CIMAPRA17-BA4-1-ENG Exam Questions – BA4 – Fundamentals of Ethics, Corporate Governance and Business Law

1. How can a company help employees make the right decision when faced with a difficult situation?

2. Which of the following statements is incorrect?

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

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

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

3. Although no-one has reason to suspect, you have taken a violent dislike to a particular assurance client.

This could severely affect your independence:

4. Which of the following is not valid consideration?

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

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

7. Which of the following is a ‘financial stakeholder’ of an organization?

8. Which of the following is incorrect?

9. 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:

10. B agreed in his contract that he would not work for a competitor of Gee Ltd for a period of 12 months after leaving the company’s employment. On leaving Gee Ltd, B worked for Zed Ltd, a competitor of Gee Ltd. If the restriction in B’s contract with Gee Ltd should be found to be reasonable, which of the following remedies is Gee Ltd entitled to?

(i) A decree of specific performance forcing B to comply with his contract with Gee Ltd.

(ii) Damages in respect of any loss caused by B’s breach of contract.

(iii) An injunction to stop B working for Zed Ltd.

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

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

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

14. 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:

15. 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.

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

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

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

This is an example of a tension between:

19. B is employed by Zed plc and has suffered an occupational injury.

Which of the following is correct?

Zed plc may be liable to B for:

i. breach of an implied term in B’s contract of employment

ii. breach of the duty to take care in the tort of negligence

iii. breach of statutory duty

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

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

22. 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.

23. Which of the following terms can be defined as follows?

"…the way an organization manages its relationships"

24. Which of the following need NOT be submitted in order to register a private company limited by shares?

(i) Articles of association

(ii) The name of the company secretary

(iii) A statement of share capital

25. 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?

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

27. In relation to the law of misrepresentation, which of the following is correct?

28. 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"?

29. A company’s board of directors is found to have committed widespread fraud and engaged in a wide range of unethical practices.

Which of the following is the LEAST likely consequence of this?

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

31. In relation to the Unfair Contract Terms Act 1977, which of the following is correct?

(i) A clause which attempts to exclude liability for death or personal injury caused by negligence is only valid if it is reasonable.

(ii) A clause which attempts to exclude liability for damage to property is void unless it is reasonable.

(iii) The Unfair Contract Terms Act applies to contractual terms and to occupiers’ liability.

32. What can companies do in order to minimize the likelihood of future legislation?

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

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

35. Which of the following is correct?

36. Which of the following types of committee is NOT required by the UK Corporate Governance Code?

37. Which of the following is correct?

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

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

(iii) A liquidated damages clause is void if it is for an amount in excess of the actual loss caused by the breach of contract.

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

39. Which of the following is incorrect?

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

41. The articles of association of Zed Ltd provide that Z is to be an executive director for life.

Zed is also a shareholder in the company.

Which ONE of the following is CORRECT?

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

Which of the following is correct?

43. 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?

44. Which of the following is NOT one of the fundamental principles of CIMA’s Code of Ethics?

45. Which of the following statements are correct?

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

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

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

46. 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?

47. 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?

48. In which country are accountants legally required to speak up about certain ethical concerns?

49. Which of the following do CIMA members NOT have a specific duty to do?

50. Rank the following, starting with the highest court:

(i) Court of Appeal (Civil)

(ii) Supreme Court

(iii) County Court

(iv) High Court

51. Which of the following statements is incorrect?

52. 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?

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

54. Zed plc wishes to issue £500,000 of shares on terms that the holders will receive a dividend before the other shareholders and they will be bought back by the company in 12 months’ time.

Which of the following best describes these shares?

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

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

i. The Health and Safety Commission

ii. The Health and Safety Executive

iii. The Health and Safety Inspectorate

57. Which of the following is NOT one of the fundamental principles of CIMA’s Code of Ethics?

58. B is a director and shareholder in Cee Ltd.

Which ONE of the following is INCORRECT?

59. Which of the following is incorrect?

(i) All contracts must be in writing.

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

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

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

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

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

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

61. Which of the following is incorrect?

62. Which of the following is correct?

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

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

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

63. ABC Accountants has taken out an advert in its local paper to promote its services. Mr B, an account manager, is uncomfortable, as the advert says that ABC is expert in charitable tax issues, and he knows that none of the partners have that expertise. However, Mr B does not want to be thought of as a ‘trouble maker’ by bringing the matter up with his manager.

Which TWO things should Mr B do?

64. A professional accountant’s social responsibility relates to which TWO of the following?

65. Which of the following statements is correct?

66. Which of the following requires the approval of a simple majority of all the company’s shareholders who are entitled to vote?

67. Miss B is working closely with Mr L to deliver an important report on the efficiency of Mr L’s department. They have had to work late together several times, and last night they went out to dinner afterwards. Miss B is starting to think she may have feelings for Mr L.

Could her independence be called into question?

68. Advocacy threats to compliance with fundamental principles are described as threats that may occur

69. Which of the following is incorrect?

70. You are concerned that your boss may have been putting together misleading financial statements for some time. As a well known and well respected accountant, you are concerned that your boss might bring the profession into disrepute.

Which TWO of the CIMA Code of Ethics fundamental principles does this affect?

71. B was employed by CDE Ltd and was dismissed. B claimed unfair dismissal and requested a written statement of reasons for his dismissal.

Within what period must CDE Ltd comply with this request?

72. 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.

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

Which of the following is correct?

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

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

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

74. Tom is a director of XYZ Ltd. The company is considering purchasing Tom’s business for £200,000.

Which of the following is incorrect?

75. Which of the following is incorrect?

76. 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?

77. The Articles of Association of Dee Ltd state that the company has power to borrow money and that the directors have authority to borrow up to £200,000 on behalf of the company. The board has resolved to purchase a piece of land for £300,000. The Midwest Bank plc has agreed to make a loan of £250,000 to Dee Ltd to acquire the land.

Which of the following statements is correct?

78. 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:

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

80. In a situation where a professional accountant needs to choose in whose interest he or she is to behave and act, which of the following interests should he or she put first?

81. According to CIMA, what is accountability?

82. What is the purpose of the equitable remedy of rescission?

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

84. 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.

85. Which of the following is NOT one of the fundamental principles of CIMA’s Code of Ethics?

86. 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?

87. Which of the following is correct in relation to corporate governance in the UK?

(i) If a listed public company in the UK fails to comply with the UK Corporate Governance Code, the company and the board may be prosecuted by the Financial Services Authority.

(ii) The duties of directors are codified in the Companies Act 2006 and breaches are enforceable by the company.

(iii) The ability of the majority of shareholders to dismiss a director for any reason whatsoever is the main sanction provided by the UK Corporate Governance Code.

88. After the Companies Act 2006, which of the following is correct in relation to a reduction of capital by a public company?

(i) If the reduction results in the company no longer having the authorized minimum capital for a public company, it may be necessary to re-register as a private company.

(ii) The Articles of Association may restrict the company’s ability to reduce capital.

(iii) The reduction must be approved by the court.

89. Working late one evening, you see a colleague copying information on to series of CD Roms. He tells you that software is too expensive for him to afford for his home computer but that he needs the software for his own personal use and in case he might take work home at some point. Is this an ethical issue and why?

90. In relation to corporate governance, which of the following statements best describes the situation in the UK?

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

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

93. 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.

94. Evidence suggests that during a recession, companies with a clear sense of ethical direction will:

95. Which of the following is CORRECT?

(i) A company limited by shares is a legal person separate and distinct from those who own and manage the company

(ii) If the company structure is used as a mere façade for fraudulent purposes the company but not the directors or shareholders can be held liable

(iii) If the company has carried on business despite the fact that insolvency appeared inevitable the directors may be personally liable for the debts contracted.

96. 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.

97. Which of the following governs all public sector employees?

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

99. 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".

100. 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.