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4. BA4 CIMA > ALL Wrong Answers > Flashcards

ALL Wrong Answers Flashcards

1
Q

who compiled the code published by IFAC

A

International Ethics Standards Board for Accountants (IESBA)

a separate board within IFAC which just develops ethical code, IFAC is standards as a whole not just ethical

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2
Q

what is the role of the conduct committee

A
  • overseeing the FRC’s Conduct Division that monitors recognised supervisory bodies (such as CIMA)
  • audit quality reviews
  • corporate reporting reviews
  • professional discipline
  • the oversight of the regulation of accountants and actuaries
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3
Q

what is someone breaching if they take a report home to do whilst watching something on TV

A

professional behaviour and due care

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4
Q

what trait is this person showing:

An accountant avoids all situations that they believe could cause a reasonable observer to doubt their objectivity

A

independence

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5
Q

who is the principal/agent in shareholders and directors

A

directors = agents
shareholders = principal

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6
Q

who sets out the corporate governance for a plc

A

board of directors

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7
Q

who does the remuneration committee make the remuneration for

A

directors and senior managers

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8
Q

what are ethics

A

personal principles that guide behaviour

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9
Q

what does a rules based approach attempt to do

A

anticipate every possible ethical dilemma

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10
Q

what is IFACs code based on

A

compliance principles

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11
Q

who does the accountant have to give information to if requested

A

regulator

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12
Q

what causes a conflict of interest

A
  • working part time for two rival businesses
  • being employed by a close relative
  • being offered a valuable gift by a friend who is also a business contact
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13
Q

what kind of stakeholder is the government

A

financial
external

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14
Q

who do cima members go to first to resolve an issue

A

themselves

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15
Q

what kind of ethical code is CIMAs

A

ethical framework

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16
Q

what do ethical codes require of its individuals

A

to respect the spirit of the law rather than the letter of the law

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17
Q

why are corporate governance codes necessary

A

to encourage boards of directors to act in the best interests of all stakeholders

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18
Q

benefits of a two tier board approach

A
  • separation of power between those that manage the business and those controlling it for the benefit of shareholders
  • more independent thinking as separate board meetings held
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19
Q

common audit benchmarks:
profit before tax
gross profit
revenue
total and net assets
profit after tax

A

5% of profit before tax.
0.5 to 1% of gross profit.
0.5 to 1% of revenue.
1 to 2% of total assets.
2 to 5% of net assets.
5 to 10% of profit after tax.

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20
Q

3 elements of external audit?

A
  • subject matter
  • evaluation
  • report
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21
Q

if an agreement is commercial, how is intention seen

A

If an agreement is of a commercial nature, the parties cannot argue that there was no intention to create legal relations, it is not presumed

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22
Q

do employers have a duty to provide work and provide a reference?

A
  • only duty to provide work is in certain circumstances (where needed to maintain skill)
  • no duty to provide reference
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23
Q

data principles

A
  • Data not retained for longer than necessary
  • Data only collected for a specific purpose
  • Data is processed fairly
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24
Q

powers of a health and safety inspector - what can they issue?

A
  • a criminal prosecution
  • a prohibition notice
  • an improvement notice
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25
Q

what doesn’t the equality act do

A

The Equality Act does not outlaw discrimination that is proportionate and legitimate

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26
Q

who does an accountant notify if they suspect money laundering

A
  • The Money Laundering Reporting Officer within their organisation
  • The National Crime Agency
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27
Q

what are qualifying disclosures

A
  • A miscarriage of justice is likely to occur
  • The environment is likely to be damaged
  • A company has deliberately concealed its failure to meet a legal obligation
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28
Q

what are the artificial legal persons

A
  • limited liability partnerships
  • corporation sole
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29
Q

do articles of association have to be submitted to the registrar when forming a company

A

no

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30
Q

what do changes in clauses in AoA require

A

a special resolution

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31
Q

do private companies need to hold a general meeting to change their articles of association

A

no

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32
Q

can public companies alter their articles by written resolution

A

no

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33
Q

when may an alteration be void

A

if the majority who approve it are not acting bona fide in what they deem to be the interests of the company as a whole

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34
Q

structure of remuneration and audit committee

A

at least 3 NEDs

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35
Q

what does non compliance with the UK Corp Gov Code result in?

A
  • a civil liability created that directors may be sued for
  • directors being liable for wrongful trading
  • directors of non compliant companies may be disqualified from acting as a director for up to 5 years
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36
Q

benefits of non executive directors

A
  • Bring experience and knowledge that executive directors may not possess
  • Can appreciate wider perspective when executive directors become involved in complex operational issues
  • Provide the executive directors someone to confide in regarding any concerns with other board members
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37
Q

what is the senior independent director

A

the title given to the non executive director to whom shareholders can contact outside of normal channels of communication

38
Q

who make up the audit and remuneration committees

A

all NEDs

39
Q

what needs to happen for a misrepresentation to take place

A
  • To cause a misrepresentation, both parties to the contract must be aware of the misleading statement.
  • The misrepresentor will be liable if they know a misleading statement will be passed on to the other party.
  • Statements must be complete enough not to mislead.
40
Q

what are the types of stakeholders

A
  • Internal stakeholders = people inside eg employees and contractors
  • Connected stakeholders = people with economic interest in business eg, shareholders, customers, suppliers
  • External stakeholders = people outside the organisation eg, government, competitors, local communities
41
Q

can a revocation of an offer be communicated by a third party

A

yes

42
Q

what are the OECDs general principles of corporate social responsibility

A
  • Be respectful of human rights.
  • Encourage local capacity.
  • Abstain from improper involvement in local political activities.
  • Reject exemptions not contemplated in the regulatory framework related to environmental, health, safety, labour, taxation, financial incentives, or other issues.
  • Encourage the formation of human capital.
43
Q

on what bases is a partnership formed

A
  • must consist of at least two partners
  • exist to perform some kind of business activity
  • The authority and liability of partners is based on agency law
  • In an LLP, two members must be designated as responsible for the publicity requirements of the partnership
44
Q

how is
1) transparency
2) fairness
shown

A

1) Feeling comfortable about the decision and knowing the resulting actions are justifiable
2) Thinking about what a rational bystander would think about the outcomes

45
Q

does freedom of contract exist

A

yes, freedom of contract means that parties may include any contractual terms they like.

46
Q

which contracts are valid

A

contracts complete in their terms

47
Q

which documents do public and private companies need

A

PUBLIC:
- trading certificate
- certificate of incorporation
- memorandum/articles of association

PRIVATE:
- certificate of incorporation
- memorandum/articles of association

48
Q

what is the purpose of the oecd principles

A
  • to act as a benchmark to ensure that national codes all comply with generally accepted best practice
  • they are not directly binding on business organisations.
49
Q

who are the parties in an audit engagement letter

A
  • auditors
  • managers/directors
  • shareholders.
50
Q

do CSR policies meet legal obligations

A

CSR involves going beyond legal obligations, not meeting them

51
Q

purpose of CSR policies?

A
  • attract and retain staff
  • differentiate brand
  • exceed legal obligations
52
Q

how are terms incorporated into a contract

A
  • By statute
  • By trade practice
  • By courts, where the parties agreed the term but failed to express it because it was obvious
53
Q

what can a company do that an LLP cant

A

A company may grant floating charges over its assets but an LLP may not

54
Q

which sub organisation is within the SOX

A

The Security and Exchange Commission is an American organisation and the Sarbanes-Oxley Act is American legislation regarding corporate governance rules

55
Q

which types of companies have to comply with corporate governance codes

A
  • Only listed companies must state in their accounts whether or not they complied with the Code
  • Non-compliance with the Code is not a criminal or civil offence and will not result in disqualification of directors
  • The Code is only applicable to listed companies, although private limited companies may choose to apply it as best practice
  • There is no requirement for sole traders and partnerships to apply the Code.
56
Q

four social responses from Carroll and meaning

A

Reaction - denying responsibility
Defence - initially fighting responsibility, then do the least required to comply
Accommodation - accepting responsibility, and doing what is demanded of you
Proaction - volunteering to go beyond industry norms.

57
Q

statutory grounds for lifting the veil

A

Failing to obtain a trading certificate
Fraudulent or wrongful trading
Forming a company with a similar name to one which is insolvent

58
Q

cimas suggestions to improve global corp gov

A
  • Including more specific reports in governance in the Chairman’s statement.
  • Linking the activities of the board to the key corporate events, using graphics if required to link actions to events.
  • Communication and engagement with stakeholders explained via detailed reporting on how the investor relations were managed.
  • Demonstrating how the board works as a team.
59
Q

five areas covered by uk corp gov

A
  • Board leadership and company purpose
  • Division of responsibilities
  • Composition, succession and evaluation
  • Audit, risk and internal control
  • Remuneration
60
Q

International Integrated Reporting Council 7 guiding principles

A

Strategic focus and future orientation
Connectivity of information
Stakeholder relationships
Materiality
Conciseness
Reliability and completeness
Consistency and comparability

61
Q

how is the audit committee structured

A

three NEDs, of which one has recent and relevant financial experience

62
Q

what are the remedies for wrongful dismissal

A

Wrongful dismissal is a common law action against an employer for breach of contract and therefore damages are the usual remedy.

The other remedies (reinstatement/re-engagement/compensation) are only available for unfair dismissal.

63
Q

what is a self review threat

A

the risk that an accountant may not appropriately re-evaluate their (or a colleague’s) previous work (including judgements made or services performed) when relying on the work while performing a current service.

64
Q

what does the suggest about AGMs

A

all board members should attend the AGM

65
Q

is there any age restriction on unfair dismissal claims

A

no, they can claim regardless

66
Q

what is unfair dismissal

A

a form of employment protection created by legislation

67
Q

difference between advocacy and familiarity

A

Advocacy is promoting a position, familiarity is from a close relationship and being too trusting of their representations

68
Q

what counts as valid consideration

A
  • the creditor must become entitled to something that they are not already entitled to
  • signing an agreement is not consideration
  • payment on the date isn’t gaining or losing anything
69
Q

what is the effect of corporate governance

A
  • reduces risk to stakeholders
  • improves transparency of how organisation is run
  • impose checks and controls on directors
70
Q

what are the types of risk and their meaning

A

INHERENT = susceptibility of a transaction or balance to material misstatement
AUDIT = the risk that the auditor gives an incorrect opinion on the financial statements
CONTROL = risk that a control would not have prevented or detected a material misstatement
DETECTION = the risk that the auditor fails to detect a material misstatement

71
Q

which boards are most common in which countries

A
  • Dual/two tier (management and supervisory) boards = Europe
  • UK = single (unitary) board
  • Japan = three tier boards
72
Q

who has to comply with SOX

A
  • all US companies
  • directors of subsidiaries of US companies
  • auditors of US listed companies
73
Q

what are the considerations of an accountant when resolving an ethical issue

A

transparency, effect, fairness

74
Q

what does the king report require

A

requires companies to ‘Apply or explain’ rather than ‘Comply or explain’

75
Q

what are terms of reference

A

define the scope of the investigation

76
Q

what is an executive summary

A

a high-level summary of the report

77
Q

what is the appendix and what does it contain

A

supporting analysis and the conclusion and recommendations contains the findings of the report and sets out what should be done next

78
Q

how much does fraud cost an economy

A
  • organisations may lose up to 7% of annual turnover
  • corruption costs $1.5 trillion each year
  • only recover a small % of fraud losses
79
Q

development of uk corporate governance

A
  1. cadbury, 1992 = introduced comply or explain
  2. greenbury, 1995 = director remuneration
  3. hampel, 1998 = resolving issues in previous reports
  4. turnbull, 1999 = internal control system review
  5. higgs, 2003 = focus on NED roles
  6. tyson, 2003 = developing NEDs
  7. smith, 2003 = auditors and audit committees
  8. sir david walker/frc, 2010 = combined code of official corp gov code
80
Q

what traits does independence of mind require

A
  • integrity
  • professional scepticism
81
Q

what is the cima ethical code used for

A

as a basis for judging a member’s behaviour against what is expected of them

82
Q

what helps prevent fraud

A
  • reconciliations
  • control accounts
83
Q

who is the oecd guidance aimed at

A

to multinational companies on how they should develop policies that take into account countries in which they operate and the views of other stakeholders

84
Q

are corporate governance and CSR interlinked

A

not necessarily

85
Q

are existing duties valid consideration?

A
  • Where a contract already exists, a party may accept performance by a third party and this will be valid consideration because it is not something they were entitled to before.
  • Performance of an existing duty is not good consideration as it is no more than one would be expected to do in the circumstances.
  • Performance of an act before a promise to pay is past consideration.
86
Q

if someone is personally injured, contractually what does this mean?

A

It is not possible to exclude liability for personal injury caused by negligence.

they can claim back if this occurs

87
Q

responsibilities of remuneration committee

A

Establishing a pension policy for board members, agreeing compensation for loss of office

88
Q

what is the board introduced by sarbanes oxley

A

In SOX, a five-member board called the ‘Public Company Oversight Board’ was established to enforce professional standards in audit and accounting

89
Q

what does the trade certificate encompass

A

that it has satisfied the requirement regarding allotted share capital

90
Q

how is an exclusion clause incorporated

A
  • An exclusion clause must be incorporated into a contract before the contract has been agreed between the parties.
  • An exclusion clause in a business-to-business contract may be invalidated by the Unfair Contract Terms Act 1977.
  • If a person signs a document containing an exclusion clause they are generally held to have agreed to it, even if they have not read the document.

4. BA4 CIMA (16 decks)

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