BA4 CIMA Fundamentals of Ethics, Corporate Governance and Business Law exact Exam Questions

Fundamentals of Ethics, Corporate Governance and Business Law

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Question # 16

Alan, Ben, Chris and Debbie are the only shareholders in ABCD Ltd, each holding 100 ordinary £1 shares. Alan, who is the company ' s sole director, has recently learned that Ben, Chris and Debbie are intending to remove him as a director by passing an ordinary resolution. In consequence Alan sold his computer to the company in return for 1,000 ordinary £1 shares. The company was in need of a computer, which was of equal value to the 1,000 ordinary £1 shares.

Which of the following is correct?

The share issue is valid and Alan may use his 1,100 votes to defeat the resolution proposed by Ben, Chris and Debbie.

The share issue is invalid as it has had the effect of manipulating the voting structure within the company.

The share issue is invalid as the shares should have been offered to all the existing members first.

The share issue is valid as long as Alan has the necessary authority to issue shares.

Question # 17

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.

(i) only

(ii) only

(ii) and (iii) only

(i), (ii) and (iii)

Question # 18

In relation to the law of misrepresentation, which of the following statements is incorrect?

In general, silence cannot amount to a misrepresentation.

A misrepresentation is not actionable unless it induced the claimant to contract.

An honest statement of opinion by a layman cannot amount to a misrepresentation.

A person cannot be liable for misrepresentation, if the truth of the statement could be determined by the misrepresentee making reasonable enquiries.

Question # 19

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.

(i) and (ii) only

(ii) and (iii) only

(i) and (iii) only

(i), (ii) and (iii)

Question # 20

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?

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

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

No - Only small companies need an internal auditing department.

No - All companies should be externally audited.

Question # 21

In the UK, which organization that governs the accounting profession has taken the lead with respect to ethical considerations?

The Accounting and Auditing Policy Committee

The Financial Reporting Council

The Financial Standards Accounting Board

The International Accounting Standards Board

Question # 22

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:

Responsibility

Respect

Confidentiality

Cooperation

Question # 23

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?

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

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

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

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

Question # 24

An internal auditor discovered evidence of a fraud earned out by an employee who worked in the accounting department. The auditor concluded that the fraud had been possible because of unsatisfactory segregation of duties in the department.

Poor segregation between which of the following duties would provide the best opportunity for this type of fraud to occur?

Issuing both sales invoices and purchase invoices.

Issuing sates invoices, and recording payments to suppliers in the ledger.

Receiving payments from customers, and recording them in the ledger

Receiving purchase invoices, and banking payments from customers.

Question # 25

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

Of belief

In appearance

Of mind

In competence

Question # 26

A distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest Therefore:

the public interest will always be served if an accountant complies with his or her employer ' s corporate ethical policies

frauds which are detected in an audit must be reported to the public

a professional accountant ' s responsibility is not exclusively to satisfy the needs of an individual client or employer

professional accountants must be prepared to break laws that they consider to be against the public interest

Question # 27

Which ONE of the following most accurately describes corporate governance?

It is a code of best practice which instructs directors of listed companies how to maximise profits for the benefit of shareholders

It is a body of law, morals and ethics designed to ensure that the shareholders of listed companies are treated fairly by the board

It is the body of rules and ethics primarily concerned with the effective control, business efficacy and accountability of the management of public-listed companies for the benefit of stakeholders

It is the set of rules contained in the constitution of listed companies which governs the relationship between the board and the shareholders