Fundamentals of Ethics - Corporate Governance and Business Law

Question 1

Company A has recently been having problems matching the views of its employees to its own. Which of the following might help their situation? Select ALL that apply.

A. Change its views so that it matches each of their employees.

B. Remove any barriers that might prevent an employee from adhering to the company's ethics.

C. Reward those who consistently recognise and and adhere to the company's values.

D. Discipline those who regularly ignore the company's rules and values.

E. Implement a weekly hour-long session that recaps the company's values. All employees must attend.

F. Only hire those who share the company's views.

G. Ensure management level employees follow the actions and behaviour of those higher up.

H. Threaten legal action against those who regularly ignore the company's ethics.

I. Teach employees the company's values and train them to follow them.

Correct Answer: B,C,D,F,G,I

Question 2

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

A. In competence

B. In appearance

C. Of belief

D. Of mind

Correct Answer: D

Question 3

Badger has just been offered a job after completing a series of long interviews.
Which of the following would legally form the employment contract between him and his employer:

A. A signed formal document

B. A handshake

C. Any of the above

D. A verbal declaration

Correct Answer: C

Question 4

Which of the following is one of the fundamental principles identified in the CIMA Code of Ethics?

A. Obsession

B. Observation

C. Objectivity

D. Obedience

Correct Answer: C

Question 5

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

A. A written special resolution

B. A special resolution

C. A written ordinary resolution

D. An ordinary resolution

Correct Answer: C

Question 6

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 facade 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.

A. (i) and (ii) only

B. (i) and (iii) only

C. (i) only

D. (ii) and (iii) only

Correct Answer: B

Question 7

Which of the following is correct in relation to damages?
(i) As a general rule damages for breach of contract are designed to place the innocent party in the position that he or she would have been in had the contract been carried out properly.
(ii) Damages are only available for breach of contract, if the breach caused the loss.
(iii) Damages are only available for losses arising naturally from the breach.

A. (i) and (ii) only

B. (ii) only

C. (ii) and (iii) only

D. (i), (ii) and (iii)

Correct Answer: A

Question 8

Who is entitled to sue the directors for a breach of statutory duty?

A. The board.

B. The company.

C. Any shareholder.

D. The holders of the majority of the company's shares.

Correct Answer: B

Question 9

Which of the following is not a source of English law?

A. Roman law.

B. Common law.

C. Legislation.

D. European law.

Correct Answer: A

Question 10

Members of the accountancy profession are expected to demonstrate certain personal qualities and virtues such as 'respect' Which of the following is an example of the demonstration of the virtue of respect?

A. An accountant agrees to accept calculations provided by his manager relating to a new project, despite having misgivings as to their accuracy. The manager has several years more experience of such projects than him

B. When deciding whether or not to move production of a particular product from one site to another, employers listen to the views of a wide range of employees, including those on the factory floor

C. For several weeks before going on annual vacation, an accountant doubles her normal working hours to ensure that she meets the deadline for the preparation of a set of management accounts.

D. An accountant politely turns down a request to help produce a business plan for a friend who wants to start up a new company which will be a rival firm to their current employer.

Correct Answer: A

Question 11

D is the chief executive of a UK-based mining company which has operations across the world and, in some countries, employs children. Child workers are only permitted to undertake certain tasks that are deemed to be safe and not physically demanding. Endorsed by his board of directors, D argues that it is better for children in poor countries to have the option of fairly paid work than to risk starvation or be forced into prostitution or criminality. A national newspaper publishes the story and gets an unprecedented number of UK voters to sign a petition for government to intervene and stop these practices. This is an example of a tension between:

A. None of the above

B. Corporate and societal values

C. Personal and professional values

D. Corporate and professional values

Correct Answer: B

Question 12

X was employed by Bee Ltd as its senior design consultant. X contracted with Bee Ltd that, when his employment with the company ceased, he would not act in competition with it or solicit its customers.
After X left Bee Ltd, he registered a company called Cee Ltd which immediately began working in competition with Bee Ltd and soliciting its customers. Bee Ltd complained to X about this conduct, but X stated that, as the work was being undertaken by Cee Ltd, a separate legal entity, X had not acted in breach of the agreement with Bee Ltd.
Which of the following statements is correct?

A. X is correct and cannot be said to be in breach of the agreement with Bee Ltd.

B. If the court finds that Cee Ltd was set up by X to avoid the agreement with Bee Ltd, it will "lift the corporate veil" and enforce X's contract with Bee Ltd against X and Cee Ltd.

C. Cee Ltd will be bound by the agreement because a company is always liable for the actions of its shareholders.

D. The agreement between Bee Ltd and X is of no legal effect, as it attempts to regulate X's activities after he has left Bee Ltd's employment.

Correct Answer: B

Question 13

Which of the following is a civil action?
i. An action by a local authority against a restaurant for selling impure food.
ii. An action by a taxpayer against Her Majesty's Revenue and Customs ("HMRC") in relation to an expenses claim which has been refused by the Inspector of Taxes.
iii. An action by Exe Ltd against Zed Ltd for supplying equipment which was found to be dangerous.

A. (i) and (ii) only

B. (ii) only

C. (i) and (iii) only

D. (i) only

Correct Answer: D

CIMA Fundamentals of Ethics - Corporate Governance and Business Law - BA4 Exam Practice Test

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