FAB ACCOUNTANT IN BUSINESS Test

NAME
BATCH TEACHER USMAN RAHAT
DATE 9TH SEP 2019 TEACHER ASST SHAHAB SHAFI
OBT MARKS TOTAL MARKS 80

1. Secondary stakeholders is another term for which group of stakeholders?

A Internal stakeholders
B Connected stakeholders
C External stakeholders
C : Primary stakeholders are those who have a contractual relationship with the
organisation, including some internal and connected stakeholders. Secondary stakeholders are
therefore external stakeholders.

2. The supply curve of a firm operating in a competitive market is its

A Marginal cost curve above the average variable cost curve
B Marginal cost curve above the average total cost curve
C Average total cost curve beyond the point where the marginal cost curve cuts it from below
D Average variable cost curve below the average revenue curve

A : The supply curve for a perfectly competitive firm is its marginal cost curve above the
average variable cost curve. The firm will not continue to produce if price is less than average
variable cost.

3. Porter’s five forces model identifies factors which determine the nature and strength of
competition in an industry. Which of the following is not one of the five forces identified in
Porter’s model?
A Substitute products or services
B New entrants to the industry
C Bargaining power of customers
D Government regulation of the industry

D : The other forces are bargaining power of suppliers and rivalry amongst current
competitors in the industry.
The five forces model is basic: you really need to learn the details…

4. Which of the following is a support activity in Porter’s value chain model?

A Procurement
B Operations
C Marketing and sales
D Inbound logistics

A : Procurement, technology development, HR management and infrastructure are support

activities. Inbound and outbound logistics, operations, marketing/sales and service are primary
activities.

5. For what function in an organisation would demographic information about social class be most
relevant?
A Human Resources
B Marketing
C Purchasing

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B : Socio-economic groupings are often the basis on which markets are segmented, so
that products/services and marketing messages can be targeted appropriately (to people with the
right levels of income, aspiration, education and so on). You might have paused over Human
Resources, because social class includes education factors, but the data cannot be used topredict
skill availability.

6. Janet works for a toy company called K Co. She telephones Mary at P Co on a daily basis to
order parts. Janet has no contact with customers but does deal with complaint letters from D
Group, an organization against slave labour. D Group believe that K Co use slave labour in the
toy manufacturing factories. Which of the following are internal stakeholders of K Co?
A Janet only
B Janet and Mary at P Co
C Janet and D Group
D Janet, Mary and D Group

A : Internal stakeholders include employees and management and so Janet is the only
internal stakeholder. Customers and suppliers (like Mary at P Co) are connected
stakeholders.Pressure groups such as D Group are external stakeholders.

7. Which of the following would not be an objective of stakeholder management in relation to

major suppliers?
A Continuity of supply
B Mutual dependency
C Information sharing

B : Dependency increases stakeholder power and creates risks and constraints. A buyer
would not necessarily want a supplier to be dependent on its business (for ethical reasons), any
more than it would want to be dependent on a supplier (for bargaining and supply risk reasons).
You may have hesitated over information-sharing, because of intellectual property and
confidentiality issues – but it is necessary for high-interest, high-power ‘key players’.

8. Which of the following statements about corporate social responsibility is true?

(i) CSR guarantees increased profit levels
(ii) CSR adds cost to organisational activities and reduces profit levels
(iii) Social responsibility may have commercial benefits
(iv) Social responsibility is a concern confined to business organisations
A (i), (ii), (iii) and (iv)
B (i) and (iii)
C (ii) and (iv)
D (iii) only

D : Statement (i) is incorrect, because there is no such ‘guarantee’; statement (ii) because it is not
necessarily so, and statement (iv) because other organisations (eg charities, government bodies)
are often more concerned with social responsibility than businesses.
It is always worth checking to see if logic helps. Words like ‘guarantee’ often signal an
untrue statement, because they make such extreme claims. And if statement (i) is therefore
incorrect, you’ve halved your options. It should then be obvious that (iv) is incorrect (if you think
about a hospital, say).

9. Which of the following is a feature of poor corporate governance?

A Domination of the board by a single individual
B Critical questioning of senior managers by external auditors
C Supervision of staff in key roles
D Lack of focus on short-term profitability

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A : This is a feature of poor corporate governance because it makes way for self-interested
decision-making. The others may ‘look’ like negatives, but are in fact the opposites of three other
features of poor corporate governance: lack of independent scrutiny; lack of supervision; and an
emphasis on short-term profitability (which can cause pressure to conceal problems or
manipulate accounts).
You could have got to the answer with logic, with a sound grasp of corporate
governance – but it would be worth learning the list of features of poor corporate governance, so
you can recognise them in an exam question.

10. Which of the following would be included in the principles of Corporate Social Responsibility?
(i) Human rights
(ii) Employee welfare
(iii) Professional ethics
(iv) Support for local suppliers
A (ii) and (iii) only
B (i) only
C (ii), (iii) and (iv) only
D (i), (ii) and (iv) only

D : Professional ethics concern the individual ethical sphere, not the wider sphere of
Corporate Social Responsibility which operates at the level of the firm. All of the others are CSR
principles: human rights as a component of ethical trading and investment; employee welfare as
part of ethical employment; and support for local suppliers as an example of sustainability.
The combinations were designed to test if your thinking was limited to internal
organisational matters or commercial matters.

11. In most countries, what is the usual purpose of codes of practice on corporate governance?
A To establish legally binding requirements to which all companies must adhere
B To set down detailed rules to regulate the ways in which companies must operate
C To provide guidance on the standards of the best practice that companies should adopt
D To provide a comprehensive framework for management and administration

C Examiner's comments: The examiner commented that only 47% of candidates answered this
question correctly. Codes of practice are usually associated with a principles-based approach
(rather than a rules-based approach) and so options A and B should have been easily eliminated.
The words ‘guidance’ and ‘should adopt’ were the key words to lead to the correct option.

12. Who should set directors’ reward and incentive packages, according to corporate governance
provisions?
A The board of directors
B The nomination committee
C A remuneration committee made up of independent non-executive directors

C : Only Option C fulfils the requirement for full independence of the body that sets
directors’ remuneration (to avoid directors’ awarding themselves unjustifiable rewards!). A
nomination committee has the separate task of overseeing board appointments.

13. ABC produces a variety of soft drink. It has two competitors but all three producers use product
differentiation to distinguish themselves from each other. What type of market is this?
A Perfect competition
B Monopoly
C Monopolistic competition
D Oligopoly

C : This is an example of monopolistic competition.

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14. What is an acronym used to describe the key elements of an organisation’s external
environment?
A SWOT
B SMART
C PEST

C : PEST stands for Political, Economic, Socio-cultural and Technological.

SWOT (Strengths, Weaknesses, Opportunities, Threats) is a related exercise, as PEST
data is fed into the O/T part of the business appraisal.

15. Which of the following is not a legitimate method of influencing government policy in the
interests of a business?
A Employing lobbyists to put the organisation’s case to ministers or civil servants
B Giving lawmakers non-executive directorships
C Offering financial incentives to public officials to use their influence on the organisation’s behalf
D Attempting to influence public opinion, to put pressure on the legislative agenda

C : This would be interpreted as corruption. The other options are usually legitimate
methods of influence. Although B may be questionable in some parts of the world, in others like the
UK it is perfectly legitimate.

16. ........................................ is an analysis of statistics on birth and death rates, age structures of
people and ethnic groups within a community.
Which word correctly completes the sentence?
A Ergonomics
B Economics
C Psychographics
D Demographics

D : The statement defines demographics. Ergonomics is a study of the interaction of

humans and their environments (used in design of office equipment and furniture, for example).
Psychographics is the study of psychological factors (used in selection testing, for example).

17. A recent trend in organisation and management is the rise in ‘virtual organisation’ and ‘virtual
teamworking’. To which of the following environmental (PEST) factors is this most directly
attributed?
A Economic
B Socio-cultural
C Technological
D Political

C : Virtual organisation is the collaboration of geographically dispersed individuals and

teams, specifically using the latest information and communication technology (ICT) enablers: the
Internet, web-conferencing and so on.

18. The stationery and printing company S Co, has recently upgraded its computers and printers
so that more production has become automated. Many middle managers will now be made
redundant. This is known as:
A Downsizing
B Delayering
C Outsourcing

B : Information technology has enabled managers or staff ‘lower down’ the hierarchy to
make decisions previously made by middle management. This is known as delayering.
You may have been tempted to think that this was downsizing. Downsizing, however,
means reducing staff from all levels or layers in the business.

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19. In the context of ’best practice’ employment protection law, in which of the following
circumstances is dismissal of an employee automatically considered unfair?
A Selection for redundancy on the basis of age
B Misconduct
C Marriage to an employee of a key competitor
D Incompetence

A : This constitutes unfair selection for redundancy (on the basis of recent age
discrimination legislation): redundancy is potentially fair grounds for dismissal as long as the
basis of selection is fair. Options B and D are potentially fair grounds: there should be a
reasonable attempt at performance or disciplinary management (warnings, training etc). You may
have hesitated over C, but this is an example of ‘substantial reasons’ that would be considered by
a tribunal.
You could narrow the options by considering that there must be some way for
companies to dismiss incompetent or deliberately obstructive employees.

20. . Which of the following socio-cultural trends will have a direct impact on most business
organisations?
(i) Increasing ethnic and religious diversity in populations
(ii) Falling birthrates
(iii) Focus on ‘green’ issues
(iv) Increase in single-member households
A (iii) only
B (i) and (iii) only
C (i), (ii) and (iii) only
D (i), (ii), (iii) and (iv)

C Increasing diversity has an impact on HR policies in regard to equal opportunity and

prevention of discrimination. Falling birthrates creates an aging workforce and skill shortages. All
organisations need to take account of environmental regulation and consumerism. An increase in
single-member households will impact on some organisations: notably, those which market goods
and services to this segment (eg single-serve pack sizes), but the questions said 'most'
organisations.
You need to think through a range of compliance, marketing and skilling issues when appraising
socio-cultural factors.

21. Which of the following socio-cultural trends will have a direct impact on most business
organisations?
(i) Increasing ethnic and religious diversity in populations
(ii) Falling birthrates
(iii) Focus on ‘green’ issues
(iv) Increase in single-member households
A (iii) only
B (i) and (iii) only
C (i), (ii) and (iii) only
D (i), (ii), (iii) and (iv)

C : Increasing diversity has an impact on HR policies in regard to equal opportunity and

prevention of discrimination. Falling birthrates creates an aging workforce and skill shortages. All
organisations need to take account of environmental regulation and consumerism. An increase in
single-member households will impact on some organisations: notably, those which market goods
and services to this segment (eg single-serve pack sizes), but the questions said 'most'
organisations.

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22. What is the name given to an approach to ethical decision-making which considers the ‘right’
decision to be the one which results in the greatest good to the greatest number of people in a
given situation?
A Utilitarianism B Deontology C Virtue ethics

A : Utilitarianism is based on ‘usefulness’: the greatest good of the greatest number.

Deontology is an alternative approach based on absolute moral principles (or categorical
imperatives): what is morally ‘right’ in a situation. Virtue ethics is a belief in pursuing positive
moral qualities, which flow out into behaviour.

23. X plc is trying to get a trading permit, for which it qualifies. Unfortunately, there is a backlog at
the issuing office, and X plc has been notified that there will be a delay in the processing of its
permit. The divisional manager offers a donation to the issuing office’s staff welfare fund, if the
official concerned will expedite the paperwork.
Which of the following statements is true of this action?
A It is not unethical, because the money is offered for positive purposes.
B It is not unethical, because X plc is legally entitled to the benefit it is claiming.
C It constitutes bribery.
D It constitutes grease money.

D : Grease money refers to payments for benefits to which the company is legally entitled– just to
‘oil the wheels’. Bribery is payment for benefits to which the company is not legally
entitled – to ‘bend the rules’! In either case, this is unethical (and in some situations, illegal) –
regardless of the legitimacy of the claim or the purposes to which the payment is (supposedly)
put.
Know the difference between extortion, bribery, grease money, gifts and hospitality.

24. Which of the following is an approach to ethics which combines a concern for the law with an
emphasis on managerial responsibility?
A Compliance based
B Integrity based
C Environmental based
D Economic based

B : The emphasis on managerial responsibility is a feature of the integrity or values-based

approach to ethics management. A concern for the law alone is a compliance based approach.
Options C and D are examples of responsibilities.

25. Farrah works in the sales tax section of the accounts department of BCD Co. When the finance
director is on holiday, Farrah notices that BCD Co has not been paying the correct quarterly
amounts to the authorities. Farrah had suspected this for some time and decides to contact the
authorities to tell them about the fraud. This disclosure is known as...................................
What two words correctly complete the sentence?
A Confidentiality breach
B Corporate conscience
C Whistle blowing

C : Options B is irrelevant, and option A is incorrect, since whistle-blowing gives some protection to
employees from being in breach of confidentiality.

26. Which of the following would raise ethical issues for a manufacturer of fast-moving consumer
goods?
(i) The materials used in manufacture of the goods
(ii) The quality of the goods

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(iii) How the goods are advertised

(iv) How much its raw materials suppliers pay their staff
(v) How the goods are packaged
A (ii) and (iii) only
B (i), (ii) and (iii) only
C (ii), (iii) and (v) only
D (i), (ii), (iii), (iv) and (v)

D : These are all potential ethical issues. Materials used impacts on product safety and
eco-friendliness (eg for recycling). Quality is a safety and customer satisfaction issues. Advertising
poses issues of truth and non-manipulation. You may have hesitated over supplier labour
practices, but this is a key area of ethical sourcing. It can cause significant damage to corporate
reputations. Packaging raises issues of safety/perishability, eco-friendliness and truthful product
labelling.

27. Reliability, responsibility,........................................ , courtesy and respect are the personal

qualities expected of an accountant. Which of the following words correctly complete this
statement?
A Accountability
B Social responsibility
C Timeliness
D Ambition

C : Accountability and social responsibility are classed as professional qualities, not

personal qualities. Ambition is a personal quality – but is not considered essential in a
professional ethics context: it can even pose ethical dilemmas…
You need to read the question stems carefully to pick up fine distinctions such as
‘personal’ and ‘professional’.

28. You have been asked to work on a major investment decision that your company will be
making, and discover that your brother-in-law is the managing director of a firm that may
benefit from the outcome of the decision. You have no intention of allowing this to influence the
advice you give your firm, and you know that your brother-in-law will not try to influence you in
any way.What professional quality would make you consider handing this task to a colleague,
or otherwise raising questions with your superiors?
A Scepticism
B Accountability
C Independence of mind
D Independence in appearance

D : Independence in appearance means avoiding situations that could cause a reasonable

observer to question your objectivity. In the scenario, this is a risk – while independence of mind
(free from actual partiality) isn’t. The pure distractors were plausible because of the possibility of
raising questions (scepticism) with your superiors (accountability) – but irrelevant.

29. Which of the following would not represent an ethical objective in relation to employment
practices?
A Guarantee of minimum wages
B Proactive health, safety and welfare promotion
C Promotion of workforce diversity
D Employability training

D : Employability training helps employees to get other employment but it is not an ethical
objective.

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30. Of the three main sources of rules that regulate the behaviour of businesses, the minimum
level of acceptable behaviour is set by which?
A Non-legal rules and regulations
B Ethics
C The law
D Society

C : The saying is: ‘the law is a floor’. By meeting non-legal regulations (including the rules of your
workplace) you should meet a higher standard of behaviour than the legal requirements.Ethical
behaviour is a higher moral standard, based on society’s expectations and principles.

31. The directors’ deliberations must be balanced by taking into account everyone who has a
legitimate interest in the company and respecting their rights and views.
This statement describes which concept?
A Fairness
B Openness
C Probity

A : This is a definition of fairness.

32. Which of the following statements is a definition of probity?

A Open and clear disclosure of all relevant information
B Telling the truth and not misleading stakeholders
C Accepting the blame or credit for decisions
D Answerable in some way for the consequences of its actions

B : Option A is a definition of openness, C is responsibility and D is accountability.

33. Holders of public office should not place themselves under any financial or other obligation to
outside individuals or organisations that might influence them in the performance of their official
duties. This statement refers to which concept?
A Independence
B Reputation
C Integrity

C : The statement is the definition of integrity made by the UK Nolan Committee on

Standards in Public Life.

34. Which one of the following is not part of a corporate code of ethics?
A Professional ethics
B Organisational culture
C Organisational self-interest

C : Organisational self-interest is a threat to independence and a source of conflict of

interest. The other options are different varieties of ethical systems.

35. Abner is the lead partner on the audit of DEF Inc. The client often gives Abner corporate
hospitality at major sporting events and small gifts, such as a bottle of spirits, on his birthday.
Which threat does this represent?
A Self-interest
B Self-review
C Advocacy
D Intimidation

A : A firm or a member of an assurance team should not accept gifts or hospitality unless

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the value is clearly insignificant. In this case, it is likely that the cost of corporate hospitality at
major sporting events will be significant.

36. XYZ carries out the audit of Delta Products Inc. Delta Products Inc is in financial trouble and
XYZ has had to qualify the audit report for the past two years. The managing director of Delta
blames the qualified audit reports for her firm’s continuing problems. She is threatening to sue
XYZ for poor work if they qualify the audit report for this year. What threat does this represent?
A Familiarity
B Intimidation
C Self-interest
D Self-review

B : This is a case of intimidation. You may have been tempted to pick self-interest but the threat of
legal proceedings makes this intimidation.

37. Sport-4-Kidz is a charitable organisation that operates a sports centre in a large city.
The land on which the playing fields and facilities are located is held on behalf of the charity by
Donna and Dietmar, the two trustees. Donna and Dietmar simply hold the land on behalf of Sport-
4-Kidz and play no role in running the charity. They are rarely contacted by the management of the
charity. However, they are the only people who are able to enter into contracts in relation to the
land and its use. Sport-4-Kidz is managed and operated by a management committee. The
committee has decided on a major expansion of facilities by building a new sports hall. The
committee has the power to legally bind the charity in all matters other than the land. Their
decisions are overseen by the government charity regulator, which generally sanctions the
charity’s decisions except in relation to financial reporting. The management committee is
negotiating with four building companies.The proposed expansion of the facilities has angered the
local residents, many of whom are concerned about heavy building site traffic and the danger
posed to their children. Many believe that the design of the new sports hall is ugly and insensitive.
Three well-respected local politicians serve on the residents’ committee.

(a) The following are types of stakeholder:

A Internal stakeholder
B External stakeholder
C Connected stakeholder

Required:
For each of the following, indicate whether they are internal, connected or external stakeholders.
(i) Donna and Dietmar. Select one of A, B or C
(ii) Members of the management committee. Select one of A, B or C
(iii) The four building companies. Select one of A, B or C
(iv) Local residents. Select one of A, B or C

(a) (i) B Donna and Dietmar play no part in the charity’s operations so are external
stakeholders.
(ii) A The management committee are internal to the charity as they can legally bind the
charity.
(iii) C The building companies are in negotiation with the management committee and
therefore are connected stakeholders.
(iv) B Local residents will always be external stakeholders.

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FAB ACCOUNTANT IN BUSINESS Test

(b) Complete the following sentences about Sport-4-Kidz stakeholders, with reference to
Mendelow’s grid.The local residents exert 1 and should be 2
(i) Select which ONE of the following fills Gap 1:
A high power, low interest
B high power, high interest
C low power, low interest
D low power, high interest
Write down A, B, C or D.

(ii) Select which ONE of the following fills Gap 2:

A treated as a key player
B kept satisfied
C kept informed
Write down A, B, or C.

The building companies exert 3 and should be 4

(iii) Select which ONE of the following fills Gap 3:
A high power, low interest
B high power, high interest
C low power, low interest
D low power, high interest
Write down A, B, C or D.

(iv) Select which ONE of the following fills Gap 4:

A treated as a key player
B kept satisfied
C kept informed
Write down A, B, or C.

(b) (i) B Residents have high interest due to the anticipated effects of the development, but
due to the involvement of the local politicians they also have high power.
(ii) A Stakeholders with high power and high interest should be treated as key players.
(iii) D The building companies have high interest in the decision to award the building
contract.
(iv) C Stakeholders with low power and high interest should be kept informed.

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38.

(a) A, E, F, H The fundamental principles are Integrity, Confidentiality, Objectivity, Professional

behaviour and Professional competence and due care.

(b) A, C, D, G These qualities distinguish a profession from an occupation.

GOOD LUCK

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