CIMA BA4 flashcards

If CIMA’s ethical principles conflict with national law, which should be followed? National law.

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.

With regard to directors and shareholders, who are the principals and who are the agents?

• Shareholders = principals
• Directors = agents

Which of the following statements is/are true?  

1. Auditors prepare the financial statements
2. Auditors check every transaction
3. Undertake to find every error.

None of these statements is true.

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.

 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.  

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

In terms of ‘sufficiency’ and ‘adequacy’ what is the rule for valid consideration? Consideration must be sufficient but need not be adequate.

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.

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.  

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.

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.

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.

Who has responsibility for health and safety at work? Employers only, employees only, both? Both employers and employees have responsibility.