensation

A.

(i) and (ii) only

B.

(ii) and (iii) only

C.

(i) and (iii) only

D.

(i), (ii) and (iii)

Full Access
Question # 43

S is Assistant Management Accountant for a large telecommunications company. S has become aware that the company is paying fees to those government ministers responsible for the regulation of the telecommunications industry and for authorizing large public contracts. S is concerned that this is unethical, so she mentioned it to the Finance Director during her most recent appraisal. The Director seemed amused at her concern and said that such a situation was 'perfectly normal'.

 

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

A.

Nothing further

B.

Request a further meeting with the Finance Director  

C.

Ask for confirmation in writing from the Director

D.

Resign

E.

Bring the matter to the attention of the Managing Director

F.

Ask for advice from the company's external legal advisors

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Question # 44

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.

A.

(i) and (ii) only

B.

(ii) only

C.

(ii) and (iii) only

D.

(iii) only

Full Access
Question # 45

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

A.

Goods on display in a shop window.

B.

A billboard advertisement

C.

Goods on display on a supermarket shelf.

D.

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

E.

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

Full Access
Question # 46

X, Y and Z are the only shareholders in XYZ Ltd each holding 1,000 ordinary £1 shares. X is the only director of the company. The articles of association of XYZ Ltd provide that “in the event of any proposal to dismiss a director by ordinary resolution, the votes of the director are to count 3 times.” Which ONE of the following is CORRECT?

A.

X will be able to rely on the provision in the articles and outvote any proposal to dismiss him as a director.

B.

The provision in the articles is void as it effectively means that X is irremovable as a director of XYZ Ltd.

C.

The clause in the articles cannot be used by X as it is not an ordinary membership right.

D.

The company would be able to pass a special resolution removing the provision in the articles and then dismiss X by passing an ordinary resolution.

Full Access
Question # 47

On the basis of the National Minimum Wages Act 1998, what is the age range for the lowest national minimum wage entitlement?

A.

workers aged 16-18

B.

workers aged 16-17

C.

workers aged 15-17

D.

workers aged 16-19

Full Access
Question # 48

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

A.

The separation of the roles of Director and Company Secretary

B.

The appointment of independent non-executive directors to the Board

C.

The establishment of an audit committee

D.

The identification of an independent director as primary shareholder contact

Full Access
Question # 49

Which of the following is correct?

A.

In England the government cannot make law without the authority of Parliament.

B.

In England the government can pass a law overruling any Act of Parliament.

C.

In England the government is not bound by the law.

D.

In England the government may delegate authority to a local authority to make law.

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Question # 50

Which of the following statements is correct?

(i) An employer may rely on information discovered after an employee's dismissal to justify a wrongful dismissal.

(ii) An employer may rely on information discovered after an employee's dismissal to justify an unfair dismissal.

(iii) An employment tribunal will take into account the employee's conduct when determining how much compensation for unfair dismissal to award.   

A.

(i) only

B.

(i) and (ii)

C.

(i) and (iii)

D.

(iii) only

Full Access
Question # 51

A company's board of directors is found to have committed widespread fraud and engaged in a wide range of unethical practices. Which of the following is the LEAST likely consequence of this?

A.

Insolvency or bankruptcy for the company

B.

Prison sentences for company directors

C.

Loss of credibility

D.

A significant rise in the company's share price

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Question # 52

S is management accountant for a small construction company. The company's financial year is due to end in a few weeks. The company has a number of large construction projects, one of which is behind schedule. One of the directors of the company has asked S to raise an invoice for a progress payment that is due on completion of the next phase of the contract. S knows that this phase will not be complete until after the year end, but the director says that the client needs the invoice now, to allow them to process it in time for payment when the phase is complete.

 

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

A.

Do as requested

B.

Challenge the request

C.

Ask for confirmation in writing from the director

D.

Refuse

E.

Bring the matter to the attention of the managing director

F.

Ask for advice from the company's external auditors

Full Access
Question # 53

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

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.

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Question # 54

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

A.

The identification of an independent director as primary shareholder contact

B.

The appointment of executive directors to the Board

C.

The separation of the roles of Chairman and Chief Executive

D.

The establishment of an audit committee

Full Access
Question # 55

The body responsible for reviewing the operations of the accounting profession worldwide is:

A.

The Professional Oversight Board for Accountancy

B.

The International Federation of Accountants

C.

The Financial Reporting Council

D.

The Financial Review Board

Full Access
Question # 56

Which of the following terms can be defined as follows?

 

"...the system by which companies are directed and controlled"

A.

Ethics

B.

Social responsibility

C.

Corporate governance

D.

Professional behavior

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Question # 57

On 1st May Wye Ltd wrote to Zed Ltd offering to sell a machine for £20,000, and allowing Zed Ltd 7 days to consider the offer.

 

Which of the following statements is incorrect?

A.

Wye Ltd can withdraw the offer at any time before Zed Ltd has accepted.

B.

Wye Ltd is contractually obliged to keep the offer to Zed Ltd open for 7 days.

C.

If Zed Ltd accepts the offer by post on 4th of May, then there is a contract from 4th May.

D.

If Wye Ltd posts a revocation of the offer on 2nd of May which is received by Zed Ltd on 3rd May then the offer is withdrawn with effect from the 3rd May.

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Question # 58

Which of the following is presumed not to be intended to create legal relations? 

A.

A commercial transaction.

B.

An agreement by Exe Ltd to make a gift to Wye Ltd.

C.

A social arrangement.

D.

A contract between father and son.

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Question # 59

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

A.

The Professional Oversight Board for Accountancy

B.

The International Federation of Accountants

C.

The Auditing Practices Board

D.

The Financial Review Board

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Question # 60

Which of the following statements is correct?

A.

An employer is vicariously liable for all acts of his employees committed in the course of their employment.

B.

An employer is vicariously liable for torts committed by his employees in the course of their employment.

C.

An employer is vicariously liable for all torts committed by employees and independent contractors.

D.

An employer is vicariously liable for all the acts committed by employees and independent contractors.

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Question # 61

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

A.

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

B.

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

C.

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

D.

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

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Question # 62

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

A.

Integrity

B.

Objectivity

C.

Responsibility

D.

Professional behavior

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Question # 63

Rank the following, starting with the highest court:

(i) Court of Appeal (Civil)

(ii) Supreme Court

(iii) County Court

(iv) High Court

A.

(ii), (i), (iv), (iii)

B.

(i), (ii), (iv), (iii)

C.

(i), (ii), (iii), (v)

D.

(ii), (iv), (i), (iii)

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Question # 64

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

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

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Question # 65

Paschal has just passed his CIMA certificate exams and on doing so joined Un-Ethi-Cal Ltd for his first accountancy role.

Upon arrival he was been asked to do his company's corporation tax return, and not wanting to seem as if he was not keen in his first week, tells them he knows what to do and so goes online to find out how to do it.

He's got to go to a party that night, so although he can't work it out properly he fills in the form as best he can so he can get out on time.

Unfortunately, Paschal has breached CIMA's five fundamental ethical principles.

Which of the following has Paschal breached?

Select ALL that apply.

A.

Integrity + Professional competence and due core

B.

Integrity + Objectivity

C.

Confidentiality + Professional competence and due care

D.

Professional behaviour + Objectivity

E.

Objectivity + Confidentiality

F.

Professional behaviour + Integrity

G.

Confidentiality + Professional competence and due care

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Question # 66

Which ONE of the following is needed to solve ethical problems?

A.

Motivation to do what is right

B.

Motivation to come to a decision as quickly as possible

C.

Motivation to do what is personally satisfying

D.

Motivation to help others

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Question # 67

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

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

Full Access
Question # 68

Articles of association regulate the relationship between:

A.

the company and its directors

B.

the company and its customers

C.

the company and its members

D.

the company and its creditors

Full Access
Question # 69

All policies for governance and social responsibility are ultimately rooted in an organization's:

A.

Values and code of ethics

B.

The Board

C.

Stakeholder relationships

D.

The Government

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Question # 70

What is a fundamental attribute of a competent accountant?

A.

Ability to exercise good judgment

B.

Ability to communicate effectively

C.

Ability to calculate correctly

D.

Ability to be efficient

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Question # 71

Which of the following are reasons why regulatory frameworks may differ between countries: Select ALL that apply.

A.

Differences in law and tax

B.

Differences in history and culture

C.

Differences in types of shareholder

D.

Difference in language

E.

Difference in GDP

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Question # 72

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

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

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Question # 73

You work for a manufacturing company and are told that one of the line managers made a genuine mistake that led to the discharge of waste material into a local river. Your managing director says that the company cannot afford a large fine and demands that no one reports the waste spillage or mentions it again. Is this an ethical issue and why?

A.

Yes - but only if the waste causes damage to the local environment

B.

Yes - the manager who created the spill has behaved unethically and should be disciplined

C.

Yes - the company has a duty to report something that might breach environmental legislation and could cause environmental damage

D.

No - the leak was a mistake, so this is not an ethical issue

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Question # 74

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

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

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

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

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(ii) and (iii) only

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Question # 75

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

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.

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Question # 76

Which of the following must be satisfied for an employee to claim wrongful dismissal?

(i) The employer terminated the contract without notice, and was not justified in doing so.

(ii) The employee must have at least 12 months' continuous employment.

(iii) The dismissal was not for reasons of conduct, capability, redundancy or some other substantial reason.

A.

(i) and (ii).

B.

(i).

C.

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

D.

(iii).

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Question # 77

In relation to directors, which of the following statements is incorrect?

A.

The Remuneration Committee usually consists entirely of non-executive directors

B.

The directors may be dismissed by the shareholders tor any reason

C.

The executive directors are bound to carry out only those duties which are stated in the director's contract of service

D.

The boards of listed companies commonly appoint sub-committees to enable them to comply with corporate governance requirements

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Question # 78

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

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.

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Question # 79

Which of the following entitles the innocent party to cancel the contract?

(i) A breach of a warranty.

(ii) A breach of a condition.

(iii) An express term authorizing termination of the contract.

A.

(i) only

B.

(i) and (ii) only

C.

(ii) and (iii) only

D.

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

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Question # 80

A situation has arisen which will involve you participating in transactions which are legally correct but ethically unsound.

 

Which of the following is correct?

 

(i) It is not possible for a transaction to be both legal and ethically unsound.

(ii) As long as the transactions are legal you are acting properly in participating.

(iii) One of the purposes of ethical codes is to guide professionals as to how to behave even when the proposed transactions are legal.

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(i) and (ii) only

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Question # 81

R and P are the only shareholders in RP Ltd, each holding 100 ordinary £1 shares. They have both paid half the nominal value of the shares. The company has been placed in creditors' voluntary liquidation on the ground that it is unable to pay its debts.

 

Which of the following is correct?

A.

As it is a limited company, RP Ltd is not obliged to pay its debts.

B.

As the liability of R and P is limited they are not obliged to pay anything towards the company's debts.

C.

Rebecca and Paul must each pay 50% of the company's debts.

D.

Rebecca and Paul are each obliged to pay the other half of the nominal value of their shares, and no more.

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Question # 82

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

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

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Question # 83

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?

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

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Question # 84

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

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

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Question # 85

X Ltd has entered into a number of contracts with Y Ltd. In which of the following situations could the directors be held personally liable for the debts contracted with Y Ltd?

(i) X Ltd has continued to trade at a time when insolvency appeared inevitable

(ii) X Ltd has become insolvent and is unable to pay its debts to Y Ltd

(iii) X Ltd has contracted for a purpose not specified in its articles of association

A.

(i) only

B.

(i) and (ii) only

C.

(ii) only

D.

(iii) only

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Question # 86

Which of the following statements is INCORRECT? 

i. A contract is a voluntary agreement whereas obligations in the tort of negligence are imposed by the state.

ii. Damages are only available for breach of contract and breach of the tort of negligence if damage, injury or loss has been suffered by the claimant.

iii. A contract breaker is liable whether or not he is at fault whereas to be liable in the tort of negligence the defendant must have been at fault.

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(ii) and (iii) only

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Question # 87

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"

A.

Integrity

B.

Objectivity

C.

Professional competence and due care

D.

Professional behavior

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Question # 88

Which of the following is normally implied into a contract of employment?

A.

A duty to provide a reference.

B.

A duty to provide work.

C.

A duty to pay wages.

D.

An employee's duty to disclose his own misconduct.

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Question # 89

Which of the following is incorrect?

A.

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

B.

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

C.

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

D.

The Articles of Association may be altered by special resolution.

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Question # 90

Which of the following is the superior source of law?

A.

A decision by the Supreme Court.

B.

A provision in an Act of Parliament

C.

A Regulation issued by the European Council of Ministers.

D.

A Statutory Instrument.

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Question # 91

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.

A.

(i) only

B.

(ii) only

C.

(i) and (ii) only

D.

(ii) and (iii) only

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Question # 92

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

A.

Rapid advances in technology

B.

Evolving regulations

C.

Career progression

D.

Computer virus-protection

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Question # 93

One of your colleagues is running an event to raise money for a local charity. One evening, you see her taking boxes of pens, notepads and post-it notes. When you challenge her, she says that she is taking them for her fundraising and, although she has not asked permission to take them, she is sure the company will not mind. Is this an ethical issue and why?

A.

Yes - she is using company property for other purposes without permission

B.

Yes - she should not be undertaking charitable initiatives

C.

No - it is just stationery and nothing valuable

D.

No - the company would undoubtedly not mind her using the stationery for charitable purposes, so there is nothing wrong with her taking it

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Question # 94

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

A.

The board.

B.

Any shareholder.

C.

The company.

D.

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

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Question # 95

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

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

A.

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

B.

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

C.

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

D.

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

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Question # 96

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

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.

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Question # 97

Which of the following have made an error of principle? Select ALL that apply.

A.

Svetlana - Recorded a payment of £530 in the company's expenses account rather than its sales account.

B.

Jim - Recorded a payment of £1,000 in both the company's expenses account and the sales account.

C.

David - Forgot to record a payment of £50 in the company's sales account.

D.

Jean - Recorded a customer payment as £120 when they actually paid £150.

E.

Janet - Recorded the payment made by one customer in another customer's account.

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Question # 98

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?

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.    

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Question # 99

Which of the following statements is correct?

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.

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Question # 100

A advertised his van for sale in the local newspaper at a price of £5,000.

 

In which of the following situations is a contract between A and B created?

A.

B wrote to A accepting his offer to sell the van for £5,000.

B.

B wrote to A and offered to buy the van at £4,800. B stated “if I hear no more from you in the next three days I shall assume that you agree to sell the van to me at that price.”  Three days have now passed and B has heard nothing from A.

C.

B offered to buy the van for £4,800. A wrote to B accepting his offer. B wrote back stating: “payment will be made over three months.”

D.

B offered to buy the van for £4,500. A wrote to B accepting his offer but later changed his mind and sent an email to B withdrawing his acceptance. The email was read by B before he read A's letter of acceptance.

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Question # 101

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?

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.

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Question # 102

Which of the following statements about the relationship between external and internal auditors is FALSE?

A.

Internal and external auditors should meet regularly to ensure timely and efficient completion of the work

B.

In some countries, there is a statutory requirement to have both an internal and an external audit

C.

Internal auditors may provide engagement work programs and working papers to external auditors

D.

Oversight of the work of external auditors is the responsibility of the chief internal auditor

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Question # 103

High profile corporate scandals in the past decade have had an effect on which of the following?

A.

Public trust in business

B.

Legislation in the US and elsewhere

C.

Public trust in accountants

D.

All of the above

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Question # 104

Which of the following is correct in relation to the purchase by a company of its own shares?

(i) If a company wishes to purchase its own shares it must have authority in its Articles of Association.

(ii) A private company may purchase its own shares out of capital.

(iii) It is not possible for a company to purchase all its own shares. 

A.

(i) only

B.

(i) and (ii) only

C.

(ii) and (iii) only

D.

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

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Question # 105

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

A.

Professional competence

B.

Credibility

C.

Integrity

D.

Professional behavior

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Question # 106

A manager is consistently rude to a female employee and seems to have a low opinion of her ability, despite the fact that she is competent, works hard and is well liked by her peers. This is potentially an example of the ethical issue of:

A.

Incompetence

B.

Negligence

C.

Discrimination

D.

Conflict of interest

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Question # 107

Which of the following is INCORRECT in relation to the recommendations of the Greenbury Committee Report of 1995?

A.

All the recommendations were incorporated into the Stock Exchange Listing Rules.

B.

Directors should never be given discounted share options.

C.

Annual bonuses should not be pensionable.

D.

Any long-term incentive schemes to be offered to directors should first be approved by the shareholders.  

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Question # 108

Which of the following is not an equitable remedy?

A.

Specific performance.

B.

An injunction.

C.

Damages.

D.

Rescission.

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Question # 109

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

A.

A contract breaker is liable for losses which arise naturally from the breach.

B.

A contract breaker is liable for special losses which are within his contemplation.

C.

Damages will not normally be awarded for the distress caused to the innocent party by the breach.

D.

Damages are designed to compensate the innocent party and to punish the contract breaker.    

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Question # 110

When might an ethical dilemma occur?

A.

When the boundaries between right and wrong are unclear

B.

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

C.

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

D.

All of the above

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Question # 111

Which of the following statements is incorrect?

A.

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

B.

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

C.

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

D.

A person cannot be bound by an onerous clause.

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Question # 112

The IFAC Code of Ethics applies:

A.

To accountants by law

B.

To accountants around the world

C.

To those accountants whose employers sign up to the principles of acting ethically

D.

To all professionals, including accountants

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Question # 113

What is the legal meaning of the word “simple” in the expression “valid simple contract”?

A.

The consideration for the contract is less than £5,000

B.

There are 5 or fewer parties to the contract

C.

The contract has no implied term

D.

The contract does not have to be in any particular form

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Question # 114

Which TWO of the following are features of a compliance-driven framework?

A.

Fear driven

B.

Mandatory

C.

Discretionary

D.

Implicit

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Question # 115

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

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

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Question # 116

Company B wants to implement ethical control over its staff. It wants to do this by implementing a strong organisational culture.

Which of the following are ways in which the organisation could exercise control in regards to its organisational culture?

Select ALL that apply.

A.

Introduce a statement of values which outlines what the organisation stands for.

B.

Ensure the company's ethical expectations are thoroughly communicated.

C.

Ensure that the company's chairman and CEO lead by example.

D.

Ensure that the company's organisational systems encourage adherence to its ethics.

E.

Ensure that disciplinary action is taken when the company's ethical code is broken.

F.

Only employ directors who have proven strong moral values.

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Question # 117

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

A.

(i) only

B.

(i) and (ii) only

C.

(ii) and (iii) only

D.

(iii) only

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Question # 118

An ethical dilemma generally refers to:

A.

a deadlock in commercial disputes

B.

a particular position on the spectrum of ethical philosophies

C.

two or more possible solutions to an ethical problem

D.

two or more opinions on the spectrum of ethical philosophies

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Question # 119

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.

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.

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Question # 120

Abel has just completed an audit on a large law firm. He has decided to issue a modified audit report with a qualified opinion due to the issues he discovered regarding misstatements in the company's financial records.

Why has Abel decided to issue the report with a qualified opinion as opposed a different kind?

A.

Because even though he has discovered material statements, he has not deemed them to be pervasive.

B.

Because he has found the misstatements to be both material and pervasive.

C.

Because he was unable to find enough suitable evidence to determine whether or not the misstatements were both material and pervasive.

D.

Because he has come to the conclusion that the misstatements aren't an issue, but should be noted in the report.

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Question # 121

Louis is the only director in MNO Ltd. Max, Nick and Olga each hold one third of the issued share capital of the company. Louis has proposed an amendment to the company's Articles of Association. Which of the following is correct?       

A.

The Articles may only be changed if Max, Nick and Olga vote in favor of the proposal.

B.

The Articles may be changed if any two of the shareholders vote in favor of the proposal.

C.

The Articles may be changed if any one of the shareholders votes in favor of the proposal.

D.

The Articles may be changed if Louis and any one of the shareholders vote in favor of the proposal.

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Question # 122

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?

A.

Reliability

B.

Courtesy

C.

Timeliness

D.

Respect

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Question # 123

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

A.

Respect

B.

Responsibility

C.

Reliability

D.

Timeliness

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Question # 124

X was employed by Bee Ltd as its senior design consultant. X contracted with Bee Ltd that, when his employment with the company ceased, he would not act in competition with it or solicit its customers. After X left Bee Ltd, he registered a company called Cee Ltd which immediately began working in competition with Bee Ltd and soliciting its customers. Bee Ltd complained to X about this conduct, but X stated that, as the work was being undertaken by Cee Ltd, a separate legal entity, X had not acted in breach of the agreement with Bee Ltd.

 

Which of the following statements is correct?           

A.

X is correct and cannot be said to be in breach of the agreement with Bee Ltd.

B.

If the court finds that Cee Ltd was set up by X to avoid the agreement with Bee Ltd, it will "lift the corporate veil" and enforce X's contract with Bee Ltd against X and Cee Ltd.

C.

Cee Ltd will be bound by the agreement because a company is always liable for the actions of its shareholders.

D.

The agreement between Bee Ltd and X is of no legal effect, as it attempts to regulate X's activities after he has left Bee Ltd's employment.

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Question # 125

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

A.

Materiality

B.

Integrity

C.

Objectivity

D.

Professional behavior

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Question # 126

Self regulation is based upon:

A.

Trust

B.

Compliance

C.

Rules

D.

Professional bodies

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Question # 127

Y has an opening at his company for a trainee accountant. His nephew is just about to leave school, and Y receives a call from his sister suggesting that her son should get the job. Y's firm has a strict policy with regards to the employment of family members, especially in finance departments. But for Y, looking after his family is very important, and he is sure he will be an excellent staff member.  Y has an ethical dilemma because there is tension between:

A.

His personal and corporate values

B.

His personal and societal values

C.

His professional and corporate values

D.

His personal and professional values

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Question # 128

In relation to the company secretary which of the following is correct? 

(i) A public company must have a company secretary who is appropriately qualified

(ii) A member of CIMA is qualified to act as a company secretary

(iii) A private company may choose to have a company secretary and if so he/she must be appropriately qualified

A.

(i) only

B.

(i) and (ii) only

C.

(ii) only

D.

(i), (ii) and (iii)

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Question # 129

Maintaining professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service demonstrates the CIMA Code of Ethics fundamental principle of:

A.

Integrity

B.

Objectivity

C.

Professional competence and due care

D.

Professional behavior

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Question # 130

Which of the following has overall responsibility for enforcing the Health and Safety at Work Act 1974 and its related legislation?

i. The Health and Safety Commission

ii. The Health and Safety Executive

iii. The Health and Safety Inspectorate

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(i) and (ii) only

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Question # 131

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

A.

Providing ethical leadership which focuses on minimizing environmental costs sustainably.

B.

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

C.

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

D.

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

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Question # 132

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

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

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Question # 133

Which of the following statements is incorrect?

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

(ii) A term may be implied into a contract by statute.

(iii) A term may be implied into a contract by a court where it would be reasonable to imply it.

A.

(i) only

B.

(i) and (ii) only

C.

(ii) only

D.

(iii) only

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Question # 134

Exe Ltd was under contract to deliver goods by road to London for Wye Ltd for £2,000. After part of the journey was completed the lorry broke down and Wye Ltd was forced to arrange for Zed Ltd to complete the delivery. Subject to the contract not providing for this situation, which of the following is correct?

A.

Exe Ltd is entitled to part of the delivery fee.

B.

Exe Ltd is entitled to nothing.

C.

Exe Ltd is entitled to a reasonable sum for the work done.

D.

Exe Ltd is entitled to the full £2,000.

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Question # 135

Which of the following statements are correct?

(i) A claim for unfair dismissal must be made to an industrial tribunal within 3 months of the effective date of termination.

(ii) A claim for wrongful dismissal must be made to an industrial tribunal within 6 years of the effective date of termination.

(iii) A claim for wrongful dismissal must be made to an industrial tribunal within 3 months of the effective date of termination.

A.

(i) and (ii)

B.

(i)

C.

(ii)

D.

(i) and (iii)

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Question # 136

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

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

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Question # 137

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

A.

(i) only

B.

(i) and (ii) only

C.

(ii) only

D.

(ii) and (iii) only

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Question # 138

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.

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.

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Question # 139

In which THREE of the following situations might professional accountants be required or permitted to disclose confidential information relating to their employer?

A.

When directly asked for information by a potential investor in the business

B.

When wishing to discuss an ethical problem with friends and colleagues from outside the organization

C.

Where production of documents is required in the course of legal proceedings

D.

Where disclosure is permitted by law, and authorized by the employer

E.

To comply with the quality review of a professional body

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Question # 140

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.

A.

(i) and (ii) only  

B.

(ii) and (iii) only

C.

(i) and (iii) only

D.

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

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Question # 141

Company C got rid of a director because his interests failed to align with the shareholders'.

They've recently hired a new director, and they are keen to avoid a repeat scenario.

Which of the following could the company do to ensure the new director works with the best interests of shareholders in mind?

Select ALL that apply.

A.

Give bonus payments to the director when he hits the company's targets.

B.

Implement an incentive scheme to reward the director when he works in line with the interests of shareholders.

C.

Ensure the deliverance of a detailed and comprehensive Chairman's message.

D.

Widen the remit of the governance report to includes details about the the company's strategy, business model and risks.

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Question # 142

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:

A.

Corporate and professional values

B.

Corporate and societal values

C.

Societal and personal values

D.

All of the above

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Question # 143

B is a director and shareholder in Cee Ltd. Which ONE of the following is INCORRECT?

A.

B may be dismissed at any time by an ordinary resolution of the shareholders.

B.

B cannot vote as a shareholder in any meeting called to dismiss him as a director.

C.

The company must be given 28 days notice of any proposed resolution to dismiss B.

D.

B is entitled to speak at the meeting called to consider the proposal to dismiss him.

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Question # 144

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

 

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

A.

Integrity

B.

Objectivity

C.

Professional competence and due care

D.

Professional behavior

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Question # 145

C is a professional accountant He encounters an ethical dilemma in his role and wishes to seek help in resolving it. Which of the following would NOT be an appropriate source of advice?

A.

The CIMA ethics helpline

B.

Legal advisors.

C.

The external auditors.

D.

The internal whistle-blowing helpline

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Question # 146

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?

A.

Client involvement in illegal activities (such as money laundering)

B.

Dishonesty

C.

Questionable financial reporting practices

D.

A client having an objectionable personality

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Question # 147

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

 

Which of the following is correct?

A.

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

B.

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

C.

X Ltd and Y Ltd contracted on 5th October.

D.

X Ltd and Y Ltd contracted on 7th October.

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Question # 148

Which of the following may be liable to contribute to the assets of the company in the event of the company carrying on business at a time when it appeared that insolvency was inevitable?

A.

The current directors and shareholders of the company.

B.

The current and former directors of the company.

C.

The current directors of the company.

D.

The current directors and former shareholders of the company.

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Question # 149

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

Rules-based approaches:

A.

are inflexible and expensive

B.

motivate compliance through value and judgment

C.

are subject to precise definitions of wording and hence become contentious

D.

have subjective standards which may cause confusion.

E.

require objective enforcement by an independent party.

F.

are inconsistently applied due to the need for judgment.

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Question # 150

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

A.

Yes, her feelings could be influencing her independence of mind

B.

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

C.

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

D.

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

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Question # 151

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

A.

Constancy

B.

Confidentiality

C.

Contemplation

D.

Conviction

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Question # 152

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:

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

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Question # 153

Jimmy wants to sell his scooter, so he puts an advert on the internet with a price of £50.

He quickly gets an offer for the full amount, but then decides that he doesn't want to sell his scooter after all!

The buyer complains and threatens to report jimmy to the police.

This doesn't worry Jimmy as he knows he is not legally obliged to sell his scooter. Why is this?

A.

Because the advertisement was an open offer.

B.

Because a seller can choose to withdraw their item whenever they want.

C.

Because jimmy only stated that he intended to sell the scooter.

D.

Actually, jimmy does have to sell the scooter.

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Question # 154

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

A.

Customer

B.

Media

C.

Employee

D.

Government

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Question # 155

Which of the following is incorrect in relation to the memorandum of association when registering a company limited by shares?

A.

The memorandum must be in the prescribed form

B.

The memorandum must state the objects for which the company is being registered

C.

The memorandum must state that the subscribers agree to take at least one share each

D.

The memorandum must state that the subscribers wish to form a company under the Companies Act 2006

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Question # 156

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

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.

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Question # 157

S is assistant management accountant for a large telecommunications company. S has become aware that the company is offering different levels of discount to different corporate customers. S is concerned that this is unethical, so she mentioned it to the Finance Director during her most recent appraisal. The Director seemed amused at S's concern, and said that such a situation was 'perfectly normal'.

 

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

A.

Nothing further

B.

Request a further meeting with the Finance Director

C.

Ask for confirmation in writing from the Director

D.

Resign

E.

Bring the matter to the attention of the Managing Director

F.

Ask for advice from the company's external auditors

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Question # 158

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

A.

Loss of reputation

B.

Loss of Chartered Institute status

C.

Undermined credibility

D.

Systematic widespread fraud

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Question # 159

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

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.

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Question # 160

Which of the following would be regarded as an issue of shares for an improper purpose?

(i) An issue of shares to enable the directors to maintain control of the board.

(ii) An issue of shares to prevent a take-over bid.

(iii) An issue of shares in return for a non-cash consideration. 

A.

(i) and (ii) only

B.

(i) only

C.

(ii) and (iii) only

D.

(ii) only

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Question # 161

Governance denotes the generic way an organization is run with particular emphasis on:

A.

Accountability, integrity, risk management

B.

Accounting, integrity, risk management

C.

Accountability, integration, financial management

D.

Accounting, integration, financial management

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Question # 162

Which of the following is correct? 

(i) The Court of Appeal is bound by obiter dicta of the Supreme Court.

(ii) The High Court is bound by a Supreme Court ratio decidendi.

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

A.

(i) only

B.

(i) and (ii) only

C.

(ii) and (iii) only

D.

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

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Question # 163

Ethical dilemmas may be raised with a professional accountant via which of the following routes?

A.

Via an external customer

B.

Via an in-house helpline

C.

Anonymously

D.

All of the above

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Question # 164

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

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.

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Question # 165

Which of the following remedies is available as of right in the event of a breach of contract?

(i) Specific performance.

(ii) Damages.

(iii) An injunction.

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(ii) and (iii) only

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Question # 166

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

 

(i) A public company cannot commence trading until it has received a certificate from the Registrar of Companies confirming that it has satisfied the minimum requirements as to authorized and issued share capital.

(ii) If a public company commences trading without a trading certificate, and fails to meet its obligations, the directors may be held jointly and severally liable for those obligations.

(iii) A public company must have a minimum of one shareholder. 

A.

(i) and (ii) only

B.

(ii) and (iii) only

C.

(i) and (iii) only

D.

(i), (ii) and (iii)

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Question # 167

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

A.

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

B.

The internal audit activity must be free from interference.

C.

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

D.

Any problems identified during the audit should be reported.

E.

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

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Question # 168

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?

A.

Integrity

B.

Objectivity

C.

Confidentiality

D.

Professional behavior

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Question # 169

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?

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.

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Question # 170

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

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 an audit committee

D.

The appointment of a senior external auditor to the Board

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Question # 171

Which of the following is INCORRECT in relation to the European Commission?

A.

The Commission is the executive arm of the European Union.

B.

The Commission is made of independent Commissioners whose role is to further the interests of the Member States which they represent.

C.

The Commission represents the European Union in any trade negotiations with states which are not members of the European Union.

D.

The Commission has a duty to ensure the treaties and law are upheld, potentially by taking Member States or other institutions to the European Court of Justice.

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Question # 172

Who is responsible for identifying and managing fraud?

A.

Management

B.

External auditors

C.

Internal auditors

D.

Management and external auditors

E.

Management and internal auditors

F.

External auditors and internal auditors

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Question # 173

After the enactment of the Companies Act 2006, which of the following is incorrect in relation to a reduction of capital by a private company?

A.

It is not necessary for the company's Articles of Association to authorize a reduction

B.

The shareholders must pass a special resolution

C.

The directors must make a statement as to the company's solvency

D.

The reduction must be approved by the court

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Question # 174

Why is it difficult to measure ethical issues?

A.

Because they tend not to be 'black and white'

B.

Because they tend to be kept secret

C.

Because they are open to interpretation

D.

Because there are no records

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Question # 175

In the event of the directors of a company limited by shares ignoring a provision in its Articles of Association which is for the benefit of the shareholders, which of the following is correct?

A.

The shareholders as a whole may sue the directors for breach of contract.

B.

Any or all of the shareholders may sue the company for breach of contract.

C.

Individual shareholders have no remedy against the company.

D.

Individual shareholders may sue the directors for breach of contract.

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Question # 176

Independence of mind allows a professional accountant to:

A.

Act with integrity

B.

Exercise objectivity

C.

Exercise professional skepticism

D.

All of the above

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Question # 177

Which of the following is NOT one of the 'seven principles of public life', as defined by the Committee of Standards in Public Life?

A.

Leadership

B.

Professionalism

C.

Honesty

D.

Integrity

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Question # 178

Which of the following statements regarding companies limited by shares and general partnerships is correct?

A.

Unlike a general partnership, a private company limited by shares may create a floating charge as security for a loan

B.

Private companies limited by shares and general partnerships are required to disclose financial information regarding the operation of the business to the general public

C.

In the event of insolvency both a private company limited by shares and a general partnership may be placed in insolvent liquidation

D.

Both a private company limited by shares and a general partnership are established by registration

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Question # 179

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?

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.

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Question # 180

The directors of Zed Ltd issued a number of shares to their supporters, so that they would vote against a takeover bid by Exe Ltd.

 

Which of the following statements is INCORRECT?

A.

If the shares were issued for cash, they should have first been offered to the existing members in proportion to their current shareholding unless statutory pre-emption rights have been dis-applied.

B.

If the shares were issued for a non-cash consideration, they were not subject to the statutory pre-emption rights of shareholders unless the articles of association so provided.

C.

If the directors had the legal authority to issue shares, the issue cannot be challenged by the shareholders.

D.

The share issue is voidable and the original shareholders may ratify or cancel the issue by ordinary resolution.

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Question # 181

Which ONE of the following is NOT contained within form IN01 which must be submitted to the Registrar of Companies in order to register a company limited by shares?

A.

The name of the company

B.

The objects of the company

C.

The location of the company’s registered office

D.

The names of the first directors

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Question # 182

Which of the following most accurately describes the ratio decidendi?

A.

It is a statement of law by a court which is binding on all higher courts which are called upon to decide a similar case.

B.

It is a statement of law by a court which is not binding on lower courts which are called upon to decide a similar case.

C.

It is a statement of law by a court which is binding on all lower courts which are called upon to decide a similar case.

D.

It is a statement of law by a court which is binding on all future courts which are called upon to decide a similar case.  

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Question # 183

Which TWO of the following are reasons why a company would choose to introduce a values based code of ethics?

A.

To improve the cost efficiency of internal processes

B.

To identify gifted staff

C.

To provide guidance for staff

D.

To help staff to tackle the ethical dilemmas that they might face at work

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Question # 184

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.

A.

(i) only

B.

(i) and (iii) only

C.

(ii) and (iii) only

D.

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

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Question # 185

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?

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.

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Question # 186

Which of the following is CORRECT?

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

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

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

A.

(i) only

B.

(ii) only

C.

(i) and (iii) only

D.

(i), (ii) and (iii)

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Question # 187

Which of the following might a company experience if they were to implement internal control measures?

Select ALL that apply.

A.

Reduced risk

B.

More control

C.

A requirement to hire external auditors

D.

Less paper work

E.

Less bureaucracy

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Question # 188

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?

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

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Question # 189

In which of the following countries are employees represented at board level?

i. Germany.

ii. United States of America

iii. France.

A.

(i) only

B.

(i) and (ii) only

C.

(i) and (iii) only

D.

(iii) only

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Question # 190

The Professional Accountant should always:

A.

Think objectively; act professionally; continue to learn and develop

B.

Think subjectively; act professionally; continue to question

C.

Think professionally; act personably; continue to question

D.

Think accurately; act purposefully; continue to learn and develop

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Question # 191

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

A.

Integrity

B.

Professional behavior

C.

Objectivity

D.

Accountability

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Question # 192

Which of the following is correct?

(i) Purchasing a "shelf company" enables business to commence more quickly.

(ii) It is generally cheaper to purchase a "shelf company", than to arrange for a solicitor or accountant to register a new company.

(iii) Incorporating a company by registration enables the company's documents to be drafted to the particular needs of the incorporators.  

A.

(i) and (ii) only

B.

(ii) and (iii) only

C.

(i) and (iii) only

D.

(i), (ii) and (iii)

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Question # 193

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?

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.

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Question # 194

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

A.

The reduction of waste on building sites

B.

The formation of a world class team of employees to win more business

C.

The use of recycled paper in head office

D.

Health and safety training for employees and sub-contractors

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Question # 195

Which of the following reasons for dismissal are NOT deemed to be automatically unfair?

A.

Serious misconduct

B.

Refusing to join an independent trade union.

C.

Pregnancy

D.

Selection for redundancy because of membership of a trade union.  

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Question # 196

Which of the following is a 'financial stakeholder' of an organization?

A.

Media

B.

Employee

C.

Non-governmental organizations

D.

Competitor

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Question # 197

Dilemmas arise when:

A.

There are two or more unpalatable choices

B.

There is a choice between what is good for me and what is prescribed professional standards

C.

You are asked to do something illegal

D.

You have no choice

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Question # 198

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

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

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