BA4 Fundamentals of Ethics, Corporate Governance and Business Law Question and Answers

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

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.

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

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.

While working as an accountant, you are asked to overlook certain irregularities in your company's accounts. This is likely to result in tensions described by which TWO of the following four options:

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?

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

One of the fellow accountants in your office thinks that she is intellectually superior to the rest of you. This has made her complacent and she refuses to attend training courses or ongoing professional development. As a result, she may be failing to adhere to the CIMA Code of Ethics fundamental principle of:

Pablo and Paula are in discussions with a potential buyer over the sale of their house. They tell the potential buyer that if they want to purchase the house for the full amount of £200,000, they'll need to send a letter that

confirms their offer by Friday. If they don't receive such a letter by then, they'll withdraw the house from the market.

Friday comes and no letter arrives. However, it turned out the potential buyer actually posted the letter on the Monday before, and it simply got lost in the post. The letter eventually turns up on the following Monday.

Baring this in mind, are Pablo and Paula legally obliged to sell their house?

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?

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

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

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

Which of the following is incorrect in relation to shareholder meetings held by a public company?

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?

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

Which of the following does the IFAC Code of Ethics establish?

Seller Ltd is a wholesaler of electrical goods which it sells to retailers only Which one of the following statements is correct in relation to the exclusion of the conditions which are implied into contracts for the sale of goods by sections 12 to 15 of the Sale of Goods Act 1979?

Agency theory is often cited as an explanation for the development of corporate governance Which TWO of the following statements are correct?

Which of the following is incorrect?     

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:

Which of the following is incorrect?

Section 172 of the Companies Act 2006 provides that directors must promote the success of the company for the benefit of its members. Which of the following factors must be taken account of in complying with this duty? 

(i) The interests of the company's employees

(ii) The likely consequence of any decision in the long term

(iii) The impact of the company's operations on the community and the environment

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

A professional accountant is NOT accountable to:

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?

SuperSole is a large shoe company that sells its products all over the world. It has many factories and stores in many different countries, and its yearly revenues often exceed £100 million. The company is also listen on

the stock exchange.

Should SuperSole have its own internal auditing department?

Which of the following statements would amount to indirect discrimination in the workplace?

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

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

In Germany the two-tier board structure is used by many limited liability companies. A two-tier board structure is made up of a Management Board and which other organ?

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

Which of the following are cases where the veil should be lifted? Select ALL that apply.

Which of the following statements is correct?

(i) A wrongful dismissal cannot also be an unfair dismissal.

(ii) An unfair dismissal can also be a wrongful dismissal.

(iii) An unfair dismissal must also be a wrongful dismissal.

Which of the following is incorrect?

(i) Legal title cannot pass on a contract induced by misrepresentation.

(ii) Misrepresentation renders a contract voidable.

(iii) A victim of negligent misrepresentation may seek rescission and damages. 

Which of the following causes a charge to be void?

(i) A failure to register the charge at Companies House within 21 days of its creation.

(ii) A failure to register the charge at the company's registered office.

(iii) The issue of a charge to secure borrowing which is outside the directors' authority 

Completing work within established deadlines reflects the personal quality identified by the CIMA Code of Ethics as:

Which of the following correctly describes the circumstances in which directors may be held liable to contribute to the assets of insolvent companies in respect of "wrongful trading"?

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.   

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

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

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

Which of the following is an example of a safeguard created by the profession, legislation or regulation as opposed to a safeguard in the work environment?

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

Decklt is a skateboard manufacturer that is ethically run and has a good reputation.

However, it has just transpired that one of their suppliers - with whom they have a good relationship with due to their cheap prices - is involved in a serious fraud case.

What should Decklt do?

John is conducting an external audit on a biscuit factory. He wants to make sure that his audit is comprehensive and thorough. To do this, he aims to make full use of his powers and rights.

Which of the following is John allowed to do?

Select ALL that apply.

Which of the following automatically causes a contract to become unenforceable?

(i) Where the contract has become frustrated.

(ii) Where the buyer was induced to enter into the contract by a fraudulent misrepresentation.

(iii) Where one of the parties has acted in breach of a warranty in the contract.

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

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

Which of the following terms can be defined as follows?

 

"How an organization manages its relationships in the wider community"

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.

Which of the following statements is correct?

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

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

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

(i) In general a person is assumed to know of a clause of which he has been given reasonable notice at or before the time of the contract.

(ii) In general a person cannot rely on a clause brought to the other party's attention after the contract has been concluded.

(iii) In general a person cannot be bound by a clause written in small print.

 

Choose one of the following.

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:

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

Which of the following is correct?

Which of the following is NOT a personal quality expected of professional accountants by CIMA?

Which of the following is the main legislature within the European Union?

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

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

Which of the following statements are correct regarding companies'?

1. Both public and private companies must have a minimum amount of share capital before they can commence trading.

2. The shareholders of both public and private companies cannot interfere in the management of the company.

3. The minimum number of directors for both public and private companies is two

Which of the following is correct?

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

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

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

ABC Ltd has contracted with DEF Ltd. If ABC Ltd acts in breach of a warranty, which of the following is correct? 

(i) DEF Ltd may terminate the contract and sue for damages.

(ii) DEF Ltd may sue for damages but may not terminate the contract.

(iii) DEF Ltd may ignore the breach and continue with the contract. 

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?

ABC plc has acted in breach of its health and safety obligations and this has led to a number of employees and members of the public being injured.  

 

Which of the following is correct?  

The breach could give rise to:  

i. Civil claims on the part of the employees and members of the public

ii. Enforcement action by the Health and Safety Executive

iii. Criminal sanctions against ABC plc

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?

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

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

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

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

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

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.

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

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

The IFAC Code of Ethics applies:

C tends to be polite to colleagues when they are present, but very rude about them in their absence. She lacks the personal quality identified by CIMA as:

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

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

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

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

Which of the following can consideration take the form of?

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

 

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

(i) Sue Wye Ltd for breach of contract.

(ii) Appoint an administrator

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

Which of the following is INCORRECT?

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.

What is the purpose of the equitable remedy of rescission?

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

S Ltd has an issued share capital of 1000 ordinary shares of £1 each.  Some of the shareholders would like to change the name of the company.  What is the minimum number of votes which must be cast in favor of the resolution to make it effective?

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

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?

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

A business that has an internal ethical code is likely to experience which of the following benefits? Select ALL that apply.

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

Select ALL that apply.

Articles of association regulate the relationship between:

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

Which of the following statements are correct in relation to the purpose of the OECD principles of corporate governance?

1. The principles are regarded by OECD members as representing a common basis essential for the development of good corporate governance practice

2. The principles are intended to be a substitute for individual government's proposals for governance best practice.

3. The principles are intended for the use of OECD members only.

According to CIMA, governance and social responsibility policies are:

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?

An independent audit is important to readers of financial statements because it

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

James works for a large company in the City. He likes working there, though he has just identified an issue of fraud within the company.

He has double-checked the facts, deduced that the fraudulent activity is both unethical and illegal, identified a number of ethical principles that have been breached and identified who is involved and who could be

affected.

What should he do next?

Intimidation threats to compliance with fundamental principles are described as threats that may occur

According to the CIMA code of ethics, if appropriate safeguards cannot be identified to address threats to compliance with fundamental principles, a professional accountant should:

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