Chapter One

Question 1

Key features of a remuneration committee

Answer 1

It should comprise only of NEDS

At least three for FTSE 350 companies at least 2 for smaller listed companies.

The company chairman can be a member but cannot chair the committee

Chair must’ve been a member of the committee for at least 12 months.

Question 2

Aims of corporate governance (3)

Answer 2

Protect shareholders

Effective risk management

Ensure clarity of roles and responsibilities at the top of the organisation

Question 3

Description of corporate citizenship

Answer 3

Recognition, the responsibilities extend beyond the scope of commercial relationships

Question 4

Description of corporate governance

Answer 4

The system by which companies are directed and controlled

Question 5

Normative, motivation definition

Answer 5

Desire to look after stakeholder interests is driven by an internal belief that a business has a moral and ethical duty towards its stakeholders

Question 6

Instrumental, motivation definition

Answer 6

Directors are motivated by economic interests and will only consider wider stakeholders if it is in the economic interests to do so

Question 7

Sustainability definition

Answer 7

To use resources at a rate that allows them to be replenished

Managing activities to prevent the depletion of resources

Question 8

VUCA

Answer 8

Volatility,

Uncertainty,

Complexity,

Ambiguity 

Question 9

Creating and preserving value cycle

Answer 9

Planning

Report

Control

(repeat) 

Question 10

Different groups of stakeholders

Answer 10

Internal – directors senior staff, low-level employees

Connected – shareholders, lenders customers suppliers

External – government pressure, groups local community

Question 11

The CGMA code of ethics

Answer 11

PPCC

Professionalism - be clearly identifiable as a professional person 

Provide high-quality services

Credibility - information systems must be credible

Confidence - users should feel confident that a framework of professional ethics, governs the provision of services

Question 12

Organisational values

(six)OHARTE

Answer 12

Openness– open and clear disclosure of relevant information to stakeholders.

Honesty – tell the truth and avoid misleading stakeholders

Accountability – individuals must be accountable for their actions and subject themselves to scrutiny when carrying out their duties

Respect - there should be a culture of respect within the organisation,

Trust – the organisation should ensure it can be trusted by stakeholders

Empowerment – in power staff to allow them to behave ethically in all situations

Question 13

Personal qualities required of an accountant
RRRTC

Answer 13

Reliability

Responsibility

Respect

Timeliness

Courtesy.

Question 14

Professional qualities required of an accountant
SASI

Answer 14

Scepticism

Accountability

Social responsibility

Independence 

Question 15

Stakeholder Ethical stances and strategy

Four main stances

Answer 15

Short-term shareholder interest

Long-term shareholder interest

Multiple stakeholder view

Shaper of society 

Question 16

Aims of corporate governance
Corporate

Answer 16

Control - using systems to control corporate activity

Oversight - and involved board, non-execs supervising execs

Risk - wanting to manage risks appropriately according to risk appetite of the entity

Profit maximisation - the overall objective of a board in commercial enterprise

Objectives - creating a framework within which to pursue them

Roles - a balance board in which everyone plays the part

Active - execs and non-execs working together

Telling - communication with shareholders

Experience - experience and independence bought by non-executives

Question 17

Approaches to CSR

Answer 17

Proactive strategy

A reactive strategy

Defence strategy

And accommodating strategy

Question 18

Stakeholder theory and CSR

Donaldson and Preston

Answer 18

Normative – looking after shareholder interest is driven by internal motivation

Instrumental – the business exist, primarily for economic reasons 

Question 19

Benefits of good corporate citizenship

Answer 19

Process and product design - designed to minimise the amount of resources used and if waste is created, it should be recycled

Supplier selection - suppliers should share the organisations, sustainable objectives – use local suppliers, where possible

Quality and efficiency - drive to reduce waste of resources may bring efficiency and quality improvements

Costs - costs may rise in some areas of savings can be made through better efficiency and potential environmental tax is avoided 

Question 20

The five activities that finance performs to fill his roles
CPCSC

Answer 20

Collect data

Provides insight

Communicate insight

Supports implementation of decisions.

Connects different activities to one another.

Question 21

Information to impact framework

Answer 21

Assemble – collect data from internal and external sources and convert into information.

Analyse – broadly questioning. This might include comparisons

Advice – this is where finance influences users by communicating the information to influence decision-making

Apply – accountants, assist with execution of plans.

Acumen – the ability to use practical skills and a depth of perception or decent meant to make good judgements and accurate. Quick and effective decisions. This is the underlying value which finance brings to the above cycle from cross function collaboration.

Question 22

Collecting data – the characteristics of good information
ACCURATE

Answer 22

Accurate

Complete.

Clear

User-friendly

Reliable

Accessible

Timely

Effective

Question 23

The four professional qualities required by an accountant under the same CIMA of ethics

Answer 23

Scepticism

Accountability

Social responsibility

Independence

Question 24

Equity based rewards

Answer 24

Compensation which is non-cash pay offer to employees.

May include options, restricted stock and performance shares. 

Question 25

Enabling

Answer 25

The creation, preservation of value by planning forecasting and enabling the allocation of resources to achieve maximum value

Question 26

Shaping

Answer 26

Through performance management and control.

Comparing actual performance to budgets to identify areas for improvement.

Control action can be taken when deviations identified.

Question 27

Narrating

Answer 27

Recording daily financial activities and preparation of legal required annual accounts 

Question 28

Contributing factors to the shift at the finance function to a diamond structure

Answer 28

Market orientated, approach and process automation

Question 29

Consortia

Answer 29

And Association of franchises, companies etc, especially one form for particular purpose