Learn or revise key terms and concepts for your ACCA exams using OpenTuition interactive ACCA Flashcards
ACCA flashcards are interactive and only work on line, flashcards are NOT downloadable/printable
See also ACCA P5 Flashcards: Set 1 | Set 2 | Set 3 | Set 4
What are the following:
- A private company?
- A public company?
- A listed company?
Private company: cannot offer shares to the public
Public company: can issue shares to the public (though might not have)
Listed company: listed (quoted) on a stock exchange. Must obviously be a public company for shares to have been offered and bought by the public.
How can the veil of incorporation be lifted?
The veil of incorporation can be lifted only in circumstances where incorporation is being used to give protection from improper behaviour and so the company is being used as a front or to defraud creditors.
What is meant by the term ‘corporate veil’?
Limited companies have a separate legal existence and that their actions and liabilities are separate from those of the shareholders and directors. A company might be sued if it causes damage or is owed, but the shareholders won’t be because the company is the guilty party. This distinction is the ‘veil of incorporation’.
What are the two documents that embody a company’s constitution?
- Memorandum of association
- Articles of association
What are the disadvantages of forming a limited company?
- Formalities such as filing return and financial statements and perhaps needing an audit.
- Separate tax calculations
- Publicity – financial statements are open to public inspection.
What are the advantages of forming a limited company?
- Limited liability
- Succession: because companies have a separate legal existence, they can continue in perpetuity even as shareholders change or die.
- Easy transfer of shares: ownership is represented by shares that can be bought and sold.
- Professional: limited companies might give professional impression than a sole trader.
- Raising finance: if a limited company does well it can be listed on a stock exchange.
- Taxation: advantages from time to time.
What is a partnership?
If two or more people trade together with a view to profit, then a partnership is formed.
What are the three potential remedies for unfair dismissal?
- The employer gives the employee the old job back
- Re-engagement. The employee is given a job comparable to the old one.
- This is by far the most common remedy.
What is meant by ‘constructive dismissal’?
This is where the employer’s behaviour entitles the employee to presume he or she has been dismissed.
What are the three ways in which employment can be ended?
- Resignation
- Retirement
- Dismissal
Who has responsibility for health and safety at work? Employers only, employees only, both?
Both employers and employees have responsibility.
What are the three stages of money-laundering?
- Placement
- Layering
- Integration
What is the difference between bribery and facilitation payments?
These are improper payments of cash or gifts to third parties.
Bribery: payments to induce someone to do something they shouldn’t do.
Facilitation payments: payments to induce someone to do something they should be doing anyhow.
What is meant by the term ‘diversity’ in employment?
Diversity of employment is ensuring that the composition of the workforce reflects the population as a whole.
Equal opportunities legislation mentions three types of illegal behaviour. What are these?
- Direct discrimination
- Indirect discrimination
- Victimisation
In relation to implied terms in employment contracts, how much care and skill must an employee bring to the job?
Employees must exercise reasonable care and skill. The level required will depend on the experience and qualifications of the employee.
In relation to implied terms in employment contracts, what is the duty of ‘fidelity’?
This requires the employee to serve the employer faithfully. It is implied in all employment contracts and means that an employee may not act against the interests of the employer.
What is the distinction between ‘a contract for services’ and a ‘contract for service’?
An employer-employee relationship implies that there is a contract of service and the employer controls how, when and where the work is done.
A contract for services is the relationship that exists between a self-employed person and whoever is paying him or her.
What are the three requirements for fraudulent misrepresentation?
The statement was made:
- Knowing it to be false
- Without belief in its truth
- Recklessly, careless as to whether it be true or false.
What are the three requirements for misrepresentation to have occurred?
A misrepresentation is a false statement of fact or law which induces one party to enter into a contract. The statement must be:
- False
- Relating to fact or law.
- Induces one party to enter a contract.
What are the three sources of implied terms?
- Customs
- Fact
- Law
What is the distinction between a’ term’, a ‘condition’ and a ‘warranty’?
Terms consist of conditions and/or warranties.
- Condition: vital to a contract and if breached will give the innocent party the right to repudiate (terminate) the contract and to claim damages
- Warranty: less fundamental than a term. The breach of a warranty will not cause the contract to end, but can give rise to damages.
If a grandparent promises to pay for a grandchild’s university education what document is needed to ensure that this is legally enforceable despite the lack of consideration from the child.
A deed – a formal document requiring signatures and witnesses.
As an act of goodwill and neighbourly kindness, you paint the front door of someone’s house. The householder, being delighted, promises to pay you $30, but then fails to pay.
Has a contract been formed and if no, why not?
There is no contract as the consideration (your paint work) is past. Both sided of the exchange have to be agreed before the contract is executed.
In terms of ‘sufficiency’ and ‘adequacy’ what is the rule for valid consideration?
Consideration must be sufficient but need not be adequate.
If documents relating to a contract are being posted, when do offers, acceptance and revocations occur?
- Offer: upon receipt by the offeree
- Acceptance: upon posting
- Revocation: upon receipt by the offeree
Which of the following constitute acceptance of an offer?
- Oral acceptance
- A counter-offer
- Written acceptance
- Silence
Oral and written acceptance only.
What are the six ways in which offers can be terminated?
- Acceptance
- Rejection
- Revocation
- Lapse
- Death of offeror (personal services)
- Failure of a condition attaching to the offer
What is an invitation to treat?
An invitation to treat is where one party makes it known that they are ready to receive an offer. For example, products on supermarket shelves with prices attached do not constitute offers: these are invitations to you to make an offer to buy the goods.
What are the two classes of offer?
Express and implied
What are the requirements for a contract to exist?
- Offer
- Acceptance
- Consideration
- Intention to create legal relations
- Capacity
What is the Global Reporting Initiative?
GRI is an international independent organisation that helps businesses, governments and other organisations understand and communicate the impact of business on critical sustainability issues such as climate change, human rights, corruption and many others. GRI issues reporting standards grouped like the triple bottom line approach, into environmental, social and economic standards. F
What is the ‘triple bottom line’?
The triple bottom line is one framework for reports which include CSR impacts. It has three sections:
- Financial: traditional accounting measures, such as profit.
- Social: the effect of business practices relating to labour and the community.
- Environmental: the effect of business practices on sustainability and the beneficial or harmful effects on the environment.
(These are sometimes referred to as profit, people, planet).
What is corporate social responsibility?
CSR refers to going beyond what is required by the law. CSR involves acting as a good corporate citizen, satisfying the needs of many stakeholders, and reducing adverse effects caused by the organisation’s activities.
One definition: CSR involves acting as a good corporate citizen, satisfying the needs of many stakeholders, and reducing adverse effects caused by the organisation’s activities.
In internal control systems, what is meant by ‘segregation of duties’?
Transactions should be split up so that no one person controls all of it. This increases the chance of errors being found and also make fraud more difficult because employees would need to collude – and that increases their risk of being found out.
What are the five elements of an internal control system?
- The control environment
- The risk assessment process
- The information system
- The control activities
- Monitoring
What are the elements of an anti-fraud policy which lead to fraud deterrence?
- Prevention
- Detection
- Response
What are the three pre-requisites for fraud?
- Incentive/motive
- Opportunity
- Attitude/dishonesty
What are the two classes of fraud?
- Fraudulent financial reporting
- Misappropriation of assets
An invoice from a supplier is entered twice into the accounting system (Dr Purchases; Cr Supplier)
Is this an error of omission, and error of commission, an error of principle or a compensating error?
This is an error of commission.
An invoice for redecorating is debited to non-current assets.
Is this an error of omission, and error of commission, an error of principle or a compensating error?
This is an error of principle.
A receipt of cash is debited to the cash book, but not credited to sales.
Is this an error of omission, and error of commission, an error of principle or a compensating error?
This is an error of omission.
What should go into External audit column and row of the table below?
External audit | |
Reports to | |
Appointed by | |
Power from | |
Employed by | |
Coverage | |
Responsibility for improving the organisation |
External audit | |
Reports to | Shareholders |
Appointed by | Shareholders |
Power from | Statute – allows external auditors to insist on seeing all documents and to be given full explanations. |
Employed by | External firm |
Coverage | Financial statements: true and fair view |
Responsibility for improving the organisation | Will report to management on internal control weaknesses |
What should go into Internal audit column and row of the table below?
Internal audit | |
Reports to | |
Appointed by | |
Power from | |
Employed by | |
Coverage | |
Responsibility for improving the organisation |
Internal audit | |
Reports to | Management – must have a clear route to the board though day-to-day reporting to the audit committee. |
Appointed by | Management |
Power from | Management |
Employed by | Company (unless outsourced) |
Coverage | All categories of risk and investigation |
Responsibility for improving the organisation | A major function of internal audit |
What word is missing from each of the blanks in the following definition of internal audit?
An ?????? appraisal activity established within an organisation as a service to it. It is a control which functions by examining and evaluating the adequacy and effectiveness of other ??????; a management tool which analyses the effectiveness of all parts of an entity’s operations and management.’ (CIMA’s Management Accounting Official Terminology)
An independent appraisal activity established within an organisation as a service to it. It is a control which functions by examining and evaluating the adequacy and effectiveness of other controls; a management tool which analyses the effectiveness of all parts of an entity’s operations and management.
Which of the following statements is/are true?
- Auditors prepare the financial statements
- Auditors check every transaction
- Undertake to find every error.
None of these statements is true.
What are the three ways in which an audit opinion can be modified?
- Qualified: where the misstatement or lack of evidence is material, but can be isolated
- Adverse: where the audit report would say that because the misstatements are so severe (pervasive) the financial statements do NOT show a true and fair view.
- Disclaimer: where the auditor would say that because the lack of evidence so severe (pervasive) they can form no opinion on the financial statements.
What are the five elements of a set of financial statements?
- A statement of financial position
- A statement of profit or loss
- A statement of cash flows
- Notes to the financial statements
- A statement of movement in reserves
With regard to directors and shareholders, who are the principals and who are the agents?
- Shareholders = principals
- Directors = agents
Why is external audit needed?
Shareholders own the company but directors manage and run it. Directors produce financial statements annually and an audit examines these to see if they give a true and fair view. This allows shareholders to better assess how their company and its directors are doing.
What is meant by the term ‘assurance’?
- An independent expert examines
- specified subject matter to
- agreed standards
- that is the responsibility of one party
- and produces a report
- for a second party.
What are the two levels of a two-tier board system?
- Supervisory board
- Management board
What are IFAC’s eight drivers for sustainable corporate success?
- Customer and shareholder focus
- Effective leadership and strategy
- Integrated governance, risk and control
- Innovation and adaptability
- Financial management
- People and talent management
- Operational excellence
- Effective and transparent communication
The UK Corporate Governance Code mentions three board sub-committees that are entirely (or principally) staffed by non-executive directors. What are these committees?
- Nomination committee appointment of new directors)
- Audit committee (liaison with internal and external auditors)
- Remuneration committee (directors’ remuneration)
Which of the UK Corporate Governance Code and the USA’s Sarbanes Oxley has the force of law?
UKCGC = not in statute. Enforced for listed companies by the stock exchange: comply or explain
SA Act = US law.
What are the fie headings of the UK Corporate Governance CODE?
- Leadership
- Effectiveness
- Accountability
- Remuneration
- Relations with shareholders
What are the five OECD principles of corporate governance?
Corporate governance frameworks should:
- Protect shareholders’ rights
- Recognise the rights of all shareholders
- Ensure disclosure and transparency
- Ensure timely and accurate information is available
- The board should determine and be accountable for the strategy of the company
What is ‘corporate governance’?
Corporate governance is a system by which companies are directed and controlled.
If CIMA’s ethical principles conflict with national law, which should be followed?
National law.
What are the missing labels in two of the circles in the diagram below?
What is professional scepticism?
Approach work with a questioning mind. It does not mean that you expect that every piece of information you are supplied with has been deliberately falsified. On the other hand, it does not mean that you automatically believe everything you are told. You must walk a tight-rope between belief and disbelief and be aware of human frailty and fallibility.
What is the basis of the ethical framework?
• Ethical principles to be followed
• These are subject to risks
• Accountants should use safeguards to avoid or to respond to risks.
What are the five classes of threat to professional ethics?
• Self-interest
• Self-review
• Advocacy
• Familiarity
• Intimidation
What are CIMA’s five fundamental ethical principles??
• Integrity
• Objectivity
• Professional competence and due care
• Confidentiality
• Professional behaviour
What is lifelong learning?
“The provision or use of learning opportunities, both formal and informal, throughout people’s lives in order to promote continuous development and improvement of the knowledge and skills needed for employment and personal fulfilment
What are four ways or tools in which employees’ personal values can be brought more into line with the organisation’s values?
• Recruitment
• Training
• Ethical code
• Corporate culture
For what reasons can the principle of confidentiality be breached?
Members should not disclose confidential information unless they have a legal or professional duty or right to do so. An example of a legal duty to disclose information can arise if a member thinks that a client or the person they are working for is involved in money laundering.
There might be public interest reasons also.
One of the fundamental ethical principles is ‘objectivity’.
What does that mean in the context of a member of CIMA?
Members should be influenced by the facts and the facts only. They must avoid bias, conflict of interest and undue influence.
Match the following terms to (1) or (2) following:
Rules based =
(1) compliance based
(2) integrity or principles based
Framework based=
(1) compliance based
(2) integrity or principles based
Rules based = compliance based
Framework based = integrity or principles based
What is the IESBA?
The International Ethical Standards Board for Accountants (part of IFAC) develops ethical codes and guidance.
What is IFAC?
The International Federation of Accountants. This body develops accounting and auditing standards that it hopes will be adopted across all countries.
The CIMA Code of Ethics states that a distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest.
What is meant by ‘public interest?
The “public” includes all users of financial information and decisions.
“Interest” describes the responsibilities that professional accountants have to society.
What is the deontology approach to ethics?
Deontology refers to duty bound ethics, suggests that ethics arise from the rightness or wrongness of actions themselves, as opposed to the rightness or wrongness of the consequences of those actions. It argues that decisions should be made considering the factors of one’s duties and other’s rights.
What is teleology/utilitarianism/consequentialism in ethics?
These state that any action must be viewed in terms of the consequences that the action produces: do the consequences serve some intrinsic good? Utilitarianism proposes that one should act in such a way to produce the greatest good for the greatest number.
What is the difference between absolute and relative ethical theories?
Absolute value theorists assume that there is only one set of moral rules that are unchanging and always true. Relative value theorists accept that there are many moral/ethical codes each of which evolves over time and each could be different from every other.
haroonkhalid says
Brilliant flash cards for revision. Please do not focus on learning these flash cards. I see students are keen to copy and paste to get them in hard copy.
John Moffat says
You are quite correct – there is no point at all in printing them out and learning them off by heart.
febulo says
any flashcards for P7 please?
opentuition_team says
You are missing the point!!!
this is to revise, not to learn from!
marciahart says
The materials are very helpful.
ahmadwaqas37 says
why sep exam past paper not available
opentuition_team says
Email ACCA about it
sabiali says
Respected admin and students,
I have attempted p5 8 times but could not pass it, any suggestions.? This is my last exam which is stopping me to become an ACCA.
atiqa says
hi. please don’t stop and never give up. i attempted this p5 paper twice. my approach was i did all the pass year papers. and find a good note from a good lecturer. actly, for paper p5, the points are in the questions paper itself. you just need to elaborate it. it just a matter of techniques. wish you all the best!
ndubeni says
I have also failed this paper more than six times as my last paper, it really hurts after putting in my level best.
!Don’t give up!
naomii says
stop focussing on formulae and calculations,
focus on understanding the theory.
A Lot of people fail many times and don’t understand why they failed when it is simply because they have all the figures on their finger tips but no theory!! more than half the exam is theory!
Dont allow the F5 mindset of knowing all the workings to confuse you into thinking you know it all! read read read! theory and explaining what is going on is more important than number crunching at the professional stage
akelajp says
Hello!
I haven’t found flashcards for P4 paper, are those available?
Thanks!
opentuition_team says
if it is not on line – it does not exist
hassankhan says
How I can download these flash cards?
John Moffat says
You cannot download them – they are for checking yourself online.