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Chartered Governance Institution - Foundation Programme > Exam Questions - Section A > Flashcards

Exam Questions - Section A Flashcards

1
Q

Briefly define a core values statement. (1 Mark)

A

A statement which declares how the organisation will behave when carrying out its
activities/during the process of realising its mission and vision (1)

It articulates the principles and values the leaders will follow when carrying out activities
(1)

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2
Q

What is an external stakeholder? (1 Mark)

A

An Individual or Group outside of the business who/which is affected by its activities. (1)

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3
Q

What is the standard of proof required in a criminal case? (1 Mark)

A

The prosecution must prove the case beyond reasonable doubt. (1)

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4
Q

Identify two pieces of information shown on a certificate of incorporation. (2 Marks)

A

Any two of the following:

The registered name (1)
The registered number (1)
The date of incorporation (1)
The type of company (1)
Where the registered office is situated. (1)
The Registrar’s seal/signature (1)

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5
Q

Identify the party who commences a civil legal action? (1 Mark)

A

Claimant (1)

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6
Q

What is the break-even point? (1 Mark)

A

The break-even point is the point at which the revenue of a business is equal to its total
expenses. The business has made neither a loss nor a profit. (1)

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7
Q

Name two divisions of the High Court. (2 Marks)

A

Reward up to two marks from the following:

Chancery Division (1)
King’s Bench Division (1)
Family Division (1)

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8
Q

Name one of the types of company that can be incorporated under the Companies Act 2006. (1 Mark)

A

Award up to one mark from the following:

A private company limited by shares (1)
A public company limited by shares (1)
A private company limited by guarantee (1)
A private unlimited company, with or without shares (1)

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9
Q

In legal terms, what is meant by equity? (2 Marks)

A

Award up to two marks from the following:

Equity is a supplementary system of law based on fairness and justice (1).
Unlike common law cases it was not based upon following precedent and strict procedures (1).
A system of law which provides remedies such as injunctions (1).

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10
Q

Give three examples of direct costs. (3 Marks)

A

Award up to three marks from the following:

Wages (1)
Raw materials (1)
Inventory or stock of finished goods for resale (1)
Transport costs paid to suppliers for delivering purchases to the business (1)
Transport costs paid for by the business for delivering goods to customers (1)

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11
Q

Define the qualitative characteristics of “relevance” and “faithful representation”. (4 Marks)

A

Relevance means that financial information has the ability to influence the economic decisions of a user of financial statements. (1). Relevance is affected by materiality which describes whether an item’s omission or misstatement could influence the decisions taken by users of financial statements. (1)

Faithful representation means that financial reports must represent economic events and transactions in a way that aims to be complete. (1) Such reports should be neutral (without bias) and free from error. (1)

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12
Q

Whilst the Companies Act 2006 does not set out statutory duties of a Company Secretary,
describe the duties that a Company Secretary would normally be expected to perform in relation
to the Board. (4 Marks)

A

Award up to four marks from the following:

A company secretary would be expected to:

Ensure that proper board procedures are in place/are adhered to. (1)
Support the preparation of Board papers (1)
Ensure that papers are circulated to the board in advance of meetings (1)
Provide practical support and guidance to members of the board (1)
Monitor and guide the company’s corporate governance policies (1)
Advise on/prepare formal minutes of Board meetings(1)

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13
Q

Explain what is meant by a ‘declaration of incompatibility’ and whether such a declaration
requires a change in UK law. (3 Marks)

A

Award up to three marks from the following:

A declaration of incompatibility is a declaration stating that the court is of the opinion that a legislative provision is incompatible with a right under the European Convention of Human Rights. (1)

A declaration of incompatibility does not affect the validity of the provision, (1) Nor does it affect the continuing operation or enforcement of the relevant provision (1).

Therefore, the court must still apply the law and a declaration does not compel Parliament to change the law. (1) However, in practice, if a declaration is issued, the law is almost always changed to render it compatible with the convention. (1)

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14
Q

Explain the importance of case law as a source for company law. (4 Marks)

A

Case law is an important source of company law for four main reasons:

  1. Certain company law topics are largely creations of case law (1) and have little or no legislative involvement and are entirely judge made. (1)
  2. Case-law principles that are well established often become enshrined in legislation. (1) The duties placed upon directors were, historically, case-law-based, but can now be found in CA2006. (1)
  3. Case law often establishes the scope and rules regarding the application of remedies and imposition of punishments (1)
  4. Statutory rules are interpreted and applied via case law. (1)
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15
Q

Identify, with an example of each, two external factors that are examined in a PESTEL analysis. (2 Marks)

A

Political - Examples may include tax policies, copyright and property laws, political stability, trade regulations, social and environmental policy, employment laws, health and safety regulations or potential shifts in the political landscape/a change of political party in power (1).
Economic - Examples may include taxes, inflation rates, stock market trends, wage costs (1).
Sociocultural - Examples may include consumer behaviour, potential customers, buying trends, demographics, population growth rates, age distribution, attitudes towards work and job market trends impacting how customers spend their money. (1)
Technology - Examples may include levels and advancement in technology, technology changes which impact selling products and communicating with customers. (1)
Environmental - Examples may include climate change, weather patterns and ecological friendliness of products (1).
Legal - Examples may include laws covering consumer protection, intellectual property laws, health and safety regulations and data protection (1).

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16
Q

Give two examples of the type of content you could expect to see in the articles of association relating to the share capital of a company. (2 Marks)

A

Award up to two marks from the following:

Provisions to safeguard shareholders from additional share allotments without their consent (1).
The capacity to allot additional share capital (1), the ability to make calls on shares (1) and any forfeiture rights in case of non-payment (1).
Details of any differing rights attached to each class of share (1).
Pre-emption provisions/rights on the allotment of new shares (1).
Rights of pre-emption on the transfer of shares (1).
Where a major shareholder obtains a buyer for their shares, rights which oblige the purchaser to acquire the minority shareholding on the same terms (1) OR Tag along or drag along rights (1).

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17
Q

Identify one type of public sector organisation. (1 Mark)

A

Award up to one mark from the following:

Central Government (1)
Local Government (1)
Public corporations (1)
Municipal enterprises (1)

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18
Q

What is meant by the term ‘summary offence’? (1 Mark)

A

Award up to one mark from the following:

These are minor offences (1)
Triable in a magistrate’s court (1)

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19
Q

Give one example of a finance cost. (1 Mark)

A

Award up to one mark from the following:

Interest paid on loans or overdrafts, accept interest expense (1)
Bank charges (1)
Other borrowing charges and fees (1)

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20
Q

Name one of the main two types of resolution that might be considered at a members’ meeting. (1 Mark)

A

Award up to one mark from the following:

Ordinary resolution (1)
Special resolution (1)
Ordinary resolution with special notice (1)

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21
Q

Define the term ‘secondary stakeholders’. (1 Mark)

A

Secondary stakeholders are those who may affect relationships with primary stakeholders
(e.g. pressure groups) (1)

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22
Q

Identify one of the rules of ‘statutory interpretation’. (1 Mark)

A

Award up to one mark from the following:

  1. Literal rule (1)
  2. Golden rule (1)
  3. Mischief rule (1)
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23
Q

Identify two restrictions which apply when choosing a company name. (2 Marks)

A

Award up to two marks from the following:

  1. The name can only be made up of specified characters. (1)
  2. Some words are sensitive/restricted and will require specific permission to use. (1)
  3. The name is not already registered (1), or a registered trademark (1) or a registered
    domain name. (1)
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24
Q

Give three limitations of cost-volume profit (CVP) analysis. (3 Marks)

A

It relies on assumptions so it can only provide approximate answers to both real and
hypothetical problems. (1)

It must be carried out for each specific product, service or business segment, especially
where pricing or costs involved are different. (1)

If a business has a large number of product or service lines where each item has different
direct costs associated with its production and sale, CVP analysis would be very difficult
and complex to undertake. (1)

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25
Q

State two remedies developed by the system of law known as “equity”. (2 Marks)

A
  1. Injunctions (1)
  2. Specific performance (1)
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26
Q

Identify two types of precedent. (2 Marks)

A
  1. Binding precedent (1)
  2. Persuasive authority (1)
27
Q

Give two reasons why analysing the business environment helps a business to achieve its
purpose. (2 Marks)

A

Award up to two marks from the following:

  1. It helps the organisation to understand the context in which it operates. (1)
  2. It can identify factors that may impact on its ability to achieve/deliver its current
    activities/mission. (1)
  3. It can enable the organisation to build capacity to identify issues and anticipate change, so
    that it can respond effectively. (1)
28
Q

Name the two locations where a public company may keep its statutory registers. (2 Marks)

A
  1. The registered office (1)
  2. A Single Alternative Inspection Location (or SAIL) address (1)
29
Q

Identify four advantages to a company of choosing electronic filing with Companies House rather
than filing hard copies. (4 Marks)

A

Award up to four marks from the following:

  1. It is quicker than post. (1)
  2. It is cheaper/the fee is lower. (1)
  3. It is less likely to be rejected as there are inbuilt checks/pre-population of information. (1)
  4. There is automatic confirmation of filing. (1)
  5. It is more secure. (1)
30
Q

Calculate the gross profit from the following information - (4 Marks)

Sales £1,584,763
Cost of raw materials £469,839
Interest paid on bank loan £25,830
Administrative staff wages £378,830
Inventory £134,326
Work in progress £268,364

A

Gross profit = sales – cost of goods sold (COGS)

Cost of goods sold (COGS) =
469,839 (Cost of raw materials) +
134,326 (Inventory) +
268,364 Work in progress
= £872,529 (2)

Gross profit = sales – cost of goods sold (COGS)
= £1,584,763 - £872,529 (1)
= £712,234 (1)

31
Q

State three principal methods of Alternative Dispute Resolution (ADR). (3 Marks)

A

Award up to three marks from the following:

  1. Arbitration (1)
  2. Mediation (1)
  3. Conciliation (1)
  4. Med-ARB (1)
32
Q

Briefly describe the two types of legislation in the UK. (4 Marks)

A
  1. Acts of Parliament. (1)
    Acts of Parliament (also known as ‘primary legislation’) constitute the supreme form of domestic law in the UK and cannot be amended or overruled by the courts. (1) An Act of Parliament is legislation passed by Parliament (1)
  2. Subordinate legislation. (1)
    Delegated or subordinate legislation is created by a body which has been given the power to legislate by Parliament under an enabling Act, (1) which will set out the broad legal principles, leaving the more detailed rules to be added by the appropriate body. (1)
33
Q

What is an ‘internal stakeholder’ of a business? (1 Mark)

A

Award up to one mark from the following:

Individuals or groups within a business. (1) (For example, owners, employees and shareholders.)

34
Q

Companies can create their own internal rules to govern how the company is run.

Is this true or false? (1 Mark)

A

True (1)

35
Q

What is the main type of management accounting system? (1 Mark)

A

A cost accounting system (1)

36
Q

What is a ‘confirmation statement’? (1 Mark)

A

An annual statement which confirms the information held at Companies House.

37
Q

Name one of the two most common methods of ‘situational analysis’ organisations use to
understand the business environment. (1 Mark)

A

Award up to one mark from the following:

  1. PESTEL (1)
  2. SWOT analysis (1)
38
Q

In the case of a dispute between an employer and employee, where would the dispute generally
be heard in the first instance? (1 Mark)

A

Employment Tribunal (1)

39
Q

State two of the duties of a director, as set out in the Companies Act 2006. (2 Marks)

A

Award up to two marks from the following:

  1. To act within their powers. (1)
  2. To promote the success of the company. (1)
  3. To exercise independent judgement. (1)
  4. To exercise reasonable care, skill and diligence. (1)
  5. To avoid conflicts of interest. (1)
  6. Not to accept benefits from third parties. (1)
  7. To declare interests in any proposed transaction or arrangement. (1)
40
Q

Identify three types of sustainability. (3 Marks)

A
  1. Economic (accept profit) (1)
  2. Environmental (accept the planet) (1)
  3. Social (accept people) (1)
41
Q

Identify the two parties involved in a civil action. (2 Marks)

A
  1. Claimant (1) The person who brings the action.
  2. Defendant (1) The person who is being sued.
42
Q

Identify two occupations within the legal profession. (2 Marks)

A

Award up to two marks from the following:

  1. Barrister (1)
  2. Solicitor (1)
  3. Judge (1)
  4. Para-legal (1)
43
Q

Give two types of voluntary sector organisation. (2 Marks)

A

Award up to two marks from the following:

  1. Charities (1)
  2. Foundations (1)
  3. Advocacy groups (1)
  4. Faith-based organisations (1)
  5. Community groups (1)
  6. Recreational sports clubs (1)
44
Q

Identify two documents which must be submitted to Companies House in any application to
incorporate a company. (2 Marks)

A

Award up to two marks from the following:

  1. Form IN01 (1)
  2. Memorandum of association (1)
  3. Articles of association (1)
45
Q

Name and briefly describe four statutory registers which may be held on the central register
maintained by the Registrar of Companies at Companies House. (4 Marks)

A

Award up to four marks from the following:

  1. Register of Directors: shows personal details of all current and former directors. (1)
  2. Register of Directors’ usual residence addresses: This register shows the home address of directors. (1)
  3. Register of Secretaries: Details of any Company Secretary. (1)
  4. Persons of Significant Control Register (PSC): This is a Register of natural persons who ultimately control the company. (1)
  5. Register of Members: This register includes details of members and any changes in information. (1)
46
Q

Identify four types of benchmarking which can be used to determine key performance indicators
(KPIs). (4 Marks)

A
  1. Internal benchmarking (1)
  2. Functional benchmarking – accept: operational benchmarking, activity benchmarking or best in class benchmarking (1)
  3. Generic benchmarking (1)
  4. Competitive benchmarking – accept: Strategic benchmarking (1)
47
Q

Give three principal corporate governance codes that operate in the UK. (3 Marks)

A
  1. The UK Corporate Governance Code, which is primarily aimed at companies with a premium listing. (1)
  2. The Wates Corporate Governance Principles for Large Private Companies. (1)
  3. The UK Stewardship Code. (1)
48
Q

Define what is meant by ‘civil law’. (4 Marks)

A

Award up to 4 marks from the following:

  1. Civil law refers to laws that do not impose criminal liability/punishment (1), but aim to provide a remedy to a person who has suffered loss due to a civil wrong committed by someone else. (1)
  2. Civil cases are usually brought in the County Court or the High Court. (1)
  3. The burden of proof in civil cases is on the claimant (1) and the standard of proof is on the balance of probabilities. (1)
49
Q

Identify one source of revenue. (1 Mark)

A

Award up to one mark from the following:

  1. Sales of goods (1)
  2. Sales of services (1)
  3. Interest income (1)
  4. Royalties (1)
  5. Other income (1)
50
Q

Who is responsible for creating statute law? (1 Mark)

  1. The Supreme Court
  2. Parliament
  3. The judiciary
  4. The government
A

B: Parliament

Parliament is responsible for creating statute law, also known as legislation.

51
Q

In a SWOT analysis, an external factor beyond an organisation’s control is called what? (1 Mark)

A

A threat (1)

52
Q

What is the dominant piece of company law legislation? (1 Mark)

A

Companies Act 2006 (1)

53
Q

When might a director routinely declare an interest they may have, which might conflict with the
interest of the company? (1 Mark)

A

Award up to one mark from the following:

  1. On appointment. (1)
  2. As part of a regular declaration (annually, half-yearly or quarterly). (1)
  3. At the start of any meeting where the interest may relate to items on the agenda. (1)
  4. When a potential conflict of interest is identified during a meeting. (1)
54
Q

Identify two disadvantages of being a sole trader. (2 Marks)

A
  1. As the business is owned by a self-employed individual and does not have a separate legal identity, this individual is personally responsible for any losses made by the business. (1)
  2. It is more difficult to raise funds to expand the business. (1)
55
Q

Explain ‘comply or explain’ in relation to the UK Corporate Governance Code. (3 Marks)

A

Award up to three marks from the following:

  1. Comply or explain is an obligation placed upon listed companies to state in their annual reports how they have applied the UK Corporate Governance Code. (1)
  2. If they have not complied, they should explain why they have not complied (1) and the period in which they were non-compliant. (1)
  3. This approach means that companies can comply with the UK Code where they think it correct to do so, but can also depart from it if there are good reasons for doing so. (1)
56
Q

Give three non-financial objectives that a company could pursue. (3 Marks)

A

Award up to three marks from the following:

  1. Differentiating products and services to make them more attractive than competitor’s products (1)
  2. Providing products and services of high quality (1)
  3. Innovation / research and development (1)
  4. Training / raising the skills of the workforce (1)
  5. Complying with laws and regulation (1)
  6. Sustainability / reducing carbon footprint (1)
  7. Fair trade (1)
57
Q

Give two of the criteria which must be met for a company’s statutory registers to be exempt from
the provisions of the General Data Protection Regime (GDPR). (2 Marks)

A

Award up to two marks from the following:

  1. They are statutory registers which must be available for public inspection under the Companies Acts (1).
  2. No additional non-statutory information is kept on the statutory register (1).
  3. The information held is only that specified in the Companies Acts (1).
58
Q

Identify two documents which all private companies limited by shares must file annually with
Companies House. (2 Marks)

A
  1. Annual Accounts (1)
  2. Confirmation Statement (1)
59
Q

The government may be considered by an organisation to be an external stakeholder. Give one
example of how a government policy may affect its activities. (1 Mark)

A

Reward up to one mark from the following:

  1. Changes in taxation policy (1)
  2. Changes in employment law (1)
  3. Import tariffs (1)
60
Q

Define the term ‘ratio decidendi’. (2 Marks)

A

Award two marks from the following:

The ratio decidendi is the reason for the decision. (1)
It forms part of a binding precedent (1) which can be binding on other courts. (1)

61
Q

Outline what is meant by ‘secondary legislation’. (2 Marks)

A

Award up to two marks from the following:

Secondary legislation is a source of law in addition to but subordinate to general Acts of Parliament. (1)
It is law made by some person or body to whom Parliament has delegated its general law-making power (1) and it has the same effect and force as the Act of Parliament under which it is enacted. (1)

62
Q

Define the terms ‘fixed costs’ and ‘variable costs’ and give an example of each. (4 Marks)

A

Fixed costs are costs or expenditure amounts that do not change regardless of how much work is done or how much output is produced. (1)

One mark for an example – these could include:
* rent
* business rates (local council tax on business properties)
* business insurance
* utilities (water bills, electricity and gas bills)
* legal and accountancy fees
* managers’ wages.

Variable costs are costs that change depending on how much work is done or how much output is produced (as activity rises, variable costs increase; and vice versa). (1)

One mark for an example – these could include:
* raw materials
* transport or distribution costs
* staff or labour costs

63
Q

Describe a Memorandum of Association, including its content, as required under the Companies Act 2006. (4 Marks)

A

Award up to four marks from the following:

A Memorandum of Association is constitutional document (1) which must be filed with Companies House as part of the process of incorporating a company (1).

It sets out the details of subscribers on incorporation/the subscriber clause (1) and states that they wish to form a company (1) and agree to become its first members (1).

Where the company is to be limited by shares, members agree to take at least one share (1).

Once incorporated, the information contained in the Memorandum of Association cannot be altered. (1)

64
Q

Outline four types of EU legislation. (4 Marks)

A

Award up to four marks from the following:

Following the UK’s withdrawal from the EU, EU law is no longer supreme in the UK and the UK is not obliged to implement EU law. However, significant amounts of UK law derive from, or owe their authority to, EU law or the European Communities Act 1972. (1)

Treaty provisions are the highest form of EU law. In practice, most treaty provisions provide broad legal statements and so tend not to be directly effective as they lack sufficient clarity. (1) However, they are directly applicable providing they meet the van Gend en Loos conditions. (1)

Regulations are used when the EU wishes laws across Member States to be uniform. Accordingly, Regulations are directly applicable. (1) Directives state general goals and leave the precise implementation to the individual Member States. (1)

Decisions are not intended to have general effect. They can apply to all states or can be aimed at particular states or individuals. (1)

Recommendations and Opinions do not have binding force but they may be taken into account in trying to clarify any ambiguities in domestic law (1). They are usually issued by EU Institutions to make their views known. (1)

Chartered Governance Institution - Foundation Programme (22 decks)

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