BA4 Exam Training Practice Tests (CIMA Fundamentals of Ethics - Corporate Governance and Business Law)]

Question 1

Which of the following will NOT as a general rule amount to consideration?

A. A promise to carry out an existing contract. B. A promise to do an act in return for payment. C. A promise to do more than was originally agreed. D. A promise to pay the amount due at an early date.

Correct Answer: A

Question 2

Which ONE of the following in INCORRECT in relation to a Limited Liability Partnership ("LLP")?

A. Outsiders contract with the LLP and not with the partners, just as outsiders would contract with the company and not the directors or shareholders of the company. B. In return for Limited liability, an LLP, like a company, is required to submit an annual return. C. An LLP must have "designated members" which are the LLP equivalent of the board of directors of a private company. D. An LLP, like a company limited by shares, is a separate legal entity.

Correct Answer: C

Question 3

In relation to international regulations, which of the following is correct?
i. International regulations seek to establish common standards between professions practicing in different States so as to further international cooperation and agreement.
ii. International regulations agreed by the professional bodies of different States have the force of international law.
iii. International regulations which harmonies standards and procedures may be incorporated into contracts by commerce and the professions.

A. (i) only B. (i), (ii) and (iii) C. (i) and (ii) only D. (i) and (iii) only

Correct Answer: D

Question 4

A advertised his van for sale in the local newspaper at a price of £5,000.
In which of the following situations is a contract between A and B created?

A. B offered to buy the van for £4,800. A wrote to B accepting his offer. B wrote back stating: "payment will be made over three months." B. B wrote to A accepting his offer to sell the van for £5,000. C. B offered to buy the van for £4,500. A wrote to B accepting his offer but later changed his mind and sent an email to B withdrawing his acceptance. The email was read by B before he read A's letter of acceptance. D. B wrote to A and offered to buy the van at £4,800. B stated "if I hear no more from you in the next three days I shall assume that you agree to sell the van to me at that price." Three days have now passed and B has heard nothing from A.

Correct Answer: A

Question 5

A Ltd is under contract to manufacture machinery for B Ltd for £200,000. Which of the following is a valid excuse for A Ltd failing to complete the contract on time?

A. A number of A Ltd's key workers were absent through illness. B. A Ltd's employees went out on strike. C. A Ltd had taken on too many orders and had to give priority to its regular customers. D. A Ltd's factory was flooded.

Correct Answer: D

Question 6

Rank the following, starting with the highest court:
(i) Court of Appeal (Civil)
(ii) Supreme Court
(iii) County Court
(iv) High Court

A. (ii), (iv), (i), (iii) B. (ii), (i), (iv), (iii) C. (i), (ii), (iii), (v) D. (i), (ii), (iv), (iii)

Correct Answer: B

Question 7

Which of the following statements is correct in relation to the "maintenance of capital" principle?

A. In general, a company is not able to freely return its share capital to its members. B. A company cannot use its share capital, and may only return it to its members with the permission of the court. C. In general, a company can use its share capital for any reason whatsoever, as long as it ensures that there is sufficient remaining to meet the company's debts. D. A company cannot use its share capital which must be set aside as a fund for creditors.

Correct Answer: A

Question 8

F knows from preparing the accounts that the company she works for is going to have to make redundancies due to the recession. She also knows that, despite the recession, the Managing Director continues to enjoy lavish perks and even uses a private jet. What should she do?

A. Go to the press: Mrs F has a duty to report this in the public interest and the interest of the staff who will be made redundant B. Resign: F cannot carry on working at a company which is so unethical C. Do nothing: Professionally, Mrs F is bound to respect the confidentiality of the information she has received D. Leak the information: that way F's conscience will be clear but the information won't be traced back to her

Correct Answer: C

Question 9

What can companies do in order to minimize the likelihood of future legislation?

A. Insist on the highest standards of ethical behavior from their company and its employees B. Maintain effective self regulation C. Understand and address what the public expects of companies in terms of ethical behavior and social responsibilities D. All of the above

Correct Answer: D

Question 10

Being able to be trusted by others to be dependable reflects the personal quality identified by the CIMA Code of Ethics as:

A. Reliability B. Transparency C. Respect D. Traditionalism

Correct Answer: A

Question 11

What is an essential quality for a professional accountant?

A. Ethical acumen B. Emotional sensitivity C. Listening skills D. Emotional intelligence

Correct Answer: A

Question 12

R, S and T are the only shareholders in RST Ltd each holding 5,000 ordinary £1 shares. R is the only director of the company. The articles of association of RST contain the following provisions:
1. R is to be a director of RST Ltd for life.
2. In the event of any resolution to dismiss R by ordinary resolution his votes shall count three times.
Which of the following is CORRECT?
(i) Provision 1 is void as a director cannot be appointed for a period exceeding 3 years.
(ii) Provision 2 is valid and R may outvote any proposed resolution to dismiss him.
(iii) Provisions 1 and 2 are both unenforceable by R as they are not ordinary membership rights.

A. (i) only B. (ii) only C. (iii) only D. (i) and (iii) only

Correct Answer: C

Question 13

Complying with relevant laws and legislations demonstrates part of which CIMA Code of Ethics fundamental principle?

A. Responsibility B. Professional behavior C. Objectivity D. Integrity

Correct Answer: B

Question 14

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 others to override professional or business judgments"

A. Professional competence and due care B. Professional behavior C. Objectivity D. Integrity

Correct Answer: C

Question 15

Which of the following is correct in relation to the control of boards of directors of public limited companies?
i. The boards of public limited companies are under the legal control of the shareholders ii. The majority of the shares in public limited companies are held by institutional investors who are more concerned with capital growth and income than the internal management of public limited companies iii. As a general rule, private investors in the shares of public limited companies have insufficient power to influence the activities of the board.

A. (i) only B. (i) and (ii) only C. (i),(ii) and (iii) D. (i) and (iii) only

Correct Answer: C

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