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

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Total 661 questions

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

Question 1

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

(i) The Sunnah

(ii) The Qur'an

(iii) Rules agreed unanimously by the disciples of Mohammad

Options:

A.

(i) only

B.

(i) and (iii) only

C.

(ii) and (iii) only

D.

(i), (ii) and (iii)

Question 2

'Remuneration' is one of the main principles in the Corporate Governance Code. Which of the following is NOT best practice under the 'Remuneration' principle?

Options:

A.

Remuneration should be sufficient to attract, retain and motivate directors of the quality required to run the company successfully, but should not be excessive

B.

Remuneration should be structured in order to link a significant proportion of the rewards to corporate and individual performance

C.

There should be a formal and transparent procedure for developing policy on executive remuneration

D.

The board of directors are able to set the remuneration of non-executive directors

Question 3

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

Options:

A.

A victim of a breach of contract may be unable to recover damages if he has failed to mitigate his loss.

B.

Mitigation and remoteness of damage are irrelevant where a creditor is suing to recover an agreed debt.

C.

A penalty clause in a contract cannot be enforced.

D.

Damages cannot be claimed for a breach of a contract to provide personal services.

Question 4

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.

Question 5

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

Options:

A.

No. The contractor is being paid to build a bridge with tax payers' money.  If it is built with poor quality materials it may collapse, wasting money, and potentially causing an accident

B.

Yes. Mr X used the money to get help for his wife. The bridge was built anyway

C.

Yes. Mr X needed the money to help his wife - family is more important

D.

Yes. Mr X has a duty to do as his client asked

Question 6

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?

Options:

A.

As Seller Ltd is only involved in non-consumer sales it may exclude all the conditions implied by sections 12 to 15 of the Sale of Goods Act 1979

B.

Seller Ltd cannot exclude section 12 but can exclude sections 13 to 15 where reasonable

C.

Seller Ltd may exclude section 12 where reasonable but not sections 13 to 15

D.

Sections 12 to 15 of the Sale of Goods Act cannot be excluded in any non-consumer sales

Question 7

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?

Options:

A.

Yes - Because the potential buyer sent the letter before the closing date.

B.

Yes - The potential buyer can choose to accept Pablo and Paulo's price whenever he wants, providing that he hasn't already declined it.

C.

No - Because they received the letter after the closing date they do not have to accept the potential buyer's offer.

D.

No - They can decline the potential buyer's request at any time, regardless of when they received the letter.

Question 8

How can values become part of a company's DNA? Choose TWO of the following options.

Options:

A.

Through leadership and example from the top

B.

Guidance and training for all staff

C.

Through corporate scandals

D.

Through proxy indicators

Question 9

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

Options:

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.

Question 10

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

Options:

A.

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

B.

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

C.

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

D.

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

Question 11

Which of the following is correct?

(i) A contract of guarantee is unenforceable unless it is evidenced in writing.

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

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

Options:

A.

(i) and (ii) only

B.

(i) and (iii) only

C.

(ii) and (iii) only

D.

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

Question 12

Which of the following remedies is not available for a breach of a contract to provide personal services?

Options:

A.

Damages.

B.

A decree of specific performance.

C.

An injunction.

D.

Rescission.

Question 13

Which of the following sources of law is not binding upon the Supreme Court?

Options:

A.

A Statutory Instrument.

B.

A European Council regulation.

C.

A previous decision of the House of Lords.

D.

A provision in an Act of Parliament.

Question 14

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:

Options:

A.

Integrity

B.

Objectivity

C.

Professional competence and due care

D.

Professional behavior

Question 15

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

Options:

A.

Integrity

B.

Objectivity

C.

Confidence

D.

Professional behavior

Question 16

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

Options:

A.

Serious misconduct

B.

Refusing to join an independent trade union.

C.

Pregnancy

D.

Selection for redundancy because of membership of a trade union.  

Question 17

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

Options:

A.

Mediation Committees

B.

The courts

C.

Regional tribunals

D.

Urban forums

Question 18

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

Question 19

Although no-one has reason to suspect, you have taken a violent dislike to a particular assurance client. This could severely affect your independence:

Options:

A.

Of belief

B.

In appearance

C.

Of mind

D.

In competence

Question 20

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

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

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

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

Options:

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(ii) and (iii) only

Question 21

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

Options:

A.

A Ltd's factory was flooded.

B.

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

C.

A Ltd's employees went out on strike.

D.

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

Question 22

What is a fundamental attribute of a competent accountant?

Options:

A.

Ability to exercise good judgment

B.

Ability to communicate effectively

C.

Ability to calculate correctly

D.

Ability to be efficient

Question 23

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

Options:

A.

Customer

B.

Employee

C.

Government

D.

Competitor

Question 24

Which of the following is correct in relation to the control of boards of directors of public limited companies? 

i. The boards of public limited companies are under the legal control of the shareholders

ii. The majority of the shares in public limited companies are held by institutional investors who are more concerned with capital growth and income than the internal management of public limited companies

iii. As a general rule, private investors in the shares of public limited companies have insufficient power to influence the activities of the board.

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(i) and (iii) only

D.

(i),(ii) and (iii)

Question 25

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

Options:

A.

Relativity

B.

Reliability

C.

Responsibility

D.

Respect

Question 26

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?

Options:

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.

Question 27

In the UK, the body responsible for reviewing the regulatory activities of the professional accountancy bodies is:

Options:

A.

The Professional Oversight Board for Accountancy

B.

The International Federation of Accountants

C.

The Financial Reporting Council

D.

The Financial Review Board

Question 28

Adam, Brian, Charles and David each held 25% of the issued share capital of ABCD Ltd. Adam has recently issued further shares to himself in order to increase his voting power. Which of the following is incorrect?

Options:

A.

The share issue is automatically invalid.

B.

The shareholders may ratify the share issue by ordinary resolution.

C.

The shareholders may challenge the validity of the share issue using Section 994 of the Companies Act 2006, on the ground that the issue is "unfairly prejudicial to the interests of the shareholders".

D.

The company may proceed against Adam for breach of fiduciary duty.

Question 29

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

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

Options:

A.

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

B.

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

C.

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

D.

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

Question 30

M wrote to A (Accountants), asking if he could rely on the firm's audit report of B Ltd. M told A (Accountants), confidentially, that he was considering making a take-over bid for B Ltd. A (Accountants) advised M that he could rely on the report. As a result, M relied on the report and purchased the entire share capital of B Ltd. M has now discovered that he has paid considerably more for the shares than they were worth, as the company's stock had been negligently over-valued in the audit report.

 

Which of the following is correct?

Options:

A.

M cannot recover compensation from A (Accountants) in tort, as they only owe a contractual duty to B Ltd.

B.

M can sue A (Accountants) in the tort of negligence as they knew that M intended to rely on their report and the purpose for which he intended to use it.

C.

M cannot hold A (Accountants) responsible, as he did not pay for their advice.

D.

M can recover damages from A (Accountants) for breach of contract.

Question 31

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)

Question 32

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

Options:

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

Question 33

Which of the following is a civil action? 

i. An action by a local authority against a restaurant for selling impure food.

ii. An action by a taxpayer against Her Majesty's Revenue and Customs (“HMRC”) in relation to an expenses claim which has been refused by the Inspector of Taxes.

iii. An action by Exe Ltd against Zed Ltd for supplying equipment which was found to be dangerous.

Options:

A.

(i) only

B.

(ii) only

C.

(i) and (ii) only

D.

(i) and (iii) only

Question 34

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?

Options:

A.

Yes - Its large size and complexity increases the need for an internal auditing department.

B.

Yes - All companies should have their own internal auditing department.

C.

No - Only small companies need an internal auditing department.

D.

No - All companies should be externally audited.

Question 35

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

Options:

A.

Relevance

B.

Faithful representation

C.

Understandability

D.

Verifiability

E.

Comparability

F.

Timeliness

Question 36

Company A has recently been having problems matching the views of its employees to its own. Which of the following might help their situation? Select ALL that apply.

Options:

A.

Only hire those who share the company's views.

B.

Ensure management level employees follow the actions and behaviour of those higher up.

C.

Teach employees the company's values and train them to follow them.

D.

Remove any barriers that might prevent an employee from adhering to the company's ethics.

E.

Reward those who consistently recognise and and adhere to the company's values.

F.

Discipline those who regularly ignore the company's rules and values.

G.

Threaten legal action against those who regularly ignore the company's ethics.

Question 37

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

Question 38

Which of the following terms can be defined as follows?

 

"...the generic way that organizations are run"

Options:

A.

Ethics

B.

Social responsibility

C.

Corporate governance

D.

Professional behavior

Question 39

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

Options:

A.

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

B.

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

C.

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

D.

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

Question 40

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

Options:

A.

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

B.

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

C.

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

D.

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

Question 41

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.

Options:

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.

Question 42

Which of the following statements is incorrect in relation to the Memorandum of Association of a company which is registered after the Companies Act 2006 is fully in force?

Options:

A.

The Memorandum of Association will no longer be a company's superior constitutional document.

B.

The Memorandum of Association must state that the subscribers wish to form a company under the Act.

C.

The Memorandum of Association must state that the subscribers agree to become members of the company.

D.

The Memorandum of Association must contain a statement of the company's authorized share capital.

Question 43

How might a company ensure that the roles and responsibilities of its board and management are made clear and publicly known?

Options:

A.

Ensure such details are included in the its annual report.

B.

Highlight this information during its AGM.

C.

Ensure it has an audit committee, remuneration committee and a nominations committee.

D.

Adhere to the principles outlined in the Sarbanes-Oxley Act.

Question 44

Which of the following is INCORRECT regarding the differences between a general partnership and a company limited by shares?

(i) Both a partnership and a company are formed by registration with the Registrar of Companies.

(ii) All partners are agents of the firm and all directors are agents of the company.

(iii) All partners are fully liable for the firm’s debts and the company is fully liable for its own debts.

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(i) and (iii) only

D.

(iii) only

Question 45

Which of the following statements is correct?

Options:

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.

Question 46

Which of the following statements is correct?

(i) The written statement of particulars of employment is the contract of employment and every employee with one month's service is entitled to receive a copy.

(ii) The written statement of particulars of employment is not the contract of employment.

(iii) The written statement of particulars of employment may be the best evidence of the terms of the contract and every employee with one month's service is entitled to receive a copy. 

Options:

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(ii) and (iii) only

Question 47

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?

Options:

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.

Question 48

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

Question 49

Exe Ltd has five members. A has 90% of the shares and the other four members holds 2.5% of the shares each.

 

Which of the following is correct in relation to the calling of a general meeting on short notice?

Options:

A.

All five of the members must agree to short notice

B.

A alone may call the meeting on short notice

C.

Any three of the members may agree to the meeting being held on short notice

D.

A and any two of the other members can agree to short notice

Question 50

You are at a conference. The finance director of one of your competitors is boasting about top secret plans that she says will give her company market dominance. As she walks into a conference session, she accidently drops a folder marked "private and confidential". No one else notices and you are left alone in the room with the folder. Which of the following would be an ethical course of action and why?

Options:

A.

Read the contents in the hope that you can help your company by preventing your competitor's plans

B.

Read the contents in order to teach the arrogant finance director a lesson

C.

Return the folder to your competitor unopened because this is what you would hope would be done if you were in her situation

D.

Give the folder to a journalist friend at the conference because it is in the public interest to expose the company's plans

Question 51

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

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

Question 52

To which of the following contracts does the Supply of Goods and Services Act 1982 apply?

(i) A contract with a joiner for the manufacture and supply of a cabinet.

(ii) A contract for the hire of a car.

(iii) A contract with a builder to construct an extension to a house.

Options:

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(i), (ii) and (iii)

Question 53

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)

Question 54

Which of the following statements suggests that A is an employee in relation to the work he carries out for BCD Ltd? 

i. He is required to provide his own tools.

ii. He is required to carry out his work personally and is not free to send a substitute.

iii. He is in receipt of pay after income tax has been deducted under PAYE.

Options:

A.

(i) and (ii) only

B.

(ii) and (iii) only

C.

(i) and (iii) only

D.

(i), (ii) and (iii)

Question 55

You work for an airline company and discover a series of regular payments made to a lobbying group that campaigns to allow people freedom to fly as and when they choose without being taxed for contributing to global warming. The group's website includes specific commentary that claims to 'expose the myth of global warming'. Neither your company nor the lobbying group (which describes itself as 'independent') mention the financial link between your organizations. Is this an ethical issue and why?

Options:

A.

Yes - the lobbying group appears to be funded at least in part by your company so it is not independent and is therefore misleading people about its status

B.

Maybe - depending on whether the lobbying group is funded by other airlines as well as your company

C.

No - companies are entitled to fund any groups that they choose, particularly if it is in their financial interest. Neither party has done anything unethical

D.

No - there is unlikely to be any connection between the payments and the group's aims. After all, companies regularly fund Non-Government Organizations (NGOs) and other types of organization

Question 56

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

Options:

A.

The company must have at least one director.

B.

The company must have at least one shareholder.

C.

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

D.

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

Question 57

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

Options:

A.

If the Code is ignored by any company, no action may be taken as it has no legal status

B.

If any company fails to comply with the Code, the directors may be sued for breach of duty by the company on behalf of the shareholders

C.

If a public company fails to comply with the Code, it may be sued for breach of statutory duty by those who have suffered loss as a result

D.

If a listed public company fails to produce a report explaining why it has not implemented the Code's recommendations, it has acted in breach of the Code

Question 58

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

Options:

A.

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

B.

Share capital invested by the shareholders.

C.

Fees owed to the directors

D.

Unpaid employees' wages

Question 59

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

i. Shari'ah law is intended to provide for a person's spiritual well-being but is not concerned with secular matters.

ii. The Sunnah is one of the primary sources of Shar'iah law.

iii. The salat (daily prayers) is one of the Five Pillars of Islam.    

Options:

A.

(i) only

B.

(ii) only

C.

(i) and (ii) only

D.

(iii) only

Question 60

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

Question 61

Which of the following is not financial assistance for the purchase of a public company's own shares?

Options:

A.

A loan by a company outside the ordinary course of business

B.

Allowing the use of a company's assets as security for a loan

C.

The payment of a dividend which has the effect of putting a shareholder in funds and enabling him to purchase the company's shares

D.

Releasing a shareholder from a debt owed to the company

Question 62

Which of the following is correct in relation to international relations?

(i) International regulations are voluntarily entered into by commercial and professional bodies to standardize practices and procedure to make it easier to enter into international trading agreements.

(ii) International regulations which have been agreed by the professional bodies of different states are only binding on the members of those bodies or those who choose to adopt them.

(iii) International regulations may attain the force of law by being adopted by the legislatures of individual states

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) only

D.

(i), (ii) and (iii)

Question 63

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

Options:

A.

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

B.

Both public and private companies may use a business name.

C.

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

D.

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

Question 64

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

Who is liable for the debt?

Options:

A.

Cameron

B.

Cameron's business

C.

Cameron's employees

D.

Cameron and his employees

E.

No one

Question 65

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?

Options:

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

Question 66

Which of the following are TWO reasons why new legislation might be introduced in response to corporate scandals?

Options:

A.

To prevent this type of unethical behavior by making it illegal

B.

To punish individuals for adhering to codes of ethics

C.

To encourage companies to make their own decisions about ethical matters

D.

To enforce minimum standards of behavior

Question 67

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

Options:

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

Question 68

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

Question 69

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

Options:

A.

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

B.

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

C.

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

D.

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

Question 70

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

Options:

A.

Fear driven

B.

Mandatory

C.

Discretionary

D.

Implicit

Question 71

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. 

Options:

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(ii) and (iii) only

Question 72

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

Options:

A.

Integrity

B.

Objectivity

C.

Leadership

D.

Learning

Question 73

T contracted to buy a washing machine from AB (Retailers) Ltd for his personal use at home. 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". The contract was on AB (Retailers) Ltd's standard form contract.

 

Which of the following is correct?

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

(ii) This is a consumer sale and the clause excluding liability is void.

(iii) This is a non-consumer sale and the clause is void unless reasonable.

Options:

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(i) and (ii) only

Question 74

Which of the following statements is correct?

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

(ii) A term may be implied into a contract on the ground that it is a trade custom.

(iii) A term may be implied into a contract by a court in order to give the agreement "business efficacy".

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(iii) only

D.

(i), (ii) and (iii)

Question 75

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.    

Question 76

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

(i) An LLP is formed by registration with the Registrar of Companies

(ii) Unlike the articles of a company the internal rules of an LLP are not available for public inspection

(iii) An LLP is liable to pay corporation tax on its profits

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(ii) and (iii) only

D.

(i), (ii) and (iii)

Question 77

Which of the following is incorrect?

Options:

A.

All courts below the Supreme Court  may refer a case involving European Law to the European Court of Justice for a preliminary ruling.

B.

Supreme Court must refer a case involving European Law to the European Court of Justice for a preliminary ruling.

C.

An English court is not bound to give effect to a preliminary ruling of the European Court of Justice.

D.

A preliminary ruling of the European Court of Justice is sent back to the Court which referred the question and must be given effect by that court.

Question 78

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

Question 79

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.

Options:

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

Question 80

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"

Options:

A.

Integrity

B.

Objectivity

C.

Professional competence and due care

D.

Professional behavior

Question 81

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

Options:

A.

The Professional Oversight Board for Accountancy

B.

The International Federation of Accountants

C.

The Financial Reporting Council

D.

The Financial Review Board

Question 82

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

Options:

A.

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

B.

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

C.

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

D.

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

E.

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

Question 83

The distinction between an employee and an independent contractor is important because only an employee:

i. is given statutory protection in relation to employment rights.

ii. is subject to the deduction of income tax and national insurance under the PAYE system.

iii. can make the employer vicariously liable for his/her torts.

Options:

A.

(i) and (ii) only

B.

(ii) and (iii) only

C.

(i) and (iii) only

D.

(i), (ii) and (iii)

Question 84

Tee Ltd has contracted to use Vee Ltd's "Grand Hotel" for a business conference. Which of the following would not be regarded as a valid excuse for Vee Ltd for the unavailability of the hotel on the agreed date?

(i) The hotel was closed due to flood damage.

(ii) The hotel was double booked.

(iii) The hotel manager had arranged to have the hotel redecorated; the decorators had failed to complete the work by the agreed date.

Options:

A.

(i) only

B.

(iii) only

C.

(ii) and (iii) only

D.

(i), (ii) and (iii)

Question 85

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

Options:

A.

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

B.

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

C.

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

D.

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

Question 86

Which of the following are likely advantages of being a sole trader? Select ALL that apply.

Options:

A.

No formal procedures required to set up the business.

B.

Greater degree of independence.

C.

They retain all profits.

D.

Expansion is likely to be fast.

E.

Working hours will be relatively short.

F.

They have limited personal responsibility in regards to the debts of the business.

Question 87

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.

Question 88

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

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

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

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

Options:

A.

(i) only

B.

(ii) only

C.

(iii) only

D.

(ii) and (iii) only

Question 89

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

 

Which of the following statements is correct?

Options:

A.

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

B.

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

C.

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

D.

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

Question 90

If a business trades as “Exe and Co (Office Furniture)” which of the following is CORRECT?

(i) The business could be owned by a partnership

(ii) The business could be owned by a sole trader

(iii) The business could be owned by a private company limited by shares

Options:

A.

(i) only

B.

(i) and (ii) only

C.

(iii) only

D.

(i), (ii) and (iii)

Question 91

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.   

Options:

A.

(i) only

B.

(i) and (ii)

C.

(i) and (iii)

D.

(iii) only

Question 92

Which of the following courses of action is NOT part of the process that the CIMA Code of Ethics expects of professional accountants in resolving an ethical conflict?

Options:

A.

Determine the appropriate course of action that is consistent with the fundamental principles identified

B.

Evaluate the consequences of each possible course of action

C.

Consult with other appropriate persons within the firm or employing organization for help if the matter remains unresolved

D.

Proceed with the course of action that would do least damage to a professional accountant's career prospects

Question 93

The International Accounting Education Standards Board has published a document titled "Approaches to the Development and Maintenance of Professional Values, Ethics and Attitudes in Accounting Education Programs'", which provides guidance about the personal qualities needed by accountants to meet the expectations of the public

The particular qualities which it identifies are

Options:

A.

responsibility, accountability, timeliness, independence and respect

B.

reliability, responsibility, timeliness, independence and respect

C.

responsibility, accountability, courtesy, independence and respect

D.

reliability, responsibility timeliness, courtesy and respect

Question 94

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

Options:

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

Question 95

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. 

Options:

A.

(i) only

B.

(i) and (iii) only

C.

(ii) and (iii) only

D.

(i), (ii) and (iii)

Question 96

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.

Question 97

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

Options:

A.

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

B.

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

C.

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

D.

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

E.

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

F.

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

Question 98

Which THREE of the following statements are correct regarding the CIMA Code of Ethics for Professional Accountants?

Options:

A.

Where a statutory requirement is in conflict with a provision of the CIMA Code, the CIMA Code requirement prevails

B.

The CIMA Code is mandatory for all CIMA members and students, and is applicable to all professional services.

C.

The CIMA Code imposes an obligation on CIMA members and students to comply with relevant laws and regulations

D.

Professional accountants should consider the ethical requirements contained in the CIMA Code as the basic principles which they should follow in performing their work

E.

The CIMA Code is an example of a compliance driven ethical framework

Question 99

XYZ plc has recently acted in breach of its contract with ABC Ltd. The breach caused ABC Ltd to lose several thousand pounds. The board of ABC Ltd has resolved not to proceed against XYZ plc, as it believes that the time and expense involved would be disadvantageous to the company. A number of ABC Ltd shareholders are dissatisfied with the board's decision.

 

Which of the following is INCORRECT?

Options:

A.

Individual shareholders cannot interfere with the board's decision.

B.

If the shareholders pass an ordinary resolution requiring the board to proceed against XYZ plc, the board will be obliged to comply with the resolution.

C.

If the shareholders are dissatisfied with the directors they may vote to remove them from office.

D.

If the directors are removed from office, they may be entitled to damages for breach of their service contracts.

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