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Fundamentals of Ethics, Corporate Governance & Business Law (C5) Full Time Revision Tute 1 1. Tom is the sole director of XYZ Ltd. The company is considering purchasing Toms business for 200,000. Which of the following is incorrect? A Tom cannot contract with XYZ Ltd as he would be placing himself in a conflict of interest and duty situation. B The purchase consideration may be in the form of cash or shares. C The shareholders may approve the arrangement by passing an ordinary resolution. D Tom must formally disclose his interest in the contract to the board. 2. Jo is employed as management accountant of a large retailer. Jo has been invited to take a holiday all expenses paid at a villa owned by the managing director of a supplier organisation. If Jo accepts the invitation, which of the following fundamental principles of CIMAs Code of Ethics will be compromised? A Professional Behavior B Integrity C Confidentiality D Objectivity

3. Who is entitled to sue under Section 459 of the Companies Act 1985, which empowers the court to grant a remedy in the event of the companys affairs being conducted in a manner unfairly prejudicial to the interests of its members? A The holders of at least 10% of the companys issued share capital. B The shareholders as a whole. C Any member. D The directors.

4. Which of the following is incorrect? A A floating charge must be registered at Companies House within 21 days of its creation, otherwise the charge is void against the other creditors. B A floating charge must be registered at the companys registered office, but a failure to do so does not affect the validity of the charge. C The procedures from the sale of the assets comprised in the floating charge must first be used to pay off the preferential creditors. D A floating charge is a charge over a class of company assets which the company is unable to deal with freely in the ordinary course of the business. 5. Which THREE of the following are associated with a values-based approach to ethics? A Easier B Grey C Mandatory D Discretionary E Short time-frame F Slow burner

6. Which of the following statements is correct? (i) If a company acts outside its objects clause the transaction is void. (ii) A company may change its objects by passing a special resolution. (iii) If the directors cause the company to act ultra vires, the company may sue them for breach of fiduciary duty.

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A B C D

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

7. Which of the following are recommended by the Combined Code? (i) The role of Chairman and Managing Director should be separated. (ii) A senior independent director should be identified and available as a contact for shareholders. (iii) At least one-quarter of the board should be made up if independent non-executive directors. A B C D and (iii) only (i), (ii) and (iii) only (i) and (ii) only

8.

Which of the following types of committee is NOT required by the UK Combined Code? A Risk Management Committee B Audit Committee C Remuneration Committee D Appointment Committee

9. Which of the following statements is correct? A Whether a worker is an employee or an independent contractor depends entirely on the application of the control test. B The question as to whether a worker is an employee or an independent contractor is one of law. C The question as to whether a worker is an employee or an independent contractor is one of fact and law. D The question as to whether a worker is an employee or an independent contractor is one of fact.

10. Sasha is Assistant Management Accountant for a large telecommunication company. Sasha has become aware that the company is paying fees to those government ministers responsible for the regulation of the telecommunications industry and for authorizing large public contracts. Sasha is concerned that this is unethical, so she mentioned it to the Finance Director during her most recent appraisal. The director seemed amused at Sashas concern and said that such a situation was perfectly normal. Which TWO of the following would it be appropriate for Sasha to do? A Request a further meeting with the Finance Director B Resign C Ask for advice from the companys external legal advisors D Nothing further E Bring the matter to the attention of the Managing Director F Ask for confirmation in writing from the Director 11. XYZ plc has an authorized share capital of 20m divided into 20 million ordinary shares. The company has an issued share capital of 10 million ordinary 1 shares. The current market value of each share is 5. The company intends to raise 30m by issuing a further 10 million ordinary 1 shares at 3 each. Which of the following is correct? A The company must increase the authorized capital to 50m before the shares be issued. B The issue is lawful as long as the directors have the authority to issue the shares. C The consideration for the shares must be valued by the companys auditor. D The shares cannot be issued at 3 each as that would mean that they have been issued at a discount.

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12. In relation to the duties of care and skill owed by directors, what is the standard of behavior expected by the law? A To take the same care as an accomplished professional B To take reasonable step in every transaction C To take the same care as he/she would if acting entirely for his/her own private benefit D To act as a reasonably diligent person having the general knowledge, skill and expertise of a direct 13. Which of the fundamental principles of CIMA s Code of Ethics is defined as follows? A professional accountant should act diligently and in accordance with applicable technical and professional standards A Professional competence and due care B Integrity C Objectivity D Professional behavior 14. Which of the following incorrect? A A company cannot be registered with the same name as a company already on the register. B A company must include a statement of authorized capital in its Articles of Association. C In order to register a company, promoters must include a Memorandum of Association in the document submitted to the Register of Companies. D The directors of a newly registered company cannot also act as directors of another company. 15. Which of the following is NOT one of the seven principles of public life, as defined by the Committee of Standards in Public Life? A Professionalism B Integrity C Leadership D Honesty 16. A breach of the Regulation contained in the Health and Safety at Work Act 1974 by an employer will give rise to: A Criminal and civil liability. B Neither civil nor criminal liability. C Civil liability. D Criminal liability only. 17. Which of the following remedies is not available for a breach of a contract to provide personal services? A Rescission. B Damages. C An injunction. D A decree of specific performance.

18. Which of the following is NOT one of the main requirement of the combined code? A The establishment of an audit committee. B The separation of roles of Chairman and Managing Director. C The appointment of a senior Government representative to the Board. D The appointment of independent non-executive director to the Board. 19. Which of the following statement is incorrect? A A person is assumed to know of a term of which he has been given reasonable notice at or before the timew of the contract. B A person seeking to rely upon an onerous clause must show that he has taken sufficient steps to bring the clause to the other partys attention. C A person cannot be bound by the onerous clause. D A person who signs a contract is deemed to have read it.

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20. Which of the following is incorrect? A All courts below the House of Lords may refer a case involving European Law to the European Court of Justice for a preliminary ruling. B A preliminary ruling of the European Court of Justice is sent back to the court which referred the question and must be given effect by that court. C An English court is not bound to given effect to a preliminary ruling of the European Court of Justice. D The House of Lords must refer a case involving European Law to the European Court of Justice for a preliminary ruling. 21. Which of the following is the responsibility of the Chairmen, according to the Combined Code? A Controlling the workings of the Board. B Authorizing major investment. C Carrying out the policies pf the Board D Operational Control

22. Which of the following may be liable to contribute to the assets of the company in the event of the company carrying on business at a time when it appeared that insolvency was inevitable? A The current directors and former shareholders of the company. B The current directors of the company C The current directors an shareholders of the company D The current and former directors of the company. 23. Which ONE of the following statements is correct in relation to the Combined Code? A If the Code is ignored by any company, no action may be taken as it has legal status. B If a listed public company fails to produce a report explaining why it has not implemented the codes recommendations, it has acted in breach of the Code. C If any company fails to comply with the code, the directors may be sued for breach of duty by the company on behalf of the shareholders. D If a public company fails to comply with the Code, it may be sued for breach of statutory duty by those who have suffered loss as a result. 24. Which of the following is NOT one of the main requirement of the Combined Code? A The establishment of a company website. B The appointment of a competent Company Secretary. C The appointment of independent non-executive directors of the Board. D The separation of the roles of Chairman and Managing Director. 25. Which of the following is the superior source of law? A A Regulation issued by the European Council of Ministers. B A Statutory Instrument. C A decision by the House of Lords. D A provision in an of Parliament.

26. Which of the following is presumed not to be intended to create legal relations? A A social arrangement. B An agreement by Exe Ltd to make a gift to Wye Ltd. C A contract between father and son. D A commercial transaction. 27. Which of the following is NOT a financial stakeholder of an organization? A Competitor B Employee C Government D Customer FBLW Revision 4

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28. In relation to contractual performance, which of the following is incorrect? A If one party is prevented from performing the contact by the other party , he or she may claim compensation on a quantum meruit basis. B A person who has carried out part of the contract is always entitled to a part of the contract price. C A person who has substantially performed a contact is entitled to the contract price less so much as is necessary to repair the defects. D A person who has carried out all of his contractual obligations is entitled to all of the contract price.

29. XYZ plc has recently acted breach of its contract with ABC Ltd. The breach caused ABC Ltd to lose several thousand pounds. The breach of ABC Ltd has resolved not to proceed against XYZ Ltd, as it believes that the time and expense involved would be disadvantageous to the company. A number of ABC Ltd shareholders are dissatisfied with the boards decision. A Individual shareholder cannot interfere with the boards decision. B If the shareholders are dissatisfied with the directors they may vote to remove them from office. C If the directors are removed from office, they may be entitled to damages for breach of their service contracts. D If the shareholders pass an ordinary resolution requiring the board to proceed against XYZ Ltd, the board will be obliged to comply with the resolution. 30. Which of the following is normally not an implied term of a contract of employment? A The duty to maintain mutual trust and confidence. B The duty not to disclose confidential information. C The duty to obey the employers lawful instructions. D The duty to provide work. . 31. Which of the following is incorrect in relation to the remedy of damages? A Damages are designed to compensate the innocent party and to punish the contract breaker. B A contract breaker is liable for special losses which are within his contemplation. C A contract breaker is liable for losses which arise naturally from breach. D Damages will not normally be awarded for the distress caused to the innocent party by the breach. 32. Which THREE of the following are associated are associated with a compliance-based to ethics? A Values driven B Mandatory C Explicit D Fear driven E Slow burner F Grey 33. Which of the following is correct? i.Auditors owe contractual obligations to the company which appointed them. ii.Auditors owe a duty of care to the directors of the company which appointed them. iii.Auditors can never own a duty of care to the shareholders if the company which appointed them. A (i) and (ii) only. B (i), (ii) and (iii). C (ii) and (iii) only. D (i) only. 34. Which of the following statement is correct? A An employer only has a duty to provide a reference for employees with one years continuity of employment. B An employer has a duty to provide a full and comprehensive reference. C An employer has a duty to provide a reference. D An employer has no duty to provide a reference. FBLW Revision 5

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35. Which of the following is normally implied into a contract of employment? A A duty to pay wages. B A duty to provide a reference. C An employees duty to disclose his own misconduct. D A duty to provide work. 36. l In the UK, the body responsible for reviewing the regulatory activities of the professional accountancy bodies is: A The Financial Reporting Council. B The professional Oversight Board for Accountancy. C The international Federation of Accountancy. D The Financial Review Board.

37. Consider the following statements. (i) In general a person is assumed to know of a clause of which ha has been given reasonable notice at or before the time of the contract. (ii) In general a person cannot rely on a clause brought to the other partys attention after the contract has been concluded. (iii) In general a person cannot be bound by a clause written in small print. Choose one of the following. A Only (i) and (ii) are correct. B Only (i) and (iii) are correct. C Only (ii) and (iii) are correct. D (i), (ii) and (iii) are correct. 38. Which of the following is a financial stakeholders of an organization? A Competitor B Non-government organizations C Media D Employee

39. (i) (ii) (iii) A B C D

Which of the following statement is correct? A wrongful dismissal cannot also be an dismissal. An unfair dismissal can also be a wrongful dismissal. An unfair dismissal must also be a wrongful dismissal. (i) (ii) and (iii) (ii) (iii)

40. Which of the following statement is incorrect in relation to a public company limited by shares? A The company must have at least two shareholders. B The company must have issued at least 50,000 of shares. C The company must state that it is a public limited company in its Memorandum of Association. D The company must have at least one director. 41. Which of the following is NOT one of the fundamental principles of CIMAS Code of Ethics? A Objectivity B Professional behavior. C Integrity D Accountability FBLW Revision 6

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42. Which of the following type of committee is NOT required by the UK Combined Cobe? A Appointment committee. B Investment committee. C Remuneration committee. D Audit committee 43. Which of the fundamental principles of CIMA s Code of Ethics is defined as follows? A professional Accountant should be straightforward and honest in all professional and business relationships A B C D Objectivity Professional competence and due care. Integrity. Professional behavior.

44. Which of the fundamental principles of CIMA s Code of Ethics is defined as follows? A professional accountant should not allow bias, conflict of interest or undue influence of other to override professional or business judgments A B C D Professional competence and due care. Integrity. Professional behavior. Objectivity.

45. Which of the following is correct? A A contract is frustrated when a party expressly agrees to manufacture and supply goods and then discovers that they will be far more expensive to produce than they thought at the time of the contract. B A contract is frustrated when something happens, after it has been entered into, which renders the contract impossible to perform. C A contract is frustrated when something happens, after it has been entered into, which renders the contact more difficult to perform. D A contract is frustrated if it is impossible to perform at the time that it is mode. 46. Which of the following most accurately describes the ratio decidendi? A It is a statement of law by a court which is binding on all future courts which are called upon to decide similar case. B It is a statement of law by a court which is not binding on all lower courts which are called upon to decide similar case. C It is a statement of law by a court which is binding on all lower courts which are called upon to decide similar case. D It is a statement of law by a court which is binding on all higher courts which are called upon to decide similar case. 47. Which of the following statement is correct? (i). To succeed in the tort of negligence, a claimant must show that the defendant owed him duty of care. (ii).To succeed in the tort of negligence, the defendant must have broken a duty to take care. (iii) To succeed in the tort of negligence, it is necessary to show that the claimant suffered loss or harm as a result of the defendant s breach of duty. A B C D (i), (ii) and (iii). (i) and (iii) only. (ii) and (iii) only. (i) and (ii) only. 7

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48. Which one of the following statement is correct in relation to the Working Time Regulation 1998? A An employee cannot be required to work for more than 48 hours per week in any one week. B An employee cannot be required to work an average of 48 hours per week taken over a period of 17 weeks. C An employee can put out of the requirements of the Working Time Regulations 1998 as regards maximum hours of work. D An employee cannot be required to work an average of 48 hours per week taken over a period of 13 weeks.

49. Which of the following is correct? (i) A contract of guarantee is unenforceable unless it is evidenced in writing. (ii) A contract to sell land must be in writing. (iii) A contract of employment must be in writing. A B C D (ii) and (iii) only. (i),(ii) and (iii). (i) and (ii) only. (i) and (iii) only.

50. Which of the following is NOT normally a stakeholder of an organization? A CIMA B Customer C Media D Government

51. Which of the following statement Incorrect? (i) A team may be implied into a contract on the basis of previous dealings between the parties. (ii) A team may be implied into a contract by statute. (iii) A team may be implied into a contract by a court where it would reasonable to imply it. A B C D (i) only. (i) and (ii) only (iii) only. (ii) only

52. According to the Combined Code, who is responsible for setting the companys values and standerds/ A The shareholders B The Chairman. C The Managing Director. D The Board.

53. ABC Ltd has resolved to purchase the business of ST Ltd for 500,000.ABC Ltd is to pay ST Ltd for the business by issuing ordinary 1 shares rather than cash. As the market value of ABC Ltd s shares is 5 per share, ABC Ltd is to issue to ST Ltd 100,000 ordinary 1 shares. Which of the following is incorrect? A B C D The issue is lawful as ABC Ltd may issue its shares for a non-cash consideration. The issue is lawful because ABC Ltd dose not need to first offer the new shares to its existing members. The issue is lawful if ABC Ltd arranges to have the business valued by the companys auditor. The issue is lawful if the director have the necessary authority to issue the shares.

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54. The body responsible for reviewing the operation of the accounting profession worldwide is: A The International Federation of Accountants B The Professional Oversight Board for Accountancy. C The Financial Reporting Council. D The Financial Review Board.

55. Which of the following is correct? A An extraordinary resolution may only be passed by all the companys shareholders voting in favor of the proposal either in person or by proxy. B An extraordinary resolution may only be passed by 75% of all the companys shareholders voting in favor of the proposal either in person or by proxy. C An extraordinary resolution may only be passed by 51% of the shareholders who are present voting favor of the proposal either in person or by proxy. D An extraordinary special resolution may only be passed by 75% of the shareholders who are present voting favor of the proposal either in person or by proxy.

56. Which of the following is incorrect in relation to the remedy of rescission? (i) Rescission is available automatically in the event of a breach of contract. (ii) The victim of a misrepresentation may automatically claim rescission. (iii) Rescission is designed ti return the parties to their pre-contract position. A B C D (i) only. (iii) only. (ii) only. (ii) and (iii) only.

57. Sasha is assistant management accountant for a large telecommunications company. Sasha has become aware that the company is offering different levels of discount to different corporate customers. Sasha is concerned that this is unethical, so she mentioned it to the Finance Director during her most recent appraisal. The Director seemed amused at Sashas concern, and said that such a situation was perfectly normal. Which ONE of the following would it be appropriate for Sasha to do? A Ask for confirmation in writing from the Director. B Request a further meeting with the Finance Director. C Bring the matter to the attention of the Managing Director. D Resign E Nothing further F Ask for advice from the companys external auditors. 58. Adam Smith trades under the name The Smith Computer Company. Which of the following types of business organization must this be? A A private limited company. B A sole tradership. C Any type of business organization, as The Smith Computer Company is a business name. D A partnership.

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59. Alan, Ben, Chris and Debbie are the only shareholders in ABCD Ltd, each holding 100 ordinary 1 shares. Alan, who is the companys 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 be company in return for 1,000 ordinary 1 shares. The company was in need a computer, which was of equal value to the 1,000 ordinary 1 shares. Which of the following is correct? A The share issue is valid as long as Alan has the necessary authority to issue shares. B The share issue is invalid as the shares should have been offered to all the existing members first. C The share issue is invalid as it has had the effect of manipulating the voting structure within the company. D The share issue is valid and Alan may use his 1,100 votes to defeat the resolution proposed by Ben, Chris and Debbie.

60. Which of the following statement is correct? (i) An employer may rely on information discovered after an employees dismissal to justify a wrongful dismissal. (ii) An employer may rely on information discovered after an employees dismissal to justify an unfair dismissal. (iii) An employment tribunal will take into account the employees conduct when determining how much compensation for unfair dismissal to award. A B C D (iii) only. (i) and (iii). (i) and (ii).and (iii) (i) only.

61. Which of the following dose not apply to a company which intends to provide financial assistance for the purchase of its own shares? A The director must make a declaration of solvency. B The financial assistance must be approved by the court. C The company must have authority to provide financial assistance in its Articles of Association. D The shareholders must pass a special resolution. 62. Charles is one of the three directors of Cee Ltd. The company has recently agreed to purchase Charless house at its market value of 250,000. Which of the following is correct? A The purchase must be approved by the shareholders passing an ordinary resolution. B Charles is not entitled to vote as a shareholder to approve the purchase. C Charles need not formally disclose his interest as he is in a minority on the board. D The purchase is unlawful as a company cannot contract with one of its own directors. 63. Which of the following is correct? (i) A liquidated damages clause will be void if it amount to a penalty clause. (ii) A liquidated damages clause will apply where it is a genuine attempt to pre-estimate the loss caused by a breach of contact. (iii) A liquidated damages clause is void if it is for an amount in excess of the actual loss caused by the breach of contact. A B C D (i) and (ii) only. (i), (ii) and (iii). (iii) only. (ii) only.

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64. In the UK, the body responsible for promoting confidence in corporate reporting and government is: A The Professional Oversight Board for Accountancy. B The Financial Reporting Council. C The Financial Review Board. D The International Federation of Accountants. 65. (i) (ii) (iii) Which of the following incorrect? Legal title cannot pass an a contract induced by misrepresentation. Misrepresentation renders a contract voidable. A victim of negligent misrepresentation may seek rescission and damages. A B C D (i) only. (ii) only. (ii) and (iii) only. (i) and (iii) only.

66. Which of the following statement is correct? A director of a company owes a fiduciary duty to: A All the present and former shareholders of the company. B All the presented and future shareholders of the company. C Individual shareholders of the company. D All the present shareholders of the company. 67. On 1 May Wye Ltd wrote to Zed Ltd offering to ell a machine for 20,000, and allowing Zed Ltd 7 days to consider the offer. Which of the following statement is incorrect? A Wye Ltd can withdraw the offer at any time before Zed Ltd has accepted. nd rd B If Wye Ltd posts a revocation of the offer on 2 of May which is received by Zed Ltd on 3 May than the offer is rd withdrawn with effect from the 3 May. th th C If Zed Ltd accepts the offer by post on 4 of May, then there is a contract from 4 May. D Wye Ltd is contractually obliged to keep the offer to Zed Ltd open for 7 days.
st

68. Which of the following is correct? (i) The first directors are appointed upon the incorporation of the company. (ii) A director is a person who occupies the positive of director by whatever name called. (iii) A shadow director is a person in accordance with whose directions or instructions the directors of the company are accustomed to act. A (i), (ii) and (iii). B (i) and (ii) only. C (ii) and (iii) only. D (i) only. 69. Danny holds 1%, Edward 2% and Fozia 3% of the issued share capital of Vee Ltd. Which of these shareholders, acting alone or together, hold the minimum percentage to entitle the4m to require the company to circulate a written statement of their views to all those entitled to receive notice of the forthcoming annual general meeting? A Edward and Fozia. B Danny ad Edward. C Fozia alone. D Danny and Fozia.

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70. Which of the fundamental principles of CIMA s Code of Ethics is defined as follows? A professional accountant should comply with relevant laws and regulations and should avoid any action that discredits the profession A Professional behavior. B Integrity C Objectivity D Professional competence and due care

71. GHI Ltd has contracted with JKL Ltd. If JKL Ltd acts in breach of a condition, which of the following is correct? A GHI Ltd may terminate the contract and sue for damages. B GHI Ltd may terminate the contact but cannot also claim damages. C GHI Ltd is entitled to damages only. D The contract between GHI Ltd and JKL Ltd is automatically terminated.

72. Which of the following is incorrect? A Where there is a conflict between equity and the common law, the common law prevails. B A decision of the house of Lords is a superior source of law to a decision of the High Count. C Where there is a conflict between English Law and European Law, European Law prevails. D An Act of Parliament is a superior source of law to a decision of the House of Lords.
st

73. On 1 October X ltd wrote to Y Ltd offering to sell a machine at a price of 5,000. The letter stated that Y ltd must th th give X Ltd notice in writing of its acceptance of the offer by 8 October. Y Ltd posted its acceptance on 54 th th October and this reached X Ltd on 7 October. In the meantime X Ltd sent a letter to Y Ltd on 4 October revoking th its offer, and this reached Y Ltd on 8 October. A B C D There is no contract between X Ltd and Y Ltd because the offer was withdrawn on 4 October when the revocation was sent to Y Ltd. th X Ltd and Y Ltd contracted on 7 October. th X Ltd and Y Ltd contracted on 5 October. th There is no contract between X Ltd and Y Ltd because the offer was withdrawn on 8 October when the revocation was received by Y Ltd.
th

74. Which of the following types of resolution does not generally have to be filed at Companies House? A Ordinary. B Special. C Elective. D Extraordinary.

75. In a situation where the memorandum and the articles contradict (i) The articles prevail (ii) The memorandum prevails A B C D Only (i) is true Only (ii) is true Both (i) and (ii) are false Neither (i) or (ii)

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