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

Questions 4

Which of the following most accurately describes the ratio decidendi?

Options:

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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Questions 5

Section 12 of the Sale of Goods Act 1979 implies a condition into contracts for the sale of goods that the person selling the goods has the right to sell them. Which of the following is correct?

(i) The contracting parties may agree to exclude Section 12 from their contract

(ii) Section 12 applies to both consumer and non-consumer contracts for the sale of goods.

(iii) A breach of Section 12 entitles the purchaser of the goods to cancel the contract.

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) only

D.

(ii) and (iii) only

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Questions 6

A professional accountant is NOT accountable to:

Options:

A.

The public

B.

His or her clients

C.

His or her employer

D.

His or her company's competitors

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Questions 7

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

Options:

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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Questions 8

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

Options:

A.

A promise to carry out an existing contract.

B.

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

C.

A promise to do more than was originally agreed.

D.

A promise to do an act in return for payment.

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Questions 9

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

What should he do?

Options:

A.

Purchase an off the shelf company.

B.

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

C.

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

D.

Become a sole trader.

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Questions 10

Which of the following statements is correct?

Options:

A.

An employer has a duty to provide a reference.

B.

An employer has no duty to provide a reference.

C.

An employer only has a duty to provide a reference for employees with one year's continuity of employment.

D.

An employer has a duty to provide a full and comprehensive reference.

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Questions 11

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

Options:

A.

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

B.

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

C.

No - he is protecting the reputation of the firm

D.

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

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Questions 12

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

Options:

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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Questions 13

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

Options:

A.

Investment committee

B.

Audit committee

C.

Remuneration committee

D.

Nominations committee

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Questions 14

According to the CIMA Code of Ethics:

Options:

A.

Good legal behavior may be above that required by ethics

B.

Good ethical behavior may be above that required by the law

C.

Good professional behavior may be above that required by ethics

D.

Good ethical behavior may be above that required by professional bodies

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Questions 15

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

Options:

A.

(i) and (ii) only

B.

(ii) and (iii) only

C.

(i) and (iii) only

D.

(i), (ii) and (iii)

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Questions 16

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?

Options:

A.

The CIMA ethics helpline

B.

Legal advisors.

C.

The external auditors.

D.

The internal whistle-blowing helpline

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Questions 17

Which of the following does the CIMA Code of Ethics fundamental principle of integrity NOT involve?

Options:

A.

Being straightforward and honest

B.

Fair dealing and truthfulness

C.

Avoiding false or misleading reporting statements

D.

Being respectful of others

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Questions 18

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?

Options:

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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Questions 19

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

Options:

A.

5%.

B.

10%.

C.

15%.

D.

20%.

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Questions 20

A is about to register a new company limited by shares, “A Ltd”, in order to carry on a retail business. A has ordered a quantity of goods from a supplier “for and on behalf of A Ltd”. Which of the following is correct?

Options:

A.

A Ltd is liable to pay for the order as soon as it is registered.

B.

A is personally liable for the order.

C.

The contract is void.

D.

A Ltd can ratify the contract following registration.

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Questions 21

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

Options:

A.

A partnership.

B.

A public limited company.

C.

A private limited company.

D.

Either a private limited company or a public limited company.

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Questions 22

Which of the following is correct?

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

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

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

Options:

A.

(i) only

B.

(ii) only

C.

(ii) and (iii) only

D.

(i), (ii) and (iii)

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Questions 23

Which of the following statements is correct in relation to equity?

 (i) Equity was developed by the Court of Chancery

(ii) Equitable maxims were developed by lawyers

(iii) In the event of a conflict between equity and the common law, equity prevails  

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(i) and (iii) only

D.

(i), (ii) and (iii)

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Questions 24

P contracted to buy a computer from CD (Retailers) Ltd. The contract contained a term excluding liability for any breach of the condition implied by the Sale of Goods Act 1979 that the goods should be of "satisfactory quality".

 

Which of the following is correct?

Options:

A.

If this is a consumer sale the clause is void.

B.

If this is a non-consumer sale the clause is valid.

C.

Conditions implied by the Sale of Goods Act 1979 cannot be excluded in any kind of sale.

D.

If this is a consumer sale the clause is void unless it can be shown to be reasonable.

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Questions 25

Which of the following is correct in relation to Section 14 of the Sale of Goods Act 1979 which implies a term into contracts for the sale of goods that the goods supplied will be of “satisfactory quality.”

(i) A breach of Section 14 enables the innocent buyer to cancel the contract and claim damages.

(ii) The parties to a contract for the sale of goods can choose to exclude Section 14.

(iii) Section 14 applies to contracts for the sale of new goods only and does not apply to sales of second-hand goods

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) only

D.

(ii) and (iii) only

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Questions 26

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

Options:

A.

Initiative

B.

Integrity

C.

Instinct

D.

Impartiality

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Questions 27

When might an ethical dilemma occur?

Options:

A.

When legislation dictates the appropriate course of action

B.

When there is a conflict of interest

C.

When a code of ethics provides clear guidance on next steps

D.

All of the above

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Questions 28

Brian is the registered owner of 500 shares in Exe Ltd.  Which of the following statements is correct?

Options:

A.

Brian is only contractually bound to Exe Ltd in respect of the provisions contained in the company's Articles of Association.

B.

Brian is only contractually bound to Exe Ltd and the other present shareholders of the company in respect of the provisions contained in the company's Articles of Association.

C.

Brian is only contractually bound to Exe Ltd and the present directors in respect of the provisions contained within the company's Articles of Association.

D.

Brian is contractually bound to Exe Ltd and the present and future shareholders in respect of the provisions contained within the company's Articles of Association.  

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Questions 29

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

Options:

A.

Responsibility

B.

Respect

C.

Confidentiality

D.

Cooperation

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Questions 30

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

Options:

A.

Because they are the foundations of reasoning and professional practice

B.

Because they are the foundations of human rights

C.

Because they are the foundations of corporate responsibility

D.

Because they are the foundations of management accounting

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Questions 31

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

Options:

A.

Rapid advances in technology

B.

Evolving regulations

C.

Career progression

D.

Computer virus-protection

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Questions 32

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:

Options:

A.

Personal and societal values

B.

Personal and corporate values

C.

Professional and corporate values

D.

Professional and societal values

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Questions 33

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.

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) only

D.

(i), (ii) and (iii)

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Questions 34

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

Options:

A.

Responsiveness

B.

Reliability

C.

Reverence

D.

Respect

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Questions 35

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

Options:

A.

Three

B.

Four

C.

Five

D.

Six

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Questions 36

Which of the following statements is incorrect?

Options:

A.

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

B.

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

C.

A term may be implied into a contract by statute.

D.

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

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Questions 37

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

Options:

A.

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

B.

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

C.

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

D.

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

E.

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

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Questions 38

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

Options:

A.

The Council of the European Union

B.

The European Parliament

C.

The European Court of Justice

D.

The European Commission

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Questions 39

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

 

"A professional accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgments"

Options:

A.

Integrity

B.

Objectivity

C.

Professional competence and due care

D.

Professional behavior

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Questions 40

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

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

Options:

A.

Because Steve could be motivated to steal from the company.

B.

Because Steve might not work as hard.

C.

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

D.

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

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Questions 41

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

Options:

A.

Misapplication or ignoring of ethical values

B.

Misapplication or ignoring of accounting principles

C.

Misapplication or ignoring of regulations

D.

Misapplication or ignoring of human rights

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Questions 42

J is employed as management accountant of a large retailer. Jo has been invited to take a holiday 'all expenses paid' at a villa owned by the managing director of a supplier organization. If J accepts the invitation, which of the following 'fundamental principles' of CIMA's Code of Ethics will be compromised?

Options:

A.

Integrity

B.

Objectivity

C.

Confidentiality

D.

Professional behavior

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Questions 43

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

Options:

A.

Through the CIMA Professional Development Framework

B.

Through the CIMA Code of Ethics

C.

Through the IFAC Code of Ethics

D.

Through the CIMA Public Duty Framework

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Questions 44

In regards to a claim of misrepresentation, which of the following must be proved to show that the defending party induced the other party into entering the contract?

Select ALL that apply.

Options:

A.

The other party knew of the existence of the representation

B.

The other party allowed the representation to affect their judgement.

C.

The other party was unaware of the representation's falsity.

D.

The other party was of a sound mind.

E.

The other party had no relationship with the offending party when the representation was made.

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Questions 45

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

Options:

A.

Integrity

B.

Objectivity

C.

Courtesy

D.

Professional behavior

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Questions 46

An ethical dilemma generally refers to:

Options:

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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Questions 47

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

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) and (iii) only

D.

(i), (ii) and (iii)

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Questions 48

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

didn't.

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

Select ALL that apply.

Options:

A.

John will lose his employer's trust.

B.

John will lose his job.

C.

John will face criminal proceedings.

D.

John will face civil proceedings.

E.

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

F.

John will have problems finding new employment.

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Questions 49

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

i. Germany.

ii. United States of America

iii. France.

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(i) and (iii) only

D.

(iii) only

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Questions 50

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

Options:

A.

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

B.

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

C.

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

D.

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

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Questions 51

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

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

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

Select ALL that apply.

Options:

A.

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

B.

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

C.

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

D.

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

E.

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

F.

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

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Questions 52

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

Options:

A.

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

B.

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

C.

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

D.

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

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Questions 53

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

Options:

A.

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

B.

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

C.

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

D.

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

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Questions 54

Section 13 of the Sale of Goods Act 1979 implies a condition into contracts for the sale of goods that the goods supplied will correspond to the description.  What remedies are available to the innocent buyer in the event of a breach of Section 13?

Options:

A.

The buyer is entitled to damages only

B.

The buyer has the option of retaining the goods and claiming damages or repudiating the contract and claiming damages

C.

The contract between the buyer and the seller is automatically cancelled

D.

The buyer is entitled to specific performance of the contract

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Questions 55

A was disqualified from driving but continued his employment as a driver for XYZ plc. The company discovered that A had lost his driving license and immediately dismissed him without notice.  

 

Which of the following is correct? 

 i. As no notice was provided A's dismissal amounts to constructive dismissal.

ii. The employer was justified in dismissing A without notice as he was unable to continue his employment.

iii. A may make a claim for wrongful dismissal as, although his dismissal was justified, he was entitled to notice.  

Options:

A.

(i) only

B.

(ii) only

C.

(i) and (ii) only

D.

(iii) only

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Questions 56

What is the public function of all accountants?

Options:

A.

To provide truthful and independent accounts of finances

B.

To give financial judgments to owners and shareholders

C.

To do a job and go home

D.

To represent the life-cycle of accounts

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Questions 57

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

Options:

A.

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

B.

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

C.

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

D.

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

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Questions 58

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

(i) The liability of the company is limited.

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

(iii) The liability of the shareholders is limited.  

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) and (iii) only

D.

(iii) only

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Questions 59

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?

Options:

A.

Leadership of the organization which stresses the importance of compliance with the fundamental principles

B.

Leadership of the organization which establishes the expectation that members of an assurance team will act in the public interest

C.

Professional standards

D.

An organization having documented internal policies and procedures requiring compliance with the fundamental principles

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Questions 60

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

Options:

A.

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

B.

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

C.

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

D.

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

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Questions 61

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

Options:

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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Questions 62

SuperSole eventually decides to outsource its internal audit.

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

Select ALL that apply.

Options:

A.

Flexibility to increase or reduce in size

B.

Readily available expertise

C.

Lower costs

D.

More independent auditing process

E.

Less time taken

F.

Less risk of confidential information leaking

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Questions 63

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

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

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

How might he do this?

Select ALL that apply.

Options:

A.

Resign from the company.

B.

Consider getting legal advice.

C.

Determine whether he should report the issue.

D.

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

E.

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

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Questions 64

Which of the following is correct?

Options:

A.

A fixed charge is a charge over a specific asset of the company which it is unable to deal with freely in the ordinary course of business.

B.

A fixed charge is a charge over a specific asset of the company which it is able to deal with freely in the ordinary course of business.

C.

A fixed charge is a charge over a class of company assets which the company can deal with freely in the ordinary course of business.

D.

A fixed charge is a charge over a class of company assets which the company is unable to deal with freely in the ordinary course of business.

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Questions 65

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?

Options:

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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Questions 66

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

Options:

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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Questions 67

Which of the following deal with most criminal matters in China?

Options:

A.

Mediation Committees

B.

The courts

C.

Regional tribunals

D.

Urban forums

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Questions 68

Articles of association regulate the relationship between:

Options:

A.

the company and its directors

B.

the company and its customers

C.

the company and its members

D.

the company and its creditors

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Questions 69

Which of the following is INCORRECT?

Options:

A.

A company secretary may be dismissed by the board

B.

A person may be appointed company secretary for life

C.

A company secretary is an officer and not an employee of the company

D.

A company secretary of a public company must be appropriately qualified

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Questions 70

Immediately before being placed in creditors voluntary liquidation, Tom, the sole director of Bee Ltd, arranged for the company to make an early repayment of an unsecured loan made to Bee Ltd by his wife Anne. Which of the following is correct?

Options:

A.

The company has acted in breach of fiduciary duty and can be made liable up to the amount of the loan.

B.

The company has given a "preference" to Anne, and the court may make any order it thinks fit to restore the position to what it was before Anne was repaid.  

C.

The company has entered into a "transaction at an undervalue" with Anne, and the court may fine or imprison Tom.

D.

The transaction amounts to "wrongful trading" and Tom may be held personally liable up to the amount of the loan.    

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Questions 71

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"?

Options:

A.

Where the directors have the intention of defrauding creditors.

B.

Where directors knew or ought to have known that insolvency was inevitable.

C.

Whenever a company becomes insolvent.

D.

Whenever a company's liabilities exceed its assets.

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Questions 72

A, B C and D are sole directors and shareholders of EFG Company each holding 25% of the shares in the company. The articles of association

of EFG Company state that "the directors cannot enter into any contract on behalf of the company exceeding $30,000 without the agreement of all the shareholders’’.

B contracted on behalf of the company for $40,000 with Y Company without the agreement of the other shareholders. Which of the following is correct?

1. Y Company may enforce the contract against EFG Company

2. A, C and D may obtain an injunction to stop the contract being canted out

3. B may be liable to EFG Company for breach of duty.

Options:

A.

1 and 3 only

B.

1 and 2 only

C.

1 only

D.

1,2 and 3

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Questions 73

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

Options:

A.

Applicants for a motor mechanic s position are only considered if they are male

B.

All employees in the sales departments are required to be smartly dressed and clean shaven

C.

Only women are promoted in the employee counseling department

D.

Employee X is not considered for an excellence award because she raised a complaint about sexist comments on the factory floor

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Questions 74

Which TWO of the following options describe safeguards that the CIMA Code of Ethics states may eliminate or reduce threats to compliance with fundamental principles to an acceptable level?

Options:

A.

Safeguards created by the Financial Reporting Council

B.

Safeguards created by the profession, legislation or regulation

C.

Safeguards in the governance environment

D.

Safeguards in the work environment

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Questions 75

Which of the following statements correctly defines the ethics of utilitarianism?

Options:

A.

The guiding principle of conduct should be the greatest happiness for the greatest number

B.

The guiding principle of conduct should be the consideration of the duty to respect other rational beings

C.

The guiding principle of conduct should be to do no harm

D.

The guiding principle of conduct should be to act with justice and courage

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Questions 76

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?

Options:

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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Questions 77

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

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

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

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

Options:

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(ii) and (iii) only

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Questions 78

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

Options:

A.

Respect

B.

Responsibility

C.

Reliability

D.

Timeliness

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Questions 79

Who is entitled to sue under Section 994 of the Companies Act 2006, which empowers the court to grant a remedy in the event of the company's affairs being conducted in a manner "unfairly prejudicial to the interests of members…"?

Options:

A.

Any member.

B.

The holders of at least 10% of the company's issued share capital.

C.

The shareholders as a whole.

D.

The directors.

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Questions 80

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

Options:

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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Questions 81

According to CIMA, governance and social responsibility policies are:

Options:

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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Questions 82

Which of the following are situations involving conflicts of interest? Select ALL that apply.

Options:

A.

Nina - Receives a large boxful of chocolate delivered to her house from the chocolate factory she is due to audit

B.

Shannon - A department manager at an IT firm who regularly goes out drinking with her team members.

C.

Ben - Regularly works two hours later than he should because his boss constantly gives him large amounts of work to do.

D.

Tyrone - Works standard hours, though is usually unable to do any overtime due to family commitments.

E.

Tina - A personal accountant who actively tries to build a rapport with her clients, though doesn't engage with them outside working hours.

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Questions 83

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

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

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

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

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) only

D.

(i) and (iii) only

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Questions 84

J is at his company's reception desk when the promotions manager of a new restaurant and bar nearby hands him a number of vouchers for cheap meals and drinks. At the promotion manager's request, J agrees to share out the vouchers among his company's employees. J does not earn much and is tempted to keep the vouchers for himself and his friends. Is this an ethical issue and why?

Options:

A.

Yes - promotional offers of this sort are unethical and J should throw away all of the vouchers

B.

Yes - the vouchers were given to J on the understanding that he would distribute them to other employees rather than keep them for himself

C.

No - as long as J gives vouchers to other company employees who earn as little as he does

D.

No - the vouchers were given to J, so he can do what he likes with them

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Questions 85

Which of the following is incorrect?

Options:

A.

A floating charge is a charge over a class of company assets which the company is unable to deal with freely in the ordinary course of business.

B.

A floating charge must be registered at Companies House within 21 days of its creation, otherwise the charge is void against the other creditors.

C.

A floating charge must be registered at the company's registered office, but a failure to do so does not affect the validity of the charge.

D.

A floating charge is a charge over a class of assets which change from time to time.

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Questions 86

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?

Options:

A.

501

B.

500

C.

750

D.

1,000

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Questions 87

J and K are the only shareholders in JK Ltd, each holding 500 fully paid ordinary £1 shares. J is the company's only director and K the company secretary. The company has been placed in creditors’ voluntary liquidation on the grounds that it is unable to pay its debts.

 

Which of the following is correct?

Options:

A.

J is liable for the company's debts as he is the sole director of the company which is obliged by law to have at least two directors.

B.

JK Ltd is not liable for its debts as it is a limited company.

C.

J and K are not obliged to contribute anything further towards the debts of the company.

D.

As they each hold 50% of the shares, J and K are each obliged to pay half of the company's debts.

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Questions 88

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

Options:

A.

Yes. T has a duty to maintain his professional knowledge

B.

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

C.

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

D.

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

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Questions 89

(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.

Options:

A.

Only (i) and (ii) are correct.

B.

Only (ii) and (iii) are correct.

C.

Only (i) and (iii) are correct.

D.

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

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Questions 90

Which of the following is correct?

Options:

A.

The shares of all public limited companies are quoted on the Stock Exchange.

B.

The company secretary of a public limited company must be qualified.

C.

A private limited company must have at least two shareholders.

D.

A public limited company cannot trade until it has paid up share capital of at least £50,000.

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Questions 91

Which of the following auditors would need to issue a disclaimer of opinion? Select ALL that apply.

Options:

A.

Miguel - Unable to conduct a full audit due to the client's refusal to provide access to the company's financial records.

B.

Abe - Has limited time to complete an audit, so performs a brief check of each department

C.

India - Has noticed that the company she is auditing has adopted a new set of accounting rules unusually early.

D.

Sean - Discovers during an audit that the company has overstated the value of its assets.

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Questions 92

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?

Options:

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

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Questions 93

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

Options:

A.

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

B.

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

C.

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

D.

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

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Questions 94

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

(i) To punish the contract breaker.

(ii) To compensate the innocent party.

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

Options:

A.

(i) only

B.

(ii) only

C.

(i) and (iii) only

D.

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

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Questions 95

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

Options:

A.

Responsibility

B.

Accuracy

C.

Timeliness

D.

Tardiness

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Questions 96

Which of the following is INCORRECT in relation to the United States of America (USA)?

(i) In the event of a conflict between state and federal legislation, state legislation is superior.

(ii) The USA has a federal system of government.

(iii) Legislation is enacted by Congress.

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(i) and (iii) only

D.

(iii) only

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Questions 97

Which of the following best describes "independence of mind" as referred to in CIMA's Code of Ethics

Options:

A.

It separates a professional accountant from the rest of society

B.

It ensures a professional accountant always tries to avoid any action which discredits the profession.

C.

It permits the expression of a conclusion without being affected by influences that compromise professional judgement

D.

It ensures a professional accountant is straightforward and honest in all professional and business relationships

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Questions 98

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

Options:

A.

No maximum.

B.

5 years.

C.

10 years.      

D.

15 years.

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Questions 99

The IFAC has eight main drivers of sustainable corporate success. Which of the following are included in the eight mam drivers?

1, Innovation and adaptability

2. Effective leadership and strategy.

3. Board control and responsibility

Options:

A.

1 only

B.

2 and 3 only

C.

1 and 2 only

D.

2 only

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Exam Code: BA4
Exam Name: Fundamentals of Ethics, Corporate Governance and Business Law
Last Update: Oct 10, 2024
Questions: 661
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