F1FAB Revision Question Bank - Contents - j14-j15 (Encrypted)

Revision Question Bank
ACCA
PAPER F1
ACCOUNTANT IN BUSINESS
REVISION QUESTION BANK
For Examinations to August 2015
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REVISION QUESTION BANK ACCOUNTANT IN BUSINESS (F1)

CONTENTS
Question
Page
Answer
Marks
1
2
1001
1001
4
4
3
5
1001
1001
4
4
7
8
1002
1002
4
4
9
10
1002
1002
4
4
11
13
1002
1003
4
4
14
15
1003
1003
4
4
16
17
1003
1004
4
4
18
19
1004
1004
4
4
20
21
1004
1005
4
4
22
23
1005
1005
4
4
Date worked
THE BUSINESS ORGANISATION

1
2
Organisation and Industry

Direct Service Provision
STAKEHOLDERS IN BUSINESS ORGANISATIONS

3
4
The Ultimate Football Club

Northern Bottlers
THE BUSINESS ENVIRONMENT

5
6
Personal Protection
Porter
THE MACRO-ECONOMIC ENVIRONMENT

7
8
Eland
Gross Domestic Product
THE MICRO-ECONOMIC ENVIRONMENT

9
10
Demand and Supply

Markets
ORGANISATIONAL STRUCTURE
11
12
Product-oriented structure
Greg Pye
ORGANISATIONAL CULTURE
13
14
Handy and Hofstede

Schein
COMMITTEES IN THE BUSINESS ORGANISATION

15
16
Committees
Chair and Secretary
GOVERNANCE AND SOCIAL RESPONSIBILITY

17
18
Bonus
Social Responsibility
ACCOUNTING AND FINANCE

19
20
Finance and Tax

Financial Information
(iii)
ACCOUNTANT IN BUSINESS (F1) REVISION QUESTION BANK

CONTENTS
Question
Page
Answer
Marks
24
25
1005
1005
4
4
26
27
1006
1006
4
4
28
29
1006
1006
4
4
30
31
1006
1007
4
4
32
33
1007
1007
4
4
35
36
1007
1008
4
4
37
38
1008
1008
4
4
39
40
1008
1009
4
4
41
42
1009
1009
4
4
43
44
1009
1010
4
4
Date worked
EXTERNAL AND INTERNAL AUDIT

21
22
Assurance
Auditors
REGULATORY ENVIRONMENT OF ACCOUNTING

23
24
Accounting Records
Regulation
FINANCIAL SYSTEMS AND PROCEDURES

25
26
DIY Homestore
Best Engineering
INTERNAL CONTROL AND SECURITY

27
28
Bridgford
Inherent Limitations
BUSINESS FRAUD
29
30
Fraud and Error

Money Laundering
LEADERSHIP, MANAGEMENT AND SUPERVISION

31
32
Blake and Mouton

Ashridge Model
RECRUITMENT AND SELECTION

33
34
Selection Process
Recruitment Advertising
EQUAL OPPORTUNITIES AND DIVERSITY

35
36
Diversity and Discrimination

Discrimination and Equal Value
INDIVIDUALS, GROUPS AND TEAMS

37
38
Role Theory and Groups

Belbin Team Roles
MOTIVATING INDIVIDUALS AND GROUPS

39
40
(iv)
Motivation
Motivation Theories

CONTENTS
Question
Page
Answer
Marks
45
46
1010
1010
4
4
47
48
1010
1011
4
4
49
50
1011
1011
4
4
51
52
1011
1011
4
4
53
54
1012
1012
4
4
55
56
1012
1012
4
4
Test 1
Test 2
Test 3
Test 4
57
62
67
72
1013
1015
1018
1020
50
50
50
50
Sample Questions (ACCA)
78
1023
40
Date worked
TRAINING AND DEVELOPMENT

41
42
Approaches to Learning
Training Manager
PERFORMANCE APPRAISAL
43
44
Performance Assessments
Performance and Pay Reviews
PERSONAL EFFECTIVENESS
45
46
Personal Development Planning

Conflict
INFORMATION WITHIN BUSINESS

47
48
Organisation Levels
Structured and Unstructured
COMMUNICATION WITHIN BUSINESS

49
50
Communication Flows
Networks
ETHICS AND ETHICAL BEHAVIOUR

51
52
Corporate Behaviour
Ethical Dilemmas
TESTS
Accountant in Business Specimen Paper (ACCA)
100
(v)
(vi)

Question 1 ORGANISATION AND INDUSTRY
Different types of organisation have different characteristics. The following are types of organisation:
A
B
C
D
Charities
Co-operatives
Industrial companies
Non-governmental organisations
Required:
(a)
Indicate the organisation(s) which have each of the following characteristics, by

selecting all that apply from A, B, C, D and E.
(i)
(ii)
(iii)
(iv)
Aim is wealth maximisation

Primary aim is not-for-profit
May be not-for profit or profit-seeking
Voluntary association
(2 marks)
(b)
The following are types of industry:

A
B
C
Primary
Secondary
Tertiary
For each of the following industries, indicated whether they are (A) primary (B)
secondary or (C) tertiary.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Banking services
Clothes manufacture
Oil extraction
Production of electronics
Tourism
Wheat production
(2 marks)
(4 marks)

Question 2 DIRECT SERVICE PROVISION
(a)
Complete the following definition according to Kotler.

Service is an action or an activity which can be offered by a party to another party, which is
basically 1 and cannot affect any
2 .
(i)
Select which of the following fills Gap 1:

A
B
C
(ii)
fixed
intangible
tangible

A
B
C
ownership
partnership
relationship
(1 mark)
(b)
The following are characteristics that may be used to describe products:

A
B
C
D
E
F
F
Intangibility
Heterogeneity
Homogeneity
Perishability
Simultaneity
Spontaneity
Tangibility
Required:
Select FOUR of the characteristics from the list above, which distinguish services from
goods.
(2 marks)
(c)
Identify which ONE of the following departments in a business organisation is likely to

be even more important in direct service provision than in manufacturing.
A
B
C
D
E
Customer care
Finance
Human resources
Marketing
Production
(1 mark)
(4 marks)

Question 3 THE ULTIMATE FOOTBALL CLUB
The Ultimate Football Club (UFC), a profit-making company, has received a take-over bid from a
satellite-broadcasting corporation. The club is currently assessing whether to accept the bid.
UFC is a multi-million dollar business. Its income consists of gate receipts, fees for TV rights,
merchandising, sponsorship, conferencing and catering. The club is very successful with fans
throughout the world; the teams performance on the pitch has made it a very popular club and this
success has been reflected in growth in turnover and profits in recent years.
The success of the club has not, however, prevented it from receiving some criticism. One issue which
has caused continuing concern has been the constantly-changing football shirts as worn by the clubs
football team. Parents of young fans feel pressurised into spending large sums of money each year
buying replica football shirts because the club has changed the design five times in as many years.
Another issue has been the increases in ticket prices over the past few years. These increases have been
significantly higher than the rate of inflation and the fan club has made several representations to the
board of UFC to protest about the increases.
The income from TV rights is much welcomed by the club, but key matches have been rescheduled for
the convenience of the satellite stations and their exclusive overseas audiences. The take-over bid has
therefore been met with some hostility by the fans and others who see the club they have supported and
the game they are passionate about being treated like any other profit-making organisation.
(a)
The following are types of stakeholder:

A
B
C
Connected stakeholder
External stakeholder
Internal stakeholder
Required:
For each of the following, indicate whether they are internal, connected or external
stakeholders of UFC.
(i)
(ii)
(iii)
(iv)
Club manager. Select one of A, B or C

Parents of younger fans. Select one of A, B or C
TV companies. Select one of A, B or C
A wealthy individual interested in purchasing the club. Select one of A, B or C
Note: The total marks will be split equally between each part.
(b)
(2 marks)
Complete the following sentences about UFCs stakeholders, with reference to

Mendelows grid.
The clubs football players exert
(i)
and should be
Select which ONE of the following fills Gap 1:

A
B
C
D
high power, low interest

high power, high interest
low power, low interest
low power, high interest
Write down A, B, C or D.

(ii)

A
B
C
D
treated as a key player

kept satisfied
kept informed
largely ignored
The replica-shirt supplier exerts
(iii)
and should be

A
B
C
D

(iv)

A
B
C
D

kept satisfied
kept informed
largely ignored
(2 marks)
(4 marks)

Question 4 NORTHERN BOTTLERS
Northern Bottlers Company is located in a dry country, that is, the sale and consumption of alcoholic
beverages is prohibited by law. The company bottles, under licence, a wide-range of non-alcoholic
beverage brands; primarily sparkling beverages but also a variety of still beverages, such as waters,
enhanced waters, juice drinks, ready-to-drink teas and energy drinks. The company wholesales its
bottled beverages nationally to large supermarkets, hotels and restaurant chains. It is a member of the
International Beverages Association whose objectives include to protect the interest of the nonalcoholic beverage industry and promote its image in a rapidly evolving global economy.
Its most popular product lines are manufactured from a unique syrup which is imported from a sole
supplier, CoolCo, a multinational corporation. Earlier this year CoolCo made a bid to take-over a
manufacturer of sprits, that is beverages with an alcohol content around 40%. However, with the huge
rise in demand for alcopop drinks, especially among school children, CoolCo withdrew from the
take-over negotiations. It has recently announced that it plans to launch its own new brand of readymixed fizzy drinks containing alcohol, PurEvil.
The proposed addition to CoolCos product range has angered the directors of Northern Bottlers as they
are concerned about the impact this will have on the reputation of its products. National government
officials have suggested that the import of CoolCos products should be banned to reduce the risk to the
children as the most vulnerable members of the community.
(a)
The following are types of stakeholder:

A
B
C
Required:
For each of the following, indicate whether they are internal, connected or external
stakeholders of Northern Bottlers.
(i)
(ii)
(iii)
(iv)
CoolCo. Select one of A, B or C

Directors of Northern Bottlers. Select one of A, B or C
Government officials. Select one of A, B or C
Shareholders of CoolCo. Select one of A, B or C
(b)
(2 marks)
Complete the following sentences about Northern Bottlers stakeholders, with reference
to Mendelows grid.
CoolCo exerts
(i)
and should be

A
B
C
D


(ii)

A
B
C
D

kept satisfied
kept informed
largely ignored
The International Beverages Association exerts
(iii)
and should be

A
B
C
D

(iv)

A
B
C
D

kept satisfied
kept informed
largely ignored
(2 marks)
(4 marks)

Question 5 PERSONAL PROTECTION
It is essential for organisations to ensure that adequate health and safety measures are in place to meet
legal requirements, to reduce the threat of accidents and resulting compensation claims and to meet
their moral obligation to protect employees and visitors.
Items of personal protective equipment include:
A
B
C
D
E
F
G
Ear muffs
Cut-resistant gloves
Goggles
Hard hat
High visibility vest
Safety footwear
Waterproof clothing
Required:
(a)
Select ONE item of personal protective equipment for each of the following jobs:
(i)
(ii)
(iii)
(iv)
Commercial sea fishing

Hand spraying fruit trees with pesticides
Domestic refuse collection
Motorway maintenance
(2 marks)
(b)
To whom must a UK construction company provide personal protective equipment?

Select all that apply.
A
B
C
D
E
Construction site managers

Credit controller
Independent contractors such as electricians
Quantity surveyor
Temporary construction workers
(2 marks)
(4 marks)

Question 6 PORTER
Michael Porter argued that applying a firms strengths in either a broad or narrow scope results in
generic strategies:
(i)
(ii)
(iii)
(iv)
Cost focus
Cost leadership
Differentiation
Differentiation focus
Required:
(a)
Select which strategy corresponds to points A, B, C and D on the following diagram:
Broad
Narrow
Competitive
Scope
Competitive Advantage
Low Cost
Higher Cost
D
(1 mark)
(b)
Porter also described a chain of activities common to all businesses which he divided into:
A
B
Primary activities
Support activities
Required:
Classify the following as either A (Primary activities) or B (Support activities):
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
Firm infrastructure
Human resource management
Inbound logistics
Marketing and sales
Operations
Outbound logistics
Procurement
Technological development
(2 marks)
(c)
Select the activities which correctly describe the following depiction of the value chain
i.e. select four activities from (i) to (viii).
Service
(1 mark)
(4 marks)

Question 7 ELAND
Eland is a small economy with a high per capita income. It has a high trade ratio with both imports and
exports being a high proportion of gross domestic product. The economy is an open one with low trade
barriers and no significant controls on the international movement of capital. The current and capital
accounts of the balance of payments are currently in balance. Multinational companies are generally
welcomed by Eland.
Other things being equal, the direct effect of an economic process on Elands balance of payments
current and capital accounts could be:
A
B
C
a move towards surplus

a move towards deficit
no effect
Required:
Select the correct direct effect for each of the following economic processes on the current and
capital accounts; i.e. select A, B or C.
Economic process
(i)
(ii)
(iii)
(iv)
Current account
Capital account
A significant rise in consumer

expenditure in Elands trading
partners.
(1 mark)
A large rise in interest rates in

Eland.
(1 mark)
Investment by a multinational oil

company in an offshore oilfield
in Eland.
(1 mark)
Increased remittance of profits of

foreign companies in Eland back
to their parent companies.
(1 mark)
(4 marks)

Question 8 GROSS DOMESTIC PRODUCT
(a)
The gross domestic product of a country is the total production of goods and services in an
economy over a period of time. The components of GDP are consumption, investment,
government spending and net exports. Any change in GDP is likely to have an impact on
important variables in the economy such as:
A
B
C
D
E
the rate of inflation

the level of cyclical unemployment
the level of structural unemployment
the surplus on the government budget
the deficit on the current account of the balance of payments
Required:
(b)
(i)
Write down which three of the above variables will FALL if there is a FALL in
gross domestic product by selecting THREE of the letters from (A, B, C, D, E).
(ii)
Write down which of the above variables will not be affected if there is a FALL
in gross domestic product.
(2 marks)
Identify which of the following could be a reason for an increase in demand in an

economy, by selecting all that apply.
A
B
C
D
A large rise in rate of return expected by businesses on new investment

An improvement in the balance of payments current account
An increase in rates of personal income tax
A significant fall in the average proportion of income that is saved
(1 mark)
(c)
Identify which of the following events would reduce supply in an economy, by selecting
all that apply.
A
A change to employment legislation which reduces the average weekly number of

hours that can be worked
A steep increase in the price of imported oil and gas
An increase in availability of credit as a result of increased deregulation in the

financial system
An increase in labour productivity as a result of the widespread application of new

technology
(1 mark)
(4 marks)
10

Question 9 DEMAND AND SUPPLY
The following diagram refers to the demand and supply for a good:
Price $
Supply
D1
D0
Quantity
Required:
(a)
Write down which three of the following are possible explanations for the shift in
demand curve from D0 to D1 by selecting THREE of the letters from (A, B, C, D, E, F).
A
B
C
D
E
F
A fall in the price of substitutes

A price rise has led to an increase in supply
A rise in consumer income
Consumers expect prices to rise in future
The good has a very low price elasticity of demand
The price of complementary goods has fallen
(2 marks)
(b)
Complete the following statements.

An outward shift in the supply curve would lead to 1
be greatest when the demand for the good is
2 .
(i)

A
B
(ii)
in price and the change in price will
a fall
an increase

A
B
price elastic
price inelastic
(1 mark)
The effect of a government subsidy for the production of this good would be to shift the
supply curve to the 3 causing 4 in its price.
(iii)

A
B
left
right
11

(iv)

A
B
a fall
an increase
(1 mark)
(4 marks)
12

Question 10 MARKETS
Select which of the following statements about perfect competition, oligopoly and monopoly are:
A
B
True
False
(i)
A discriminating monopolist can charge different prices in different markets only if the price
elasticity of demand in each market is different
(ii)
Collusion is rare in oligopoly industries because the dominant company has nothing to gain
from co-operating with rivals
(iii)
Excess profits may persist in oligopolies even in the long run
(iv)
If there are large economies of scale, a monopoly industry may produce more output and
charge lower prices than does a perfectly competitive industry
(v)
Natural monopolies occur when the supply of raw materials is concentrated in one country
(vi)
Oligopolies are most likely to occur where there are significant barriers to entry
(vii)
Price leadership in oligopoly occurs where one firm sets a price for the product and other
firms are not allowed to charge more than this
(viii)
Vertical integration is a common source of monopoly power
(4 marks)
13

Question 11 PRODUCT-ORIENTED STRUCTURE
White Appliances manufactures a wide range of cookers, hobs, fridges, dishwashers and other kitchen
appliances which are sold through department stores and other retail outlets. It uses a product-oriented
organisation structure to effectively manage its products. Activities include:
A
B
C
D
E
F
G
H
After-sales service and support

Finance
Inbound and outbound logistics
Information management
Operations
Personnel
Research and development
Sales and marketing
Required:
(a)
Select FOUR activities from the list above which would be centralised to support the
direct activities.
(2 marks)
(b)
Which TWO of the following are disadvantages of the product-oriented structure?

A
Customer dissatisfaction resulting from different personnel being responsible for

different products.
Difficulties in co-ordinating and integrating activities relating to each product.
Discourages product diversification and use of specialised manufacturing processes.
Duplication of effort and expense as sales managers cover wider geographic areas
for their products.
Individual products do not receive the resources and support needed.

(2 marks)
(4 marks)
14

Question 12 GREG PYE
Greg Pye is the chief executive of a medium-sized company that has been organised hierarchically
according to function. After attending a management seminar, he decided to encourage inter-functional
departmental co-operation by implementing a matrix structure.
Greg agreed that a matrix organisation and cross-functional team working would provide flexibility and
enhanced performance to the organisation. However, the company secretary drew Gregs attention to
some potential drawbacks.
These include the possibility that people wont know who they are meant to be reporting to,
supervision will be difficult for their line manager who thinks they are working in their teams and team
leaders will have no real authority over the team members.
After speaking to the company secretary, Greg began to have second thoughts about the matrix
structure. Greg decides to ask for a more considered view of restructuring the company.
Required:
(a)
Which TWO of the following are specific features of the existing functional structure?
A
B
C
D
(b)
Clear and logical division of tasks

Helps to develop broad experience in general managers
Suited to organisations which are growing rapidly through diversification
The scalar principle provides an unbroken vertical communication line
(2 marks)
Which TWO of the following are advantages of introducing a matrix structure?

A
B
C
D
Emphasis on product and customer orientation

More direct contact between managers and employees
Role ambiguity due to lack of unity of command
Suited to industries with a less skilled workforce and many products and
customers
(2 marks)
(4 marks)
15

Question 13 HANDY AND HOFSTEDE
Power and influence, organisation size, employee motivation, team work, rules and regulations,
managing change and dealing with conflict are all features of the culture of an organisation.
(a)
The following are types of culture according to Handy:

A
B
C
D
Power culture
Role culture
Task culture
Person culture
Required:
For each of the following, indicate whether they relate to a power, role, task or person
culture.
(i)
(ii)
(iii)
(iv)
A high degree of job specification. Select one of A, B, C or D

Emphasis on working in teams. Select one of A, B, C or D
Power, by consent, exerted by expert individuals. Select one of A, B, C or D
Central control exercised through key individuals. Select one of A, B, C or D
(b)
(2 marks)
Power distance and uncertainty avoidance are two of the dimensions of national culture
identified by Hofstede. Factors which may contribute to a culture include:
A
B
C
D
E
F
G
H
Anti-social behaviour legislation

Collective responsibility for welfare
Education or other establishment determines individual status
Equal opportunities and rights
Freedom of speech and expression
Informal approach to business dealings
Differentiation and discrimination between genders
A top-down chain of command
(i)
Select which TWO of the above would contribute to a high Power Distance
index.
(1 mark)
(ii)
Select which TWO of the above would contribute to low uncertainty avoidance
index.
(1 mark)
(4 marks)
16

Question 14 SCHEIN
Edgar Schein classified organisational culture into three levels including:
A
B
Artefacts
Espoused values
Required:
(a)
Classify the following as A (Artefacts) and B (Espoused values):

(i)
(ii)
(iii)
(iv)
(v)
(vi)
Dress down Friday

Equality of opportunity
Open-plan offices
Reserved parking for directors
Safety is our priority
The customer is always right
(2 marks)
(b)
Select which one of the following sentences describes Scheins third level, assumed
values.
A
B
C
D
(c)
Conscious values held closely by management

Unconsciously held, learned responses
Unspoken social environment
Values enacted by employees
(1 mark)
The cultural web comprises seven aspects of culture that can be analysed to identify culture
in an organisation:
A
B
C
D
E
F
G
Control systems
Organisational structures
Paradigm
Power structures
Rituals and routines
Stories and myths
Symbols
Complete the following statements which describe three of these aspects, by selecting
from A, B, C, D, E, F, G.
(i)
(ii)
(iii)
1
2
3
are the assumptions that managers share about organisations values

are the established protocols for doing things
are the formal and informal hierarchical relationships
(1 mark)
(4 marks)
17

Question 15 COMMITTEES
Committees are groups of people to whom authority is delegated to carry out specific functions or roles.
Examples of types of committee include ad hoc, joint, standing and subcommittee.
Required:
(a)
Which type of committee is most appropriate to carry out each of the following
functions?
A
To achieve female diversity in a global organisation.
To implement a working agreement between local government departments.
To oversee a project to launch a new product in January next year.
To research and publish developments in accounting and financial reporting matters

including application of IFRS.
(i)
(ii)
(iii)
(iv)
Ad hoc committee. Select ONE of A, B, C or D.

Joint committee. Select ONE of A, B, C or D.
Standing committee. Select ONE of A, B, C or D.
Subcommittee. Select ONE of A, B, C or D.
(2 marks)
(b)
Green Avocado, a manufacturing company, is under-going rapid growth and expansion. At a

recent board meeting one of the executives commented Committees would greatly assist us
in managing our effectiveness as a board and provide real decision making. The meeting
then discussed the following activities:
A
The companys cash flow position needs to be scrutinised more closely scrutinised
due to investment in technology and working capital
The companys health and safety guidelines need to be updated to reflect recent
changes in legislation
Hosting of the companys website needs to be relocated, data protection measures

implemented and an e-commerce platform introduced
The takeover of another company, Blue Berries, will be completed next month and
the process of integration is expected to take 18 months
Required:
Identify the activities for which the following committees are most appropriate, by
selecting A, B, C, D or None.
(i)
(ii)
Ad hoc committee; and

Standing committee.
(2 marks)
(4 marks)
18

Question 16 CHAIR AND SECRETARY
Key players in the functioning of any committee are the chair and the secretary. The following are
specific examples of their responsibilities:
A
B
C
D
E
F
G
H
To advise committee members on matters of policy and process

To approve minutes of meetings
To circulate minutes to committee members
To encourage members to participate in meetings
To give notice of meetings
To manage time spent on the agenda
To set the agenda for each meeting
To take minutes of meetings
Required:
(a)
Identify the responsibilities of:

(i)
(ii)
(b)
the chair; and

the secretary.
(1 mark)
(1 mark)
Complete the following statements in the context of committees.

Decision-making is usually
(i)
and provides
solutions.

A
B
(ii)
faster
slower

A
B
compromise
optimum
(1 mark)
Difficult decisions are taken by

(iii)
individual and decision making is more
4 .

A
B
(iv)
no one
one

A
B
objective
subjective
(1 mark)
(4 marks)
19

Question 17 BONUS
Roger, a sales director of a listed company, is paid a bonus based on the profits for the year of his
service division. Towards the end of the current year he realised that he would miss his profit target by
$200,000. As he was expecting to obtain the bonus, he had already borrowed the money and spent it.
He therefore agreed with a client to invoice $500,000 in advance for work to be carried out after the
year end. He was confident that this would not be discovered by the auditors because the amounts are
insignificant in relation to the financial statements as a whole. He has now reported the necessary
profits and been awarded his bonus.
The companys governance structure includes the following:
A
B
C
D
E
F
G
H
Audit Committee
Board of Directors
Chairman of the Board
Chief Executive Officer
Company Secretary
Internal Audit
Non-Executive Directors
Remuneration Committee
Required:
(a)
Write down, by selecting A, B, C, D, E, F, G or H, which of the above is:

(i)
(ii)
(b)
primarily responsible for Rogers actions;

ultimately responsible for detecting the fraud.
(1 mark)
(1 mark)
Which ONE of the following aspects of the companys governance should have
prevented the fraud?
A
B
C
D
E
Appropriate compensation
Independent scrutiny
Oversight of key roles
Separation of the roles of chairman and CEO
Whistle-blowing arrangements
(2 marks)
(4 marks)
20

Question 18 SOCIAL RESPONSIBILITY
Carroll suggested a four-part model of corporate social responsibility covering the expectations placed
on organisations by society:
(i)
(ii)
(iii)
(iv)
Required:
(a)
Select the responsibility that is associated with each level of the pyramid.
A
B
C
D
(b)
(1 mark)
Identify the description which is associated with each of responsibilities, selecting A, B,

C or D.
(i)
(ii)
(iii)
(iv)
(c)
Economical
Ethical
Legal
Philanthropic
Desired
Essential
Required
Wished for
(1 mark)
Complete the following statements.

According to
(i)
the key concept of corporate social responsibility is

A
B
C
D
(ii)
eXtensible Business Reporting Language

the Global Reporting Initiative
International Financial Reporting Standards
the UK Corporate Governance Code
(1 mark)

A
B
C
D
accountability
liability
profitability
sustainability
(1 mark)
(4 marks)
21

Question 19 FINANCE AND TAX
An organisation may obtain finance from many different sources:
A
B
C
D
E
F
A rights issue of shares

Bills of exchange
Bank overdraft facilities
Credit cards
Loan debentures
Venture capital
Required:
(a)
(b)
Which TWO sources would provide finance for the following?

(i)
An established business in need of long-term finance. Select TWO from (A, B,

C, D, E, F).
(ii)
An individual entrepreneur in need of short-term finance for a start-up

business. Select TWO from (A, B, C, D, E, F).
(2 marks)
Complete the following statement.

Tax evasion is an
(i)
tax liabilities and is
illegal.
intentional
unintentional

A
B
(iii)
act to

A
B
(ii)
maximise
minimise

A
B
C
always
sometimes
not
(2 marks)
(4 marks)
22

Question 20 FINANCIAL INFORMATION
Financial statements are a primary source of financial information. Annual financial statements
typically include a statement of financial positions, a statement of comprehensive income, a statement
of change in equity and a statement of cash flows.
Required:
(a)
In which financial statement for a manufacturing company would amounts for the
following be found?
A
B
C
D
A bonus issue of shares

Amounts owed to suppliers
Proceeds from the sale of an office building
Selling and distribution costs
(i)
(ii)
(iii)
(iv)
Cash flows. Select one of A, B, C or D.

Changes in equity. Select one of A, B, C or D.
Comprehensive income. Select one of A, B, C or D.
Financial position. Select one of A, B, C or D.
(2 marks)
(b)
Different types of management accounting report have different purposes:

A
B
C
D
E
F
To compare performance with targets

To define the types of expense associated with a product
To estimate income and expense for a period
To evaluate operating efficiency
To provide a comparison for actual results
To monitor trends in overspending or underspending
Required:
Identify the purpose(s) above with the associated report.
(i)
(ii)
(iii)
budgets
cost schedules
variance reports
(2 marks)
(4 marks)
23

Question 21 ASSURANCE
(a)
Complete the following definition.
Assurance engagement means an engagement in which 1 expresses 2 designed

to enhance the degree of 3 of the 4 about the outcome of the evaluation or
measurement of a 5 against 6 .
(i)

A
B
(ii)

A
B
(iii)
intended users
responsible party

A
B
(vi)
confidence
reliability

A
B
(v)
a conclusion
an opinion

A
B
(iv)
an auditor
a practitioner
results
subject matter

A
B
criteria
standards
(b)
(3 marks)
Types of assurance service include:

A
B
C
D
E
F
Audit of historic financial statements

Evaluation of internal control
Information assurance
Project assurance
Quality assurance
Review of historic financial information
Required:
Which TWO of the above services are usually carried out by the external auditor?
Select TWO from (A, B, C, D, E, F, G).
(1 mark)
(4 marks)
24

Question 22 AUDITORS
(a)
Which THREE of the following terms are used to describe the relationships between a
companys directors, shareholders and auditors?
A
B
C
D
E
F
G
Accountability
Agency
Ownership
Reputation
Stewardship
Sustainability
Visibility
Select THREE from (AG).

(b)
(2 marks)
Complete the following statements about a companys external auditors.

External auditors are appointed by
(i)
and are independent of 2

A
B
C
(ii)
an audit committee
management
shareholders

A
B
C
the assurance client

audited activities
financial interests
(1 mark)
The primary duty of external auditors is to report on the

determined by 4 .
(iii)
and the scope of their work is

A
B
C
(iv)
financial statements
internal controls
risk of fraud

A
B
C
an audit committee
legislation
shareholders
(1 mark)
(4 marks)
25

Question 23 ACCOUNTING RECORDS
Company law specifies the accounting records that a company must keep. If a company complies with
these requirements, it is highly likely that it will also comply with the requirements of tax law. Every
company must keep adequate accounting records.
In particular, accounting records must contain:
A
B
C
D
Day-to-day entries of all sums of money received

Day-to-day entries of all sums of money expended
A record of the assets of the company
A record of the liabilities of the company
Statements of inventory held at the financial year end, if the business deals in goods
Required:
(a)
Select the contents of each of the following records in a typical accounting system, by
selecting A, B, C, D, E or None.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
An asset register
A cash payments book
A cash receipts book
A payables ledger of amounts owed to individual suppliers
A receivables ledger of amounts owed by individual customers
Inventory records
(2 marks)
(b)
ABC is a retailer of accessory equipment for computers. The company buys equipment from
wholesale suppliers on credit terms and sells them from a high street shop.
Required:
Which records meet the requirement to keep proper accounting records? Select all that
apply from the records listed (i)(vi) in (a).
(1 mark)
(c)
DEF provides online marketing solutions including web design and social media services to
corporate clients.
Required:
Which records meet the requirement to keep proper accounting records? Select all that
apply from the records listed (i)(vi) in (a).
(1 mark)
(4 marks)
26

Question 24 REGULATION
There are many different ways in which commercial and non-commercial organisations are constituted.
The following are examples of organisations:
A
B
C
D
E
F
G
H
Alice, Bernadette and Clare, a partnership of legal advisors

Backcare, a charitable trust
Bob Trader, a builder
Medieval Society, a not-for-profit company of history enthusiasts
Henpale, a not-for profit co-operative providing sheltered housing
Massive, a publicly-owned company
Saloman and Sons, a privately-owned family company
TECA, an association of certified technical engineers
Required:
(a)
Identify which organisations will be regulated by company legislation.

Select from (A-H).
(2 marks)
(b)
Identify which organisation(s) would be required, under UK legislation, to keep

accounting records for at least six years.
(1 mark)
(c)
The financial statements of Bzed, a UK company, are prepared under International Financial
Reporting Standards and audited by Cyder & Co.
Required:
Select which one of the following is responsible for preparing financial statements which
show a true and fair view.
A
B
C
D
E
Cyder & Co
Directors of Bzed
Financial Reporting Council
International Accounting Standards Board
Shareholders of Bzed
(1 mark)
(4 marks)
27

Question 25 DIY HOMESTORE
DIY Homestore is a large retail store which sells decorating and other products for the repair and
maintenance of houses. The product range includes paint, electrical goods, doors, windows, ladders,
and tools such as power drills.
A computer system records sales and keeps a perpetual record of inventory levels. All sales are
recorded at the cash registers at checkout booths at the exits from the store and payments are accepted
by cash or credit card. Each product has a unique product bar code which is scanned at the checkout,
which obtains the price and description of the goods from a central computer. Each customers receipt
shows details of the goods purchased which are deducted from the inventory records. At the end of
each checkout assistants shift, the computer prints out the total of cash and credit card takings.
Required:
(a)
Identify which TWO of the following control objectives are relevant to DIY Homestores
sales cycle.
A
B
C
D
E
F
(b)
To ensure that accurate invoices are raised for all goods sold
To ensure that all cash and credit card receipts are recorded completely and accurately
To ensure that every product has a unique bar code
To ensure that goods are only sold to creditworthy customers
To ensure that goods received are not damaged
To ensure that goods sold are completely and accurately recorded
(2 marks)
For each of the following control objectives select which ONE control is most suitable.
(i)
(ii)
To ensure that cash cannot be stolen at a checkout. Select ONE from the
following:
A
Closed circuit television at the checkouts
Comparing cash in the cash register at the end of each checkout assistants
shift with revenue total for the shift
Locking the cash register whenever the checkout booth is unattended
Two assistants are present at each checkout
To ensure that goods cannot be taken from the store without being paid for.
Select ONE from the following:
A
B
C
D
Closed circuit television throughout the store

Daily checks on physical inventory with perpetual inventory records
Reconciling daily sales with inventory movements
Security bar codes activate an alarm at exit if not de-activated by scanning
at the checkout
(2 marks)
(4 marks)
28

Question 26 BEST ENGINEERING
Best Engineering manufactures components for motor vehicles and sells them to motor vehicle
manufacturers and wholesalers. The company has separate departments dealing with purchasing, goods
received and accounting.
In the purchase cycle:
Most purchases are required by the production department, but other departments can also
raise requisitions for goods and services.
The purchasing department is responsible for placing orders for goods and services at the
lowest price which is consistent with the required delivery date and quality, and for ensuring
their prompt delivery.
The accounts department is responsible for obtaining authorisation of purchase invoices
before they are input into the computer which posts them to the accounts payable (suppliers)
ledger and the general ledger.
Computerised accounting records are kept using an off-the-shelf accounting software package.
Accounting records include the accounts payable ledger, accounts receivable ledger, general ledger and
payroll. The company does not maintain inventory records, as it believes the costs of maintaining these
records outweigh the benefits.
Required:
(a)
Identify which TWO of the following control objectives are relevant to Best
Engineerings purchases cycle.
A
B
C
D
E
F
To ensure that every requisition is matched to an order

To ensure that goods received are not damaged
To ensure that goods received are recorded in inventory records
To ensure that purchase orders are authorised
To ensure that requisitions are serially numbered
To ensure that suppliers do not overcharge
(2 marks)
(b)
For each of the following control objectives select which ONE control is most suitable.
(i)
To ensure that suppliers of goods are paid only for goods received. Select ONE
from the following:
A
B
C
D
(ii)
Matching each requisition for goods to a suppliers invoice

Matching each suppliers invoice to a goods received note
Sequence checking on serially numbered goods received notes
Sequentially numbering suppliers invoices on receipt
To ensure that goods received are a valid business expense. Select ONE from
the following:
A
B
C
D
Agreeing the goods received to a purchase order

Agreeing the suppliers invoice to goods received
Matching each requisition to goods received
Matching the suppliers delivery note to the goods received
(2 marks)
(4 marks)
29

Question 27 BRIDGFORD
Bridgford has recently developed a new computerised inventory control system which will operate from
the beginning of the financial year which starts next month. As the inventory control system records
inventory movements and current inventory quantities, management is proposing to use the inventory
quantities on the computer to value the inventory at the end of the financial year. However, to remove
the need to carry out a full physical count at the end of the financial year management will need to
ensure controls are in place to provide reasonable assurance that the inventory records are complete and
accurate.
The following are types of control that are needed in a computerised information system:
A
B
Application control
General control
Required:
(a)
(b)
Classify each of the following as either A (Application control) or B (General control):

(i)
A two-month pilot operation of the new system.
(ii)
Investigation by management of items showing negative quantities on monthly

reports.
(iii)
Read-only access for sales staff who check whether items are available for sale.
(iv)
Segregation of duties between the software programmers and accounts staff

who will input data.
(2 marks)
Classify each of the controls (i)(iv) according to the alternative categorisation of:
A
B
C
Corrective control
Detective control
Preventive control
(2 marks)
(4 marks)
30

Question 28 INHERENT LIMITATIONS
An internal control system, no matter how well designed and operated, cannot provide management
with absolute assurance that the objectives of internal are met.
Required:
(a)
Complete the following sentences about inherent limitations in an internal control system.
Human 1 in decision-making can be at fault and a breakdown in internal control can
occur because of human 2 .
(i)

A
B
C
D
(ii)
error
judgement
nature
rights

A
B
C
D
error
judgement
nature
rights
Controls can be circumvented by the 3

management 4 of internal control.
(iii)

A
B
C
D
(iv)
behaviour
collusion
communication
conflict

A
B
C
D
(b)
of two or more people or inappropriate
override
oversight
skills
supervision
Below are listed six considerations of limitations of internal control.

A
B
C
D
E
F
Fewer employees may limit the extent to which segregation of duties is practicable.
Cost of internal control should not exceed the benefits derived
Growth in business activities may render controls ineffective
Management may fail to take appropriate action
Management must judge the nature and extent of the controls it chooses to implement
Oversight by an owner-manager may compensate for limited segregation of duties.
Write down which TWO of the above are specific to smaller entities by selecting TWO
of the letters from (A, B, C, D, E, F).
(2 marks)
(4 marks)
31

Question 29 FRAUD AND ERROR
To prevent fraud and fraudulent behaviour in business it is necessary to understand the circumstances
under which fraud is likely to arise. To understand such circumstances it is necessary to distinguish
between fraud and error.
Required:
(a)
Select which ONE of the following distinguishes fraud from error.

A
B
C
D
(b)
Deception
Intention
Motivation
Opportunity
(1 mark)
Classify the following as either A (Error) or B (Fraud):

(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
Collusion between employees and suppliers.

Deliberate misapplication of accounting policies.
Hiding documents to keep transactions out of the records.
Forging accounting records or documents.
Incorrect application of an accounting policy due to misunderstanding.
Overlooking to process some accounting data due to tiredness.
Purposefully recording sales transactions in the wrong accounting year.
Theft of cash.
(2 marks)
(c)
Business fraud takes many forms. For example:

A
B
C
D
Intentional omission of significant information

Manipulation of accounting principles
Teeming and lading of cash received from customers
Unauthorised resale of licenced software
Identify which, if any, of these actions amount to theft. Select all that apply or state
None.
(1 mark)
(4 marks)
32

Question 30 MONEY LAUNDERING
Mighty, a UK company, is involved in the sale and purchase and letting of residential properties. Last
year the position of money laundering reporting officer was held by Adrian. However, the position has
not been filled since Adrian left the company six months ago.
During the year Mighty was approached by an agent, Bron, looking for a country mansion for his client,
a property tycoon. Quite by chance one of Mightys directors discovered that the tycoon was the
subject of a money laundering investigation by the Serious and Organised Crime Agency (SOCA)
following suspicions that were reported by his previous agent. Mighty decided not to enter into any
dealings with Bron giving the reason we have too much work on at the moment to provide the level of
customer service that I am sure your client expects.
Required:
(a)
Identify which, if any, of the following money laundering offences have been committed.
A
Failure to appoint a money laundering reporting officer.
Failure to verify the identity of all new clients before commencing a business
relationship.
Investing funds when there are reasonable grounds to suspect that they are the
proceeds of criminal activity.
Tipping off.
(2 marks)
(b)
Norman & Co is a small accounting practice which provides audit, tax advisory, insolvency
and related services.
Complete the following statements about anti-money laundering requirements in the
accountancy sector.
Procedures designed to acquire knowledge about the firms clients and prospective clients and
to verify their 1 as well as monitor business relationships and transactions provide 2 .
(i)

A
B
C
(ii)
creditworthiness
identity
risk profile

A
B
C
customer due diligence

know your client
risk profiling
(1 mark)
33

Records of transactions need to be kept for
3 . Record keeping, including supporting
evidence for business relationships, needs to be kept for 4 after the end of a relationship
(iii)

A
B
C
(iv)
three year
five years
seven years

A
B
C
one year
three years
five years
(1 mark)
(4 marks)
34

Question 31 BLAKE AND MOUTON
Blake and Mouton observed two basic leadership dimensions, concern for production and concern for
people. They recognised that it was possible for the concern for production to be independent of the
concern for people. Using this concept they devised a Managerial Grid with five extreme scores:
A
B
C
D
E
1,1
1,9
5,5
9,1
9,9
Required:
(a)
Match each of the following styles of management to the scores on the Managerial Grid,
by selecting A, B, C, D or E.
(i)
(ii)
(iii)
(iv)
(v)
Country Club
Impoverished or Indifferent
Middle-of-the-road
Task
Team
(2 marks)
(b)
Match each of the following descriptions against the styles listed (i) to (v) above by
selecting A, B, C, D or E from the following.
A
B
C
D
E
Balance and compromise

Contribute and commit
Control and dominate
Evade and elude
Yield and comply
(2 marks)
(4 marks)
35

Question 32 ASHRIDGE MODEL
The Ashridge Model presents a continuum of management behaviour between two extremes. The four
main styles of management are identified with the continuum:
A
B
C
D
Consults
Joins
Tells
Sells
Required:
(a)
Identify the management style which is associated with the extremes of the continuum,
by selecting A, B, C or D
(i)
(ii)
boss-centred
subordinate-centred
(1 mark)
(b)
Identify the management style that is appropriate to each of the following situations, by
selecting A, B, C or D.
(i)
A major client has placed an emergency order which has to be completed within 24
hours. Because of the current workload, there is no time to complete the work
within normal working hours. All members of your team will need to work three
hours overtime.
(ii)
You wish to introduce a performance-related bonus scheme as part of your teams

remuneration package.
(iii)
It is the end of a very successful year and, as is your firms custom, your department
will be celebrating with an end-of-year bash. Your boss has basically left it up to
you to decide what you and your department wish to do, the only constraints being
the budget you are allowed to spend and that he is to be invited.
(4 marks)
36

Question 33 SELECTION PROCESS
Selection is a simple one-way process all that is required is to ensure that the organisation chooses
the right candidate.
Required:
(a)
Identify which two of the following are stages in the selection process, by selecting TWO
of the letters from (A, B, C D).
A
B
C
D
(b)
Development potential and future promotion opportunities

Each candidates formal qualifications against the person specification
Experience of each applicant against that of other applicants
(1 mark)
Which ONE of the following is a measure of the efficiency of the recruitment and
selection process?
A
B
C
D
(d)
(1 mark)
Select which TWO of the following should be assessed when choosing a candidate from
applicants for an advertised vacancy.
A
B
C
(c)
Calculating retention rates

Job analysis
Screening applications
Taking up references
Absenteeism
Offer-acceptance rate
Stability index
Staff turnover
(1 mark)
Two well-known systems of identifying the personal characteristics of the ideal candidate are
Rodgers Seven Point Plan and Frasers Five-Fold Grading System.
Which of the following attributes is specific only to Frasers Five-Fold Grading System?
A
B
C
D
Circumstances
Intelligence
Motivation
Physical appearance
(1 mark)
(4 marks)
37

Question 34 RECRUITMENT ADVERTISING
As your organisations human resource manager, you have been asked by the production department to
place a job advertisement for a replacement personal assistant to the production manager who has just
handed in her notice. You are told by the production manager that there are no changes to the job
description and person specification that were compiled when the current assistant was employed two
years ago.
Required
(a)
Classify the following as contents of the Job description (A) and Person specification
(B):
(i)
(ii)
(iii)
(iv)
(b)
Ability to prioritise and cope with changes under pressure.

Excellent communication and interpersonal skills.
Expected to undertake a variety of administrative, clerical and managerial tasks.
Providing support and assistance to the production manager.
(2 marks)
Select which ONE of the following is the most suitable source of attracting appropriate
external candidates to this vacancy.
A
B
C
D
E
Company website
Headhunting agency
Notice board in staff canteen
Recruitment fair
Temp agency
(2 marks)
(4 marks)
38

Question 35 DIVERSITY AND DISCRIMINATION
Diversity in the workplace can still be a sensitive issue, particularly if some employees believe that
there is great diversity and equal opportunities but other employees feel that there is still discrimination
at work.
Required:
(a)
Select from the list which follows the features that distinguish:
A
B
Diversity
Equal opportunities
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Government initiated
Inclusive
Legally-driven
Opportunity-focused
Proactive
Problem-focused
(2 marks)
(b)
Discrimination in the workplace is regulated in many countries to ensure that people have
equal access to jobs and equal benefits once hired. In the UK, for example, discrimination
against an employee is unfair on arbitrary grounds.
Which TWO of the following situations give rise to unfair discrimination?
A
A recently-married female worker is not short-listed for a promotion on the grounds

that she might be thinking about starting a family.
An older employee is asked to take early retirement because new management

wants the company to have a younger image.
Company cars and an executive canteen are benefits for directors and managers but
not for other employees.
Mary has been awarded 1,000 for serving with the company for 10 years and
James has been awarded for 2,000 for serving 15 years with the company.
(2 marks)
(4 marks)
39

Question 36 DISCRIMINATION AND EQUAL VALUE
Equal opportunities legislation does not only protect people from discrimination when they are in a job.
It also applies to the recruitment and selection process, with the aim of making sure that no one is
treated less favourably when applying for a job.
Forms of discrimination include:
A
B
C
D
Direct discrimination
Harrassment
Indirect discrimination
Victimisation
Required:
(a)
Identify the form of discrimination that is associated with each of the following
situations.
(i)
A job advertisement, for a circus clown, specifies that applicants must be over six
feet tall.
(ii)
An employee who has made a complaint about harrassment is told that he should
not apply for training or promotion.
(iii)
Company policy states that headgear cannot be worn in the workplace.
(iv)
Job applicants are required to have a particular national qualification; applicants

with recognised international equivalents are advised not to apply.
(v)
Remarks about an individuals skin colour are made on a regular basis.

(2 marks)
(b)
Equal pay for equal work is the concept that individuals doing the same work should
receive the same remuneration.
Required:
(i)
Identify which of the following describes equal work.

A
B
(ii)
Work is broadly similar, but there are important practical differences

Work is different, but is rated as having the same value under the same job
evaluation scheme
(1 mark)
Select which TWO of the following jobs are most likely to have equal value.
A
B
C
D
E
F
G
Architectural design technician

Department head of a hospital pharmacy
Forklift truck driver
Head of speech therapy service
Primary school classroom assistant
Nursing home nurse
Warehouse supervisor
(1 mark)
(4 marks)
40

Question 37 ROLE THEORY AND GROUPS
You are the Human Resource Director of a major international airline. Your CEO has just returned
from a meeting negotiating new landing rights at the capital citys major airport. I just could not
believe it. We have been asked to consider selling some of our rights to Caet Air. I mean to say, their
CEO does not even wear a suit and tie .. the tea boy was more appropriately dressed! AND we are
asked to conduct BUSINESS negotiations with this man.
Required:
(a)
Identify the concept of role theory which is illustrated by your CEOs reaction:
A
B
C
D
E
F
(b)
Role set
Role definition
Role signs
Role ambiguity
Role incompatibility
Role conflict
(1 mark)
Groups have certain characteristics which individuals may not have.

Write down which TWO of the following are characteristics that are unique to groups:
A
B
C
D
Ambiguity tolerance
Communication channels
Introversion
Leadership
(1 mark)
(c)
Which of Belbins team roles are suggested by each of the following?

A
B
C
D
Scrutinises work for errors

Provides the drive to ensure that momentum is not lost
Solves problems in creative and unconventional ways
Obtains inside knowledge on competitors from reliable sources
(i)
(ii)
(iii)
(iv)
Shaper. Select ONE of A, B, C or D

Plant. Select ONE of A, B, C or D
Completer Finisher. Select ONE of A, B, C or D
Resource Investigator. Select ONE of A, B, C or D
(2 marks)
(4 marks)
41

Question 38 BELBIN TEAM ROLES
Here are six short references to roles of members of an effective team:
A
B
C
D
E
F
To add value and generate new contacts

To apply high standards of quality control
To bring a balanced, disciplined and objective view to proceedings
To plan and carry out a strategy
To provoke thought and propose ideas
To weigh up options impartially
Required:
(a)
Identify the description above with is associated with each of the following team roles as
identified by Belbin, by selecting A, B, C, D or None:
(i)
(ii)
(iii)
(iv)
Chairman coordinator
Implementer
Monitor-evaluator
Plant
(2 marks)
(b)
As well as the strength or contribution they provide, each team role also has an associated
weakness which is allowable in the team because of the strength which goes with it. For
example: Shapers could be aggressive and impatient.
Select which ONE of the following weaknesses is allowable for EACH of the team roles
listed in (i) to (iv) above:
A
B
C
D
E
F
Forgetful
Indecisive
Over delegates
Perfectionist
Slow to relinquish plans
Tactless
(2 marks)
(4 marks)
42

Question 39 MOTIVATION
The following are statements about motivation:
(i)
(ii)
(iii)
(iv)
Employees must be coerced, controlled and threatened to achieve objectives.

Hygiene needs are the primary determinants of job dissatisfaction.
Individuals are motived by needs until they are satisfied.
Individual motivation is based on the expectancy of the outcome.
Required:
(a)
Identify the statements above with each of the following theorists, by selecting A, B, C, D
or None.
A
B
C
D
Herzberg
Maslow
McGregor
Vroom
(2 marks)
(b)
You are a supervisor in charge of a team of 10 employees in your companys finance

department. The company is currently undergoing a restructuring programme to ensure that
its products and services remain highly competitive. At a recent staff meeting of the finance
department the CEO stated that the company needs team players who are committed to the
company and highly motivated to ensure our customers get the best possible service. He
assured the department that there is no intention to change the departments function in any
way nor make anyone redundant but added that money is rather tight so financial rewards
will be very limited.
Required:
Identify the type of needs that were addressed in the CEOs statements, by selecting A,
B, C, D or E.
A
B
C
D
E
Hygiene
Organisational
Personal
Self-actualisation
Social
(4 marks)
43

Question 40 MOTIVATION THEORIES
The following are types of theory concerning motivation:
A
B
Content theory
Process theory
Required:
(a)
Classify each of the following theorists as proponents of A (Content theory) or B

(Process theory):
(i)
(ii)
(iii)
(iv)
(b)
Herzberg
Maslow
McGregor
Vroom
(1 mark)
Maslow proposed that people have a complex set of needs which may be arranged in order of
priority. This is usually depicted in the form of a pyramid:
(i)
(ii)
(iii)
(iv)
(v)
Required:
Select the need that is associated with each level of the pyramid.
A
B
C
D
E
Esteem
Physiological
Security
Social
Self actualisation
(2 marks)
(c)
Identify the secondary needs in the hierarchy by selecting all that apply.
(1 mark)
(4 marks)
44

Question 41 APPROACHES TO LEARNING
Learning styles relate to how people learn. There are two basic schools of learning theory:
A
B
Behaviourist learning
Cognitive learning
Required:
(a)
Classify the following as aspects of A (Behaviourist learning) or B (Cognitive learning):

(i)
(ii)
(iii)
(iv)
(v)
(b)
Learning occurs through internal processing of information.

It concentrates on the relationship between stimuli and the reaction to stimuli.
Trial-and-error learning works on this basis.
Reward following a desirable response acts as a reinforcer.
New information is most easily acquired when it has association with things already
learnt.
You have recently returned from an internal training course on the audit of payables. On your
next assignment your audit senior asks you to carry out the audit of payables.
He briefs you on the approach to use and in carrying out your work you think about what you
are doing with reference to what he told you and your training course. At the end of the job
your work is reviewed by the senior. He discusses with you how you did it, appraises your
strengths and weaknesses and summarises the areas that you need to pay attention to the next
time you audit payables.
Required:
(i)
Identify the type of learning described above, by selecting A, B, C or D.

A
B
C
D
(ii)
Behaviourist
Coaching
Developmental
Experiential
(1 mark)
Identify the theorist(s) associated with this type of learning, by selecting A, B,

C or D.
A
B
C
D
Kant
Honey and Mumford
Kolb
Mayo
(1 mark)
(4 marks)
45

Question 42 TRAINING MANAGER
Your firms training manager has recently left and you have been asked to take over the position. You
expect your new roles and responsibilities to include:
A
B
C
Co-ordinating
Developing
Researching
Required:
(a)
Classify the following as either A (Co-ordinating), B (Developing) or C (Researching):

(i)
(ii)
(iii)
(iv)
(v)
(vi)
(b)
Analysing training needs.

Ensuring a consistent application of the training strategy.
Identifying skills that will be required by the firm in the future.
Keeping up to date with developments in training technology and methodology.
Maintaining a central repository of training resources.
Providing feedback to course owners and presenters.
(2 marks)
Complete the following sentences about methods of training.

On-the-job training encompasses
organisation is called
2
.
(i)
. Work experience in another department or

A
B
C
(ii)
Induction, Instruction and Simulation

Simulation, Coaching and Induction
Coaching, Induction and Instruction

A
B
C
Job rotation
Secondment
Shadowing
(2 marks)
(4 marks)
46

Question 43 PERFORMANCE ASSESSMENT
Performance assessment takes many forms:
A
B
C
D
E
F
360-degree appraisal
Assessment centre
Bottom-up appraisal
Self-appraisal
Sideways appraisal
Top-down appraisal
Required:
(a)
Identify which form of assessment would be most appropriate in each of the following
situations, by selecting from A, B, C, D, E and F.
(i)
(ii)
(iii)
A group of army officers competing for a transfer to the special forces.

Audit seniors being considered for promotion to manager positions.
The board of directors of an unlisted organisation.
(2 marks)
(b)
State which form(s) of assessment may involve appraisal by external customers. (1 mark)
(c)
State in which form(s) of assessment an employee is appraised by subordinates, as well

as a line manager.
(1 mark)
(4 marks)
47

Question 44 PERFORMANCE AND PAY REVIEWS
Your firm is currently undertaking a review of its staff appraisal and assessment procedures. The
current procedures require a formal annual performance review with a line manager and a separate pay
review with a director. The finance director considers that holding the two reviews separately is a
waste of time and has suggested that they are combined or scrapped altogether. After all, both reviews
are usually held within the same week. Besides which, employees are only usually interested in their
pay and they will find that out when they get their pay slips.
Required:
(a)
Which TWO of the following are disadvantages to the employee if performance reviews
are scrapped as suggested by the financial director?
A
B
C
D
Increase in staff turnover

Lack of motivation
The employee does not know how he is performing against the standards expected
The risk of a lack of congruence between the employees and organisations goals
(2 marks)
(b)
Identify which of the following situations is best suited to combining performance

appraisal with a pay review.
A
B
C
D
E
External rather than internal factors limit the amount of rewards

Introduction of a salary sacrifice scheme
Organisations in the public sector
Pay increases are strictly linked to promotion
Performance-related pay schemes
(2 marks)
(4 marks)
48

Question 45 PERSONAL DEVELOPMENT PLANNING
You have been asked to advise a local health authority on establishing a personal development planning
system. You establish that the mission statement of the authority is to improve the health and wellbeing of our customers, the local residents.
The authoritys remit covers hospitals (managers, surgeons, doctors, nurses and receptionists), local
medical practices (administrator, doctors, practice nurses and receptionists) and health visitors (mainly
nurses).
Required:
(a)
Which of the following are objectives of personal employment-based development?

A
B
C
D
E
To acquire transferable skills and competences

To empower employees to define and manage problems
To plan career development and progression
To provide feedback on personal strengths and weaknesses
To support individuals in managing career development
(2 marks)
(b)
The process of personal development includes setting performance goals.

Identify which of the following are the most suitable objectives for a practice nurse.
A
B
C
D
E
F
To assess the effectiveness of the practices monthly diabetes clinic

To design a hospital discharge form
To design a poster for the reception area to promote eating a healthy breakfast
To ensure local children are healthy
To inoculate 90% of the practices at risk patients against influenza
To make home visits to 95% of the practices infirm patients during the coming year
(2 marks)
(4 marks)
49

Question 46 CONFLICT
Here are three views of conflict in an organisational climate:
A
B
C
A level of conflict should be encouraged to generate self-criticism, change and innovation.

Conflict arises from deviant behaviour that must be controlled and changed.
Conflict is inevitable due to competition for limited resources, status and rewards.
Required:
(a)
Identify the description above which is associated with each of the following views, by
selecting A, B or C.
(i)
(ii)
(iii)
(b)
Evolutionary
Happy family
Radical perspective
(1 mark)
Below are listed six effects of organisational conflict.

A
B
C
D
E
F
Demonstrates measure of power or ability

Formation of competing coalitions
Hampers the decision making process
Hinders smooth working
Reduced productivity
Stimulates a search for new facts or resolutions
Required:
Which TWO of the above are positive effects? Select TWO from (A, B, C, D, E, F).
(2 marks)
(c)
You are the Human Resources Manager of an industrial organisation and are currently dealing
with a machine operator, Ferdinand, who has persistently refused to keep the walkways
around his machine free from machine waste and oil. His supervisor has reminded him,
repeatedly, that observing health and safety requirements is a term of his employment.
However, Ferdinand considers this clearing up to be a job for the cleaners at the end of each
day.
Required:
What should be your next step in handling this conflict?
A
B
C
D
Concede and leave to the cleaners

Do nothing and let it blow over
Immediate dismissal for gross misconduct
Request that the relevant person gives an oral warning or reprimand
(1 mark)
(4 marks)
50

Question 47 ORGANISATION LEVELS
Management information is meaningful information that is generated from the mass of data
accumulated in business systems. The accountant in business needs to understand the significance of
the different types and purposes of information in business. People at different levels in an organisation
have different information requirements because they have different types of decision-making
responsibilities.
Anthonys hierarchy is commonly used to categorise organisational levels:
(i)
(ii)
(iii)
Required:
For each level of Anthonys hierarchy:
(a)
Select the organisational level from the following:

A
B
C
(b)
(1 mark)
Select the information requirements from the following:

A
B
C
(c)
Operational
Strategic
Tactical
Semi-structured
Structured
Unstructured
(1 mark)
Digitax is an established textile manufacturing company.

Required:
Identify the organisational level that is associated with each of the following decisions,
by selecting A, B or C in (a) above.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Designing an employee incentive plan to encourage productivity

Increasing production output
Launching a new product
Purchasing raw materials needed for production.
Selecting an advertising agency to promote a new product
Scheduling manpower in the factory
(2 marks)
(4 marks)
51

Question 48 STRUCTURED AND UNSTRUCTURED
Management needs the right information to help run and improve the performance of the organisation.
Information requirements may be classified as:
A
B
C
Structured
Semi-structured
Unstructured
Required:
(a)
For each of the following, indicate whether it describes structured, semi-structured or

unstructured information.
(i)
(ii)
(iii)
(iv)
Automated and easily programmed. Select one of A, B or C

Precise and rules-based. Select one of A, B or C
Rely on professional judgement. Select one of A, B or C
Unique set of circumstances. Select one of A, B or C
(2 marks)
(b)
Indicate which of the following contains structured, semi-structured or unstructured

information.
(i)
(ii)
(iii)
(iv)
(c)
Database. Select one of A, B or C

E-mail. Select one of A, B or C
Spreadsheet. Select one of A, B or C
Wikis (e.g. wikipedia, wikiinvest). Select one of A, B or C
Select which TWO of the following are advantages of unstructured information.

A
B
C
D
Easier to bundle information

Lower maintenance costs
Lower volume of information
More quickly assimilated
(1 mark)
(4 marks)
52

Question 49 COMMUNICATION FLOWS
Communication is vital in all organisations and the communication process may take many forms. It is
important that managers recognise the nature of information flows and use appropriate forms of
communication. The directions of information flows may be described as:
A
B
C
Downwards
Upwards
Lateral
Required:
(a)
Identify the description of direction with each of the following information flows, by
selecting A, B or C.
(i)
(ii)
(iii)
(iv)
Conflict resolution
Instructions to perform a task
Performance appraisal of sub-ordinates
Technical feedback
(2 marks)
(b)
Methods of communication include:

A
B
C
D
E
F
Formal letter
Formal meeting
Informal letter
Informal meeting
Newsletter
Telephone call
For each communication below, which of these methods is most appropriate in the first
instance?
(i)
(ii)
(iii)
(iv)
A legal document held by the firms solicitor is urgently required to be returned.

10 departmental stores within a retail chain are to be closed.
Monthly update on company news and events.
A final warning to an employee about behaviour at work.
(2 marks)
(4 marks)
53

Question 50 NETWORKS
Basic networks of communication, power and problem solving can be classified into different types of
interaction which can be described as patters, including:
A
B
C
D
Chain
Circle
Wheel
All channel
Required:
(a)
Select the pattern which is associated with each of the following interactions.
(i)
(ii)
(iii)
(iv)
(b)
All individuals channel information and opinions to the leader

Each individual communicates with only two others in a leaderless group
Multiple interactions are encouraged in group decisions
The span of control is very narrow or even one
(2 marks)
Select the pattern(s) which correspond to the following.

(i)
(ii)
(iii)
(iv)
Least centralised
Most centralised
Prone to loss of control and coordination
Prone to message distortion
(2 marks)
(4 marks)
54

Question 51 CORPORATE BEHAVIOUR
Organisational values which promote ethical behaviour include:
A
B
C
D
E
F
Accountability
Empowerment
Honesty
Openness
Respect
Trust
Required:
(a)
Identify the value that has the following meaning.

(i)
(ii)
(iii)
(iv)
(v)
(vi)
(b)
Assuming full responsibility for the outcome of a decision

Disclosing information and the reasons behind decisions
Giving authority to fulfil responsibilities
Giving true information on which others can rely
Relying on the judgments and information provided by others
Treating all stakeholders with dignity and adopting a professional manner
(2 marks)
Corporate codes of ethics are published by organisations in order to communicate their values
and beliefs to stakeholders. The two main types of code are stakeholder-based and issuesbased.
Required:
Select FOUR areas of content for an issues-based code of ethics from the following.
A
B
C
D
E
F
G
H
Commitments to business partners

Compliance with competition laws
Customer relations, satisfaction and service
Environmental responsibilities
Human rights standards
Insider dealing
Policy on sponsorship and charitable giving
Recruitment, remuneration and equal opportunities
(2 marks)
(4 marks)
55

Question 52 ETHICAL DILEMMAS
(a)
Ethical dilemmas often arise as a result of conflict between four sets of values:
A
B
C
D
Corporate values
Personal values
Professional values
Societal values
Required:
Select the correct value which appropriately fills each gap.
(i) are represented by the law, (ii) are held by the organisation which employs the
individual, (iii) are held by the individual and (iv) are those held by the organisation of
which the individual is a member.
(1 mark)
(b)
You are employed by an accountancy firm, Moggij & Co. Your manager has given you
written permission to keep books and prepare accounts in a private capacity in your own spare
time. The following situations might then arise:
A
B
C
D
E
A private client offers you full-time employment

Fee income from a private client exceeds the salary received from Moggij
Needing to leave Moggijs office early to deal with a private clients emergency
Taking on work for another accounting firm that competes with Moggij
Turning down private work because you do not have enough spare time to do it
Select THREE situations from the above list which would give rise to a conflict of
interest.
(2 marks)
(c)
Angies husband, Pete, is an audit manager in KAT, a firm of chartered certified accountants.
Angie has just been offered a job with an excellent remuneration package as an HR manager
in Albatross. Albatross is one of KATs audit clients and Pete is involved in the audit.
Required:
Select the most appropriate course of action from the following.
A
Angie should accept the job offer because KAT will have safeguards to manage any
ethical threat arising
Angie should decline the job offer to avoid any possible conflict of interest that
might arise
Pete should resign from KAT before Angie can take up the position
(1 mark)
(4 marks)
56

TEST 1
1.1
Time allowed: One Hour

Which one of the following is the MAIN way in which effective co-ordination is achieved
between different departments in the planning, budgeting and production functions?
A
B
C
D
1.2
The organisations reporting lines

Managerial planning meetings
Standardised skills and knowledge
The budget setting process
(2 marks)
Rodan is the international production director for ASD Co. His team consists of over 100
male and female managers spread throughout the organisation. The average age of his
managers is 40, but ranges from 25 through to 60 years. Because of the demands of various
customers, the nature of the work of each manager is never the same.
Which one of the following is likely to be the least important influence on the span of
control of Rodan over his managers?
A
B
C
D
1.3
Power, role, task, resource

Individualism, uncertainty, power, dynamism
Power, uncertainty, task, bureaucratic
Person, role, task, power
(2 marks)
Which one of the following statements is closest to the beliefs of the classical school of
management?
A
B
C
D
1.5
(2 marks)
Which one of the following states the four cultural types identified by Handy?
A
B
C
D
1.4
Location of personnel
Type of personnel
Age of personnel
Nature of the work
Emphasis is on social groups

Emphasis is on the task to be done rather than the person doing it
Emphasis is on the person rather than the task
Emphasis is on encouraging people to reach their full potential
(2 marks)
Which of the following includes the roles Belbin suggested a group needs in order to be
effective?
A
B
C
D
Evaluator, Shaper, Plant

Negotiator, Finisher, Initiator
Co-ordinator, Progress chaser, Diplomat
Finisher, Block remover, Negotiator
(2 marks)
57

1.6
Petr is a highly motivated individual, perfectly able to determine his own short-term and longterm life goals and the means of achieving those goals. His friends are often amazed as to
how he is able to start, sustain and direct his behaviour to achieving each goal, especially as
he often accepts challenges they would not consider as achievable.
Which theory best describes Petrs approach to being motivated?
A
B
C
D
1.7
1.9
Right to: seek compensation; take action to rectify, block, erase or destroy personal
data; prevent processing for direct marketing; prevent decisions against an
individual by purely automated means
Right to: obtain access to data held overseas; take action to destroy personal data;
prevent processing for direct marketing; inspect data in situ in the their home country
Right to: seek compensation; travel abroad to inspect personal data; inspect personal
data in situ in their home country; take action to destroy personal data
Right to: destroy hardware holding personal data; inspect personal data where it is
held in their home country; seek compensation; prevent processing for direct
marketing
(2 marks)
Which of the following are the three primary objectives of wealth maximisation?
Profitability, management performance and responsibility
Survival, maintaining growth/development and profitability
Market share, financial resources and physical resources
Worker performance, innovation and accountability
(2 marks)
Porters five forces collectively determine, for a single company, which one of the
following?
A
B
C
D
58
A reasonable prospect of detecting irregular records and material misstatements

The identification of every inconsistency or error within the records
To provide a systematic check of every recorded transaction
To verify pre-determined samples of all types of records
(2 marks)
Which of the following includes four examples of the seven rights of individuals
regarding information that is stored about them?
A
B
C
D
1.10
(2 marks)
In relation to error and fraud prevention, what objective should external auditors have
in designing and implementing their audit procedures?
A
B
C
D
1.8
Maslows hierarchy of needs

Herzbergs hygiene factors
Vrooms expectancy theory
McGregors XY theory
The degree of competition new entrants will face

The profitability of existing firms in the industry
The overall growth of the industry
The overall profit potential of the industry
(2 marks)

1.11
Shareholders may be considered as which type of stakeholder?

A
B
C
D
1.12
(2 marks)
Which of the following best describes the role of a standing committee within an
organisation?
A
B
C
D
1.13
Conflict
External
Internal
Connected
To complete a particular task

To perform a particular role on a permanent basis
To review the organisations internal controls and governance procedures
To monitor the compensation policies of the entity
(2 marks)
I am sorry. As a professional accountant I am bound by my code of ethics to report this

matter to the authorities. Even if I were not a professional accountant, I would consider it my
moral duty to deal with this matter, by going to the police.
What ethical approach is being taken?
A
B
C
D
1.14
(2 marks)
Which of the following would cause an auditor to modify (qualify) their opinion on a set
of financial statements?
A
B
C
D
1.15
Meta-ethics
Relativism
Instrumentalist
Deontological
A material error has not been corrected

Material errors were found, but adjusted
No approval of the financial statements has been made by the directors
They show a true and fair view
(2 marks)
Which one of the following is the predominant form of business entity?

A
B
C
D
Sole traders
Partnerships
Limited liability companies
Limited liability partnerships
(2 marks)
59

1.16
The books and records of a company contain many forms of documentation, including:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Purchase day book

Sales day book
The journal
Cash book
Non-current asset register
General ledger.
Which of the above are books of prime entry?

A
B
C
D
1.17
1.18
(2 marks)
Which of the following best summarises the purpose of organisational controls?

A
To carry out the directions of management, safeguard the assets and ensure the
financial statements are correctly audited
To ensure business processes are efficient and effective, to prevent errors and
fraud and safeguard the assets of the entity
To ensure correct processing of transactions, accountability of management and

safeguard the assets
To prevent fraud and error, ensure the effective and efficient use of resources and
ensure management information is valid.
(2 marks)
Marketing is mainly concerned with which one of the following?

A
B
C
D
1.19
i, ii, iii and iv

iii, iv, v and vi
i, ii, v and vi
All of them
Increasing sales revenue

Streamlining production
Anticipating and meeting customer needs
Maximising profit.
(2 marks)
Unemployment may arise due to a permanent reduction in demand for the products supplied
by a single industry or group of industries with traditionally large workforces.
Which of the following describes this type of unemployment?
A
B
C
D
1.20
(2 marks)
Who should maintain a sound system of internal control?

A
B
C
D
60
Frictional
Structural
Cyclical
Seasonal
The shareholders
The audit committee
The risk committee
The board of directors
(2 marks)

1.21
What is the best way for directors to discourage fraud?

A
B
C
D
1.22
Internal advertising
Advertsing within a local newspaper
Advertsing on the metro
Use of a financial recruitment consultant
(2 marks)
Which of the following states the elements of Kolbs experiential learning cycle in the
correct order?
A
B
C
D
1.24
(2 marks)
Which would be the most suitable method of advertising for a chief finance director?
A
B
C
D
1.23
Maintain a stroing internal control system

Sack all employees suspected of carrying out fraud
Ensure employee pay is above average
Maintain an internal audit department
Reflection, abstract concepts, applying/testing

Concrete experience, applying/testing, reflection
Observation, abstract concepts, concrete experience
Abstract concepts, reflection, applying/testing
(2 marks)
Which of the following best defines coaching?

A
B
C
D
Developing the individual by helping to build on skills and overcome weaknesses

Providing one-way instruction on formal tasks required to carry out the immediate job
Offering career guidance in order to maximise the individuals potential
Providing objective advice to overcome the individuals personal problems
(2 marks)
1.25
Tim is in charge of setting up a new international project. His team will consist of 30
analysts, designers, programmers and testers, all of whom are based in different locations. To
be able to effectively manage the complexity of the project, Tim needs to hold regular
eMeetings through web-based software with all of his team at the same time.
Which form of communication network should be used by Tim?
A
B
C
D
Chain
Y
Wheel
All-channel
(2 marks)
(50 marks)
61

TEST 2
2.1

Which of the following organisations would reply most heavily on value for money
indicators and efficiency rather than information on performance and profitability?
A
B
C
D
2.2
Which one of the following best describes the informal organisation?

A
B
C
D
2.3
2.6
(2 marks)
Basic assumptions and values

Espoused values and beliefs
Power and culture
Artefacts and attitudes
(2 marks)
In which one of the following Mendelow stakeholder categories could individuals join
forces to form a stronger grouping and become lobbyists or pressure groups, thus
moving into a different stakeholder category?
A
B
C
D
2.5
Enduring, plain to see, easily understood

Hierarchical, cohered by trust, excellent at alignment
Dynamic, constantly evolving, treats people as individuals
Top-down, equates person with role, flat structure
What aspects of corporate culture does Scheins Level 1 relate to?

A
B
C
D
2.4
A private accountancy college

A local authority
A small retailer
A pension fund
Low interest, high power

High interest, low power
High interest, high power
Low interest, low power
(2 marks)
Are the following statements true or false?

1
2
Adairs leadership model focuses on what leaders do and not what they are
The Ashridge leadership model proposes a democratic approach to leadership
A
B
C
D
Both statements are true

Statement 1 is true; statement 2 is false
Statement 1 is false; statement 2 is true
Both statements are false
(2 marks)
Jon is a design engineer for an international car manufacturer. His primary computer-aided
system enables him to design the interior of the driver and passenger cabin of a car, including
the seats. His system is linked via an extranet to the design templates of external component
suppliers, as well as to other members of his design team who also work on the same design.
In which of the following IS categories would Jons system be classified?
A
B
C
D
62
Knowledge work systems (KWS)

Expert systems (ES)
Decision support systems (DSS)
Office automation systems (OAS)
(2 marks)

2.7
A good ________ requires a full and complete understanding of the formal committee
procedures and how and when to apply them.
Which one of the following best completes the sentence above?
A
B
C
D
2.8
CEO
Director
Chair
Committee secretary
(2 marks)
As a fundamental element of our policy, we seek to increase awareness of human rights

issues throughout the organisation worldwide. We take any allegations that human rights are
not properly protected within our sphere of influence seriously.
What policy is most likely being referred to in this extract from a companys website?
A
B
C
D
2.9
Health and safety

Equal opportunities and diversity
Employment
Ethics
(2 marks)
A national supermarket chain operates a club card scheme where the holder of the card is
rewarded with points based on how much they spend and what they buy on each visit to one
of the chains stores. The cumulative data collected on all of the supermarkets customers is
made available to government statisticians which is aggregated with similar data collected
from other sources.
Which form of economics does the above illustrate?
A
B
C
D
2.10
Microeconomics
Business economics
Macroeconomics
Nano economics
(2 marks)
The following activities of an organisation are considered to be sustainable by its board of

directors.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
An average growth rate of 5% per annum

Using paper from managed forestry resources
Producing products that are 95% recyclable back into the production process
Reducing carbon emissions per employee by 10% per annum
Powering all office facilities using solar power
Restricting fresh water usage to 1 litre per 1,000 units of production
Which of the following combination of activities is wholly sustainable in accordance with

the generally accepted definition of sustainability (Bruntland)?
A
B
C
D
i, ii and iii
ii, iii and v
ii, iv and v
i, iv and vi
(2 marks)
63

2.11
Northland, Southland, Eastland and Westland are four countries of Asia. The following
economic statistics have been produced for the year 2012.
Country
Northland
Change in GDP (%)
-0.30
Balance of payments
current account ($m)
+5550.83
Change in consumer prices (%)
+27.50
Change in working population
employed (%)
-4.76
Southland
+2.51
Eastland
-0.55
Westland
+2.12
-350.47
+15.37
-150.90
+2.25
+220.39
+2.15
+3.78
+1.76
-8.76
Which country experienced stagflation in the relevant period?

A
B
C
D
2.12
2.14
Retained earnings
Investment bond loan capital
Share issue
Venture capital
(2 marks)
What is the main objective of the International Accounting Standards Board?

A
To bring about the convergence of national accounting standards
To ensure that accounting standards issued by national standard setters are

comparable
To ensure that all financial statements issued by listed companies show a true and
fair view
To develop a single set of high quality, understandable and enforceable global

accounting standards
(2 marks)
Which of the following controls is most likely to prevent the despatch of goods that have
not been ordered?
A
B
C
D
64
(2 marks)
Which one of the following sources of finance would be available to a governmental local
authority (city hall)?
A
B
C
D
2.13
Northland
Southland
Eastland
Westland
The authorisation of a customers credit limit before despatch of goods

The segregation of duties between sales ordering, goods despatch and invoicing
The pre-numbering of sales orders, goods despatch notes and sales invoices
The authorisation of goods despatch notes before despatch of goods
(2 marks)

2.15
In marketing, the 4Ps relate to the marketing mix for products, with the 7Ps relating to the
marketing mix for service providers.
What are the additional Ps that relate to the marketing mix for service providers?
A
B
C
D
2.16
(2 marks)
Which of the following is a main role of internal audit?

A
B
C
D
2.17
Process, Physical evidence, People

People, Physical evidence, Price
Physical evidence, Price, Place
Process, Promotion, People
To carry out a joint audit with the external auditors

To assist the directors to meet the requirements of good corporate governance
To provide an independent and objective assurance service
To prevent, detect and correct errors within the financial systems
(2 marks)
An international quality car manufacturer that prides itself on innovative design offers each of
its customers the opportunity for a custom fit car seat (referred to by the company as a glove
seat) which they believe makes them stand out from the crowd. This entails the customer
visiting a show room and sitting in a design module of their cars interior. Sensors measure
the drivers body and best driving position. The same process can be applied for up to three
other drivers (e.g. wife, husband, children, dog). When delivered, the cars seat fits like a
glove and can be re-engineered at any time to take into account changes in the drivers body.
By entering a PIN, the car seat will automatically adjust to fit the posture of the new driver.
What form of technological competitive strategic advantage is the car manufacturer
aiming to achieve?
A
B
C
D
2.18
(2 marks)
The stages of preparing a personal development plan are contained in which one of the
following?
A
B
C
D
2.19
Cost leadership
Innovation
Growth
Differentiation
Position analysis, identify attributes and set objectives

SWOT analysis, setting of goals and preparing an action plan
Set objectives, prepare detailed plan, review outcome
Identify past successes and failures, take corrective action then review
(2 marks)
In the context of internal control, which of the following best describes the control
environment?
A
B
C
D
The application of risk assessment procedures

The cascading, communication and enforcement of integrity and ethical values
The attitude, awareness and actions of management
The implementation of appropriate information systems and controls
(2 marks)
65

2.20
The controls operated within computer based systems are classified into a number of different
categories.
In which category would passwords be classified?
A
B
C
D
2.21
Processing controls
Physical controls
System development controls
Output controls
(2 marks)
An advertisement reads Attractive, young, natural blonde persons required for the role of
administrative assistants.
Which set of discrimination laws are being broken?
A
B
C
D
2.22
A large order is sent to a credit customer who does not then pay
Sales made after the year end are recorded as pre-year end sales
Customer orders are diverted to a separate company set up by a director
Receipts from credit customers are misappropriated and subsequently concealed by
furture receipts
(2 marks)
Which one of the following training methods would be the most appropriate for a
student accountant to develop the knowledge, skills and attitude to become an auditor?
A
B
C
D
2.24
(2 marks)
Which one of the following best describes the teeming and lading fraud?
A
B
C
D
2.23
Gender, age, equal pay

Equal opportunities, gender, disability
Equal pay, race, sexual orientation
Age, race, equal opportunities
Mentoring
External courses
On-the-job training
Self-study
(2 marks)
Fred is a sober, prudent individual who is able to make impartial judgements on the work of
others through dissecting and spotting flaws within their ideas. However, he lacks inspiration
and finds it difficult to motivate his fellow workers.
Which of Belbins team roles best describes Fred?
A
B
C
D
2.25
Plant
Implementer
Monitor-evaluator
Chairman co-ordinator
(2 marks)
Which one of the following appraisal methods would be most suitable for appraising a
student accountant against specific job and personal criteria as part of an audit team?
A
B
C
D
Peer ranking
Management by objectives
Rating scales
Open assessment
(2 marks)
(50 marks)
66

TEST 3
3.1

Which of the following identifies three of the characteristics of direct service provision?
A
B
C
D
3.2
Variability, intangibility, perishability

Simultaneity, collectability, ownership
Containability, loyalty, tangibility
Variability, serviceability, inseparability
(2 marks)
BCD Co is a large trading company. Steve, the administration manager, is responsible for
legal and compliance functions. Sheila, the after sales service manager, is responsible for
ensuring that customers who have purchased goods from BCD Co are fully satisfied. Sunny
deals with suppliers and negotiates on the price and quality of inventory. Sunny is also
responsible for identifying the most appropriate suppliers of plant and equipment for the
factory. Sam, the information technology manager, is responsible for all information systems
within the company.
According to Porters value chain, which of the managers is involved in a primary
activity as opposed to a support activity?
A
B
C
D
3.3
Steve
Sheila
Sunny
Sam
(2 marks)
Yana will shortly be graduating from university and is researching for her first job. In tests
conducted by the universitys careers advisor, she scored highly in wanting a job that had the
attributes of predictability, standardisation and consistency.
What organisational culture would be most suited to Yana?
A
B
C
D
3.4
(2 marks)
Which of the following can be used to explain how shareholders, directors and external
auditors interact and how their objectives may conflict with one another?
A
B
C
D
3.5
Task culture
Power culture
Person culture
Role culture
The Boston Consulting Group matrix

Mendelows framework
Corporate governance
Porters competitive factors
(2 marks)
Following an incident with one of its aircraft, the manufacturer has decided to redesign the
systems that present flight information to the pilots. The incident involved a fault in one of
the planes engines, but because of the volume of information presented, the pilots shut down
the wrong engine.
Which one of the following combinations of the qualities of information should be the
critical driver for the systems redesign?
A
B
C
D
Time period and completeness

Understandability and confidence
Accuracy and volume
Relevance and conciseness
(2 marks)
67

3.6
Which of the following is a responsibility of a committee secretary?

A
B
C
D
3.7
(2 marks)
Which one of the following ethical fundamental principles is most closely related to the
need for the professional accountant to be independent of their clients?
A
B
C
D
3.8
Circulate the approved minutes to all members of the committee

Promote high standards in corporate governance
Set the style and tone of the committee discussions
Initiate change and plan committee member succession
Integrity
Professional behaviour
Objectivity
Confidentiality
(2 marks)
One of the key performance indicators (KPIs) of a company is determined by the amount of
depletable raw materials and non-renewable resources it consumes to make its products and
the quantity of wastes and emissions generated in the process.
What is the term used to describe this KPI?
A
B
C
D
3.9
(2 marks)
The European Union, the World Trade Organisation and the International Court of
Justice are all examples of what type of organisation?
A
B
C
D
3.10
Carbon footprint
Social foorprint
Environmental footprint
Recycling footprint
Supra-national bodies
Cross-border international bodies
International law and regulation enforcement bodies
Delegated legislative bodies
(2 marks)
Research has indicated that workers in country A display characteristics such as toughness
and the desire for material wealth and possessions, while workers in country B value personal
relationships, belonging and the quality of life.
According to Hofstedes theory, these distinctions relate to which of the following
cultural dimensions?
A
B
C
D
68
Masculinity-femininity
Power-distance
Individualism-collectivism
Uncertainty avoidance
(2 marks)

3.11
A country is currently experiencing low birth rates and low death rates, the consequence of
which is that as the number of older, retired people grow the government is facing significant
pension fund and health cost increases, but with a shrinking workforce to fund the increased
costs.
At what stage in Notesteins Demographic Transition Theory is the country?
A
B
C
D
3.12
Fully developed country

Post-industrial country
Developing country
Pre-industrial country
(2 marks)
In many organisations, power and politics may play a central role when considering the
conflicts that arise over allocation of scarce resources, the status of individual employees or
the rewards given to employees.
Which view on conflict best describes this situation?
A
B
C
D
3.13
Evolutionary view (interactionist perspective)

Happy family view
Radical perspective and conflict view
Traditional view
Gross Domestic Product is the total

the country in a given period of time.
(2 marks)
of all final goods and services produced within
Which of the following correctly completes this definition?

A
B
C
D
3.14
(2 marks)
Materials, labour and overheads primarily relate to which accounting function?

A
B
C
D
3.15
consumption value
market value
factory gate cost
production input cost
Management accounting
Financial accounting
Treasury accounting
Cost accounting
(2 marks)
Who, within an organisation, is usually responsible for ensuring full compliance with all
statutory, regulatory and governance reporting, accounting and audit requirements?
A
B
C
D
Chief executive officer

Chief internal auditor
Chief compliance officer
Chief financial officer
(2 marks)
69

3.16
Under what circumstances should directors approve the financial statements?

A
B
C
D
3.17
Only when they show a true and fair view

When told to do so by the auditors
When every error discovered by the auditors has been adjusted
When requested to do so by the Chief Financial Officer
(2 marks)
A fraud was recently discovered where the monthly salary of an employee who had left many
months earlier continued to be paid after he had left. A wages administrator responsible for
updating the payroll database was his girlfriend.
Which of the following controls, if operated, would have been most likely to have
prevented the fraud?
A
Exit interview of employees by the HR department
Authorisation by the HR department of all changes to be made to the salaries

database
Independent review and approval of all changes made to the database, comparing
to original input documentation
Banning all personal relationships between payroll staff and other employees
(2 marks)
3.18
We need to ensure that, at the end of the day, our new computer is put in front of everyone,
no matter who they are, what they do or where they go, they need to know about it so they can
buy it.
Which of the marketing 4Ps is relevant to this situation?
A
B
C
D
3.19
Place
Promotion
Price
Product
(2 marks)
A team has been successfully operating for some time, when two of its members are promoted
to be the manager of their own teams. They are replaced by two new employees recruited
externally specifically to join the team.
At what stage within Tuckers team development would the team most likely find itself?
A
B
C
D
3.20
(2 marks)
Under which internal control component should the management weakness letter
received from the external auditors be classified?
A
B
C
D
70
Forming
Storming
Norming
Performing
Control activity
Control environment
Monitoring controls
Risk assessment
(2 marks)

3.21
A fraud recently discovered by a companys auditors involved the theft of receipts from credit
customers which were covered up by subsequent receipts from other customers or writing off
the debt as bad.
What is the name most commonly given to this type of fraud?
A
B
C
D
3.22
Window dressing
Teeming and lading
Cash siphoning
Ponzi
(2 marks)
In most countries, what is the usual purpose of codes of practice on corporate

governance?
A
B
C
D
To establish legally binding requirements to which all companies must adhere

To set down detailed rules to regulate the ways in which companies must operate
To provide guidance on the standards of best practice that companies should adopt
To provide a comprehensive framework for management and administration
(2 marks)
3.23
In an audit team, the phrase in-charge account is used to describe the individual who runs
the audit on a day-to-day basis at the clients premises and who also performs part of the audit
procedures at the client. A foreman or forewoman would be the industrial equivalent through
their managing a work group as well as being involved in the work itself.
Which of the following terms best describes the role of the in-charge accountant or
forewoman/man?
A
B
C
D
3.24
Workman
Manager
Facilitator
Supervisor
(2 marks)
A manager (who is smoker) has been informed by her boss that a no smoking policy is to be
introduced and there will be no exceptions. Her boss fully explains the reasons for this. The
manager has to inform her subordinates (many of whom are also smokers) of this new policy.
Which of the styles of management identified by Ashridge Management College would
be appropriate for the manager to use?
A
B
C
D
3.25
Consult
Tell
Join
Sell
(2 marks)
Dima is an individual who rises to the challenge. He is not an originator of ideas, but
always seems to know somebody who knows the answer or can help solve a problem. The
rest of his team refer to him as Radar because of his ability to find solutions to problems.
Which of Belbins team roles best describes Dima?
A
B
C
D
Plant
Implementer
Resource investigator
Chairman co-ordinator
(2 marks)
(50 marks)
71

TEST 4
4.1

An organisational employee structure usually contains workers, supervisors, managers, senior
managers, executives and board directors.
Whose hierarchy triangle best describes the strata embedding these employees?
A
B
C
D
4.2
(2 marks)
Which of the following could be either a motivator or a hygiene factor?

A
B
C
D
4.3
Anthony
Maslow
Carol
Woodcock
Supervision
Working conditions
Job security
Pay
(2 marks)
A firm wishes to obtain a competitive advantage over its rivals through the use of information
systems and technology. The CEO understands he can achieve a competitive advantage
through differentiation or cost leadership.
Which of the following is a technique of differentiation through the use of information
systems?
A
B
C
D
4.4
(2 marks)
Which of the following is an advantage of an entrepreneurial structure?

A
B
C
D
4.5
Improving efficiency
Improving customer service
Economy in purchasing
Removing product features
Economies of scale
Enhanced career opportunities
Enables growth
Goal congruence
(2 marks)
The government of an emerging nation prides itself on developing a national culture where
there is a strong emphasis on initiative and achievement, and people are expected to be selfsufficient.
Which one of the following best describes the culture of the nation?
A
B
C
D
72
Masculine
Individualistic
High uncertainty avoidance
Low power distance
(2 marks)

4.6
4.7
Which of the following are the likely consequences of a fall in interest rates?
(i)
(ii)
(iii)
(iv)
A rise in the demand for consumer credit.

A fall in investment.
A fall in government expenditure.
A rise in the demand for housing.
A
B
C
D
(i), (ii), and (iii) only

(ii), (iii) and (iv) only
(i), (iii) and (iv) only
(i) and (iv) only
(2 marks)
Sir John DeVere is a highly successful barrister operating from chambers (offices) located in
London, New York and Singapore. He has a reputation second to none for winning high
profile cases involving complex cross boarder issues. Each office is run by a legal manager
heading a team of lawyers, legal assistants and researchers. The sole aim of each office is to
present Sir John with full details of each potential case. Sir John then consults with the office
manager before deciding which clients to accept. Once a client has been accepted, the office
manager ensures that Sir John has a complete and solid brief on which to base his case in
court.
Which of Handys cultural types best describes Sir Johns chambers?
A
B
C
D
4.8
4.9
Role
Power
Person
Task
(2 marks)
Which one of the following relates directly to the work of Douglas McGregor?
A
Employees who dislike work, need direction and avoid responsibility are Theory
X people.
Employees who like work, need direction or take responsibility are concerned with
Hygiene factors.
Self-actualising employees dislike work, need direction and avoid responsibility
Employees who dislike work, need direction and avoid responsibility are Theory
Y people.
(2 marks)
Exception reporting is a primary feature of which one of the following systems?

A
B
C
D
Office automation systems

Knowledge work systems
Expert systems
Management information systems
(2 marks)
73

4.10
A systems analyst has been instructed by the key user of a new system to ensure that the
system will always deliver good quality information.
Which one of the following is a key attribute of good quality information?
A
B
C
D
4.11
Guaranteed
Produced quickly
Relevant
Cheap and cheerful
(2 marks)
A stakeholder is defined as any group or individual who can affect or be affected by the
achievement of an organisations objectives. Stakeholders are often classified as being
internal, connected or external.
Which of the following groupings of stakeholders contains an example of each
classification?
A
B
C
D
4.12
Government, local community, non-executive directors

Directors, suppliers
Bankers, trade unions, auditors
Employees, executives, company secretary
(2 marks)
Employees have a duty to take reasonable care of themselves and others, avoid creating
hazards, draw to managements attention potential problems and to co-operate with their
employer so far as is necessary to ensure that the employer can perform their legal duties.
To which general category of legislation do these duties belong?
A
B
C
D
4.13
Health and safety

Data protection and security
Whistleblowing
Discrimination and diversity
(2 marks)
Many large cities have, or are introducing, a congestion charge on the use of cars in city
centres (e.g. the City of London). Experience has shown that in some cities the charge does
not significantly reduce the use of cars for travelling to and from work (commuting).
In economic terms, what is the implication where the charge does not significantly
reduce the use of cars?
A
B
C
D
4.14
There are no substitutes for cars.

The marginal cost of driving is not affected.
The supply of alternative means of transport is price elastic.
The demand for commuting by car is price inelastic
(2 marks)
Eprum International is considering a major overhaul of its inventory control information

systems. This is expected to take at least two years.
What form of committee should be used to oversee the project?
A
B
C
D
74
Sub-committee of the Board of Directors

Standing committee
Ad hoc committee
Project steering committee
(2 marks)

4.15
Good corporate governance recommends entities establish a number of board subcommittees.

Which committees should comprise 100% non-executive directors?
A
B
C
D
4.16
(2 marks)
Which business function is involved in cost measurement, allocation and absorption to

produce budgets and actual costs, comparison and variance analysis?
A
B
C
D
4.17
Audit and nominations committee

Nominations and risk committee
Remuneration and audit committees
Audit committee only
Production
Purchasing
Marketing
Procurement
(2 marks)
In order to maintain a competitive advantage, Nile Online Retailers has implemented a

continuous information technology and systems innovation programme. The audit committee
has requested that the internal auditors continually monitor the programme to ensure that it
achieves the boards objectives, that the resources used within the programme are
competitively costed and that the programme fully follows the max/min philosophy (e.g. the
system delivers the maximum output from a given input).
What form of assignment is internal audit being asked to provide?
A
B
C
D
4.18
Auditors
Tax authorities
Company secretary
Directors
(2 marks)
Requisitions, orders and invoices all relate to which accounting system?

A
B
C
D
4.20
(2 marks)
Who must approve the financial statements of an entity?

A
B
C
D
4.19
IT/IS audit
Value for money
Operational
Risk management
Sales
Payroll
Inventory
Purchases
(2 marks)
A listed company fully complies with the requirements of the stock exchange and the
corporate governance code of its jurisdiction.
What component of internal control does the companys actions best represent?
A
B
C
D
Risk assessment
Control monitoring
Control activities
Control environment
(2 marks)
75

4.21
Professional accountants who provide assurance services must be independent of their

assurance clients.
Which fundamental principle does independence underpin?
A
B
C
D
4.22
Objectivity
Integrity
Professional behaviour
Professional competence
(2 marks)
Rozprakitka is a company that sells electronic goods through its website. As with similar
companies, customers can search the website to find the item they are looking for. Each
product is fully described and links are embedded within the product page to the
manufacturers website as well as to customer and independent reviews. If the customer
wishes to purchase the item they may add it to their shopping trolley and pay for what they
have purchased on checkout. The goods are then delivered to them by courier.
What elements of the marketing mix are demonstrated by the website?
A
B
C
D
4.23
Process, place and promotion

Place only
Promotion only
Place and promotion only
(2 marks)
(i)
A sound internal of control system is the first line of defence in the prevention and
detection of fraud. It is the duty of the board of directors to maintain a sound system of
internal control.
(ii)
As part of a sound system of internal control, internal auditors are responsible for the
prevention of fraud.
(iii)
Client money held by a professional accountant is an asset of the accountants firm

until it is used as instructed by the client.
Which of the above statements are true?

A
B
C
D
4.24
All are true

None are true
Only (i) is true
Only (iii) is true
(2 marks)
You have told me that your father influenced your choice of career. Exactly how did he do
that?
What form of question is being asked?
A
B
C
D
76
Open question
Probing question
Reflective question
Closed question
(2 marks)

4.25
Which of the following is the correct sequence of Kolbs experiential learning cycle?
A
B
C
D
Observation, formation of abstract concepts, applying/testing

Observation, concrete experience, reflection
Reflection, observation, applying/testing
Applying/testing, formation of abstract concepts, observation
(2 marks)
(50 marks)
77

SAMPLE QUESTIONS
These sample questions have been identified by the examiner as being amongst the worst attempted.
1
Janet is a member of a project group. She is highly knowledgeable and considered by her
colleagues to be rather intellectual and strategic in her approach. Janet demonstrates great
intuition when dealing with problems, sometimes adopting unorthodox but effective methods.
However, some of the team regards her as detached and uncommunicative, and she can
sometimes disregard practical details without explanation.
According to Belbins team roles theory, Janet is an example of which of the following?
A
B
C
D
(2 marks)
In order to promote proper and complete dialogue between the company registration
body and a company, and to ensure that essential administrative requirements laid
down by the company registration body come to the attention of the board, which of the
following positions should be segregated?
A
B
C
D
Monitor-evaluator
Plant
Shaper
Resource investigator
Company Secretary and Chief Executive Officer

Chief Executive Officer and Chairman
Company Secretary and Chairman
Director and Company Secretary
(2 marks)
Which of the following is an example of a substantive test?

A
Asking the procurement manager to confirm the underlying purpose of a purchase of

raw materials
Asking a senior manager for evidence that an account receivable is collectible to

ensure that the stated valuation of the account is correct
Checking that the technical quality of inventory is consistent with the order
specification
Confirming that an order for goods placed by the production manager is consistent
with the managers authorisation limit
(2 marks)
Josephs preferred way of learning is to assimilate information in a logical and systematic

manner. He can understand problems most readily when he can apply a pre-determined
framework in order to consider real life issues. He dislikes being put on the spot by having to
perform tasks as part of his training, as he feels unprepared without first being fully
instructed.
According to the Honey and Mumford learning styles model, which of the following
would best describe Josephs learning style?
A
B
C
D
78
Pragmatist
Activist
Reflector
Theorist
(2 marks)

5
As a longstanding customer, Walter has been highly critical of Fly Co, an airline which he
claims has provided him with bad service and poor value for money for many years. He has
written many letters and has made numerous telephone calls, all expressing his concerns.
Having now inherited a large block of voting shares in Fly Co, Walter can now voice his
complaints at the annual shareholders meeting for the first time.
With reference to Mendelows theory, what is the implication of this development?
Fly Co could previously have expended minimal effort on Walters concerns, but it
must now keep him informed
Fly Co should previously have kept Walter informed, but it must now treat him as a
key player
Fly Co should previously have kept Walter satisfied, but it must now regard him as a
key player
(1 mark)
HIJ Co is a large company whose shares are listed on the national stock exchange. The
company is compliant with generally accepted standards of corporate governance. The
finance department of HIJ Co has completed the preparation of the draft financial statements.
To which of the following will these statements be submitted initially for scrutiny?
A
B
C
D
(2 marks)
Analysis of costs and revenues of different products would assist the marketing
department in respect of which activity?
A
B
C
D
The external auditors

The audit committee
The board of directors
The internal auditors
Differentiating the technical features of products from those of competitors

Calculating the maximum discounts that sales personnel are permitted to offer
Targeting sales efforts towards the most appropriate socio-economic groups
Determining production bonuses to be paid
Which of the following principles is usually recommended for inclusion in legislation on

data protection?
A
The data user should provide the data subject with regular and detailed information
on the data held
All personal data held by data users should be updated by checking this data with
the subject at regular intervals
All personal data held by data users should be adequate for the purposes of the data
user but not excessive
All personal data held by data users should be reviewed regularly and automatically
deleted after a specified period of time
(2 marks)
79

9
DEF Co has decided to include in each customers account number a check digit which will
have an arithmetical relationship to other digits in the account number.
This is an example of which of the following types of control?
A
B
C
D
10
The sense of identity brought about by common objectives

The bonding and loyalty of the members to one another
The emergence of one particular individual as a leader
The organisation of work through strictly formal processes
(2 marks)
Kolbs learning cycle comprises active experimentation, experience, observation and

reflection, and which other element?
A
B
C
D
12
(2 marks)
Which of the following is a characteristic of a team but not of a group?

A
B
C
D
11
Input control
Back-up control
Output control
Contingency control
Assimilation
Application
Abstract conceptualisation
Positive reinforcement
(2 marks)
Eatkleen is a pressure group that seeks to encourage food producers to eliminate harmful
preservatives from food and make the public aware of the potential dangers of these additives.
Frustrated with the governments explicit policy not to act on this in the near future, Eatkleen
is campaigning for consumers to boycott certain products.
What combination of environmental factors is Eatkleen bringing to bear on food
producers?
A
B
C
D
13
(2 marks)
The preparation and filing of accounts by limited companies each year is required by
which of the following?
A
B
C
80
Political and social

Social and economic
Political and technological
Economic and technological
Codes of corporate governance

National legislation
International Accounting Standards
(1 mark)

14
Grant is a member of a project team. His colleagues in the team rely on him to read and check
complex project documentation. Grant has a keen eye for detail and often identifies minor
details in documents that others miss but may be of significance. Despite this diligent
approach, Grant always meets his deadlines. However, Some of Grants colleagues feel
frustrated when he refuses to involve others. He can hold up progress as he will not agree to
the team signing off project documents until all of his concerns are fully discussed.
According to Belbins team roles theory, Grant is an example of which of the following?
A
B
C
D
15
Implementer
Completer-finisher
Monitor-evaluator
Shaper
(2 marks)
What is the latest stage at which a new recruit to a company should first be issued with a
copy of the companys health and safety policy statement?
A
B
C
D
On accepting the position with the company

As early as possible after employment
After the first few weeks of employment
During the final selection interview
(2 marks)
16
VTP Co has introduced a new budgetary control system. Managers have been asked to
prepare budgets for their areas of responsibility and have agreed these formally with senior
executives.
What is the next stage of the process?
A
B
C
D
17
Reviewing outcomes in order to plan for the next period

Measurement of actual business outcomes
Analysis of variances between actual and budgeted performance
Agreement on action to be taken on significant variances
(2 marks)
A recent report commissioned by the government of Arkana has concluded that the national
birth rate has fallen from an average of 21 children per household to 17 children per
household. This decline is expected to continue, as families face a period of prolonged
financial pressure. The report also found that the life expectancy of the citizens of Arkana has
increased from an average of 74 years to 79 years. Again, this trend is expected to continue as
citizens choose healthier lifestyles. Numerous policy measures have been proposed by
ministers to reduce the long-term pressure on national finances.
Which of the following measures is most appropriate in order to achieve this objective?
A
B
C
D
A reduction in income tax rates and an increase in personal tax-free allowances

The provision of targeted support for elderly low income families
The introduction of tax incentives to invest in personal pension arrangements
Maintenance of low interest rates in order to increase the money supply
(2 marks)
81

18
The remuneration committee of RDC Co has prepared a report to the board proposing major
changes to the structure of executive remuneration packages. The recommendations include
the following:
(1)
Enhanced bonuses linked to performance over 12 years will be paid, linked to

performance, with the result that bonuses will now comprise about 80% of on
target earnings.
(2)
As the output of individual directors is impossible to measure, the fairest system of

remuneration is to reward executive directors with across-the-board increases on an
annual basis.
(3)
A significant proportion of executive pay will be made up of shares in the company,

which will be allotted subject to the achievement of objectives over a rolling five
year period.
(4)
Acknowledging the contribution of all board members, share options will be made
available to all executive and non-executive directors.
(5)
As the company pays its executives less than its main competitors, basic pay and
fringe benefits will be increased with immediate effect, which means that the
average directors remuneration will be made up of approximately 50% on target
earnings.
Which of the above recommendations are consistent with best practices in corporate
governance in respect of remuneration of directors?
A
B
C
D
19
1 and 4
2 and 3
3 and 4
3 and 5
(2 marks)
The board of directors of TBF Co has decided to establish an audit committee for the first
time. The committee will be made up of three independent non-executive directors. As the
company has six non-executive directors, three will serve on the committee in the first year
and the other three will then serve for the next year. Of the six non-executive directors, only
one has a comprehensive knowledge of financial operations.
The committee will meet every two months. One of the non-executive directors will also
serve as the chairman of the company for the next year and it has been decided that he will
also be the chairman of the audit committee for this period.
According to best practice in corporate governance, which of the following statements is
correct in relation to the above arrangements?
82
It is inappropriate for the chairman of the company to be chairman of the audit

committee at the same time
Whilst the audit committee should be made up of a majority of non-executive

directors, it is undesirable that there will be no executive directors serving on it
The audit committee will not have the necessary competences to discharge its
responsibilities over the full two year period
The non-executive directors should retire annually, so no arrangements should be

put in place in relation to the composition of the audit committee for the second year
(2 marks)

20
21
Which of the following reports prepared by the finance department would enable the
organisation to assess the effectiveness of an increase in expenditure on after sales
service?
A
Costs of defects reworked or written off due to failures in quality control
Revenues from cross-selling activities focused on existing customers
Costs of servicing, repairing and running vehicles driven by customer-facing

engineers
Revenues from sales of imperfect inventory and returned goods
(2 marks)
Jens has prepared a report detailing the sales, revenues and costs attributable to his companys
products, broken down by cities, towns and regions, for the last 12 quarters. He already has
figures for the estimated total market size for the same period. The company sells fast
moving consumer goods and adopts an undifferentiated marketing strategy.
Jens report will enable the marketing department to complete which of the following?
A
B
C
D
Carrying out a comprehensive analysis of the marketing environment

Analysing buyer behaviour according to product features and benefits
Identifying the position of the products on the product lifecycle
Understanding which promotional methods have been most effective
(2 marks)
(40 marks)
83
84

Item Answer
Justification
Answer 1 ORGANISATION AND INDUSTRY

(a) (i)
(ii)
(iii)
(iv)
C
A and D
B
B and D
(b) (i)
(ii)
(iii)
(iv)
(v)
(vi)
C
B
A
B
C
A
Answer 2 DIRECT SERVICE PROVISION

(a) (i)
(ii)
B
A
(b)
A, B, D, E
(c)
Although customer care is important for any business it is usually embedded in

direct service provision (rather than an after sale service). Therefore ensuring that
appropriate direct service staff are employed and trained is likely to be even more
important in providing direct services.
Answer 3 THE ULTIMATE FOOTBALL CLUB

(a) (i)
(ii)
(iii)
(iv)
C
B
A
B
(b) (i)
(ii)
(iii)
D
C
C
(iv)
The replica-shirt supplier can easily be replaced by the club when the contract has
been fulfilled. Alternatively, the supplier can decline any new contract offered.
Answer 4 NORTHERN BOTTLES

(a) (i)
(ii)
(iii)
(iv)
B
A
C
C
(b) (i)
(ii)
(iii)
B
A
B
(iv)
The International Beverages Association clearly has high interest and in order to
protect the interest of the non-alcoholic beverage industry would expect
appropriate standards to be met and apply sanctions if standards were not met.
1001

Item Answer
Justification
Answer 5 PERSONAL PROTECTION

(a) (i)
(ii)
(iii)
(iv)
G
C
B
E
(b)
A, C, D, E
Credit control takes place in head office rather than on-site.
Answer 6 PORTER
(a) (i)
(ii)
(iii)
(iv)
C
A
B
D
(b) (i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
B
B
A
A
A
A
B
B
(c) A
B
C
D
(iii)
(v)
(vi)
(iv)
Answer 7 ELAND
(i)
(ii)
(iii)
(iv)
A, C
A, A
C, A
B, C
Answer 8 GROSS DOMESTIC PRODUCT

(a) (i)
(ii)
A, D. E
C
(b)
A, B, D
(c)
A, B
Answer 9 DEMAND AND SUPPLY

(a)
C, D, F
(b) (i)
(ii)
(iii)
(iv)
A
B
B
A
1002

Item Answer
Justification
Answer 10 MARKETS
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
A
B
A
A
B
A
B
B
Answer 11 PRODUCT-ORIENTED STRUCTURE

(a)
B, D, E, F
(b)
A, D
Direct activities are A, C, E, H.
A product-oriented structure should facilitate co-ordination of product-related

activities, encourage diversification and ensure that each product receives the
resources it deserves. However, as after-sales service is a direct activity (associated
with each product) customer dissatisfaction could arise from there being different
points of contact for different product. As sales and marketing are also associated
with each product related costs would be higher than a geographical structure (for
example).
Answer 12 GREG PYE

(a)
A, D
The functional structure hinders the development of general managers and is not
suited to rapidly-expanding organisations
(b)
A, B
Role ambiguity is a disadvantage. The matrix structure is suitable where there are
few major customers in a highly-skilled industry with mature and professional
employees.
Answer 13 HANDY AND HOFSTEDE

(a) (i)
(ii)
(iii)
(iv)
B
C
D
A
Work is based on the position (role) rather than the individual.

Main focus is completion of the task.
The individual (e.g. a professional) is central to the person culture.
Decision-making rests with few people (e.g. entrepreneur of family board).
(b) (i)
(ii)
C, H
E, F
A high PD index indicates higher inequalities of power.

A low UA index is associated with greater tolerance for dissent and deviation from
the norm (i.e. informal rather than rule-orientated).
1003

Item Answer
Justification
Answer 14 SCHEIN
(a) (i)
(ii)
(iii)
(iv)
(v)
(vi)
A
B
A
A
B
B
(b)
(c) (i)
(ii)
(iii)
C
E
B
Conscious values (A) are espoused values which might differ from actual behaviour
(D). The social environment is a visible artefact.
Answer 15 COMMITTEES
(a) (i)
(ii)
(iii)
(iv)
C
B
D
A
(b) (i)
(ii)
C and D
None
Answer 16 CHAIR AND SECRETARY

(a) (i)
(ii)
B, D, F, G
A, C, E, H
(b) (i)
(ii)
(iii)
(iv)
B
A
A
A
Answer 17 BONUS
(a) (i)
(ii)
H
B
(b)
1004
Independent scrutiny (e.g. by the external audit) does not prevent (and may not
detect) management fraud. As Roger is a sales director the weaknesses that allowed
the fraud are unrelated to the key roles of chairman and CEO.

Item Answer
Justification
Answer 18 SOCIAL RESPONSIBILITY

(a) (i)
(ii)
(iii)
(iv)
D
B
C
A
(b) (i)
(ii)
(iii)
(iv)
B
C
A
D
(c) (i)
(ii)
B
D
Answer 19 FINANCE AND TAX

(a) (i)
(ii)
A and E
C and D
(b) (i)
(ii)
(iii)
A
B
A
Answer 20 FINANCIAL INFORMATION

(a) (i)
(ii)
(iii)
(iv)
C
A
D
B
(b) (i)
(ii)
(iii)
C and E
B
A, D and F
Answer 21 ASSURANCE
(a) (i)
(ii)
(iii)
(iv)
(v)
(vi)
B
A
A
A
B
A
(b)
A and F
Answer 22 AUDITORS
(a)
A, B, E
(b) (i)
(ii)
(iii)
(iv)
C
A
A
B
The audit fee is a financial interest.
1005

Item Answer
Justification
Answer 23 ACCOUNTING RECORDS

(a) (i)
(ii)
(iii)
(iv)
(v)
(vi)
C
B
A
D
C
E
(b)
All except (v)
A retailer sells goods for cash so is not owed money by individual

customers.
(c)
All except (vi)
A service provider does not trade in goods.
Answer 24 REGULATION
(a)
D, F, G
(b)
(c)
Answer 25 DIY HOMESTORE

(a)
B and F
(b) (i)
(ii)
C
D
Answer 26 BEST ENGINEERING

(a)
B and F
(b) (i)
(ii)
B
A
A, C, D and E are all individual controls to achieve a control objective.
Answer 27 BRIDGFORD
(a) (i)
(ii)
(iii)
(iv)
B
A
A
B
(b) (i)
(ii)
(iii)
(iv)
B
A
C
C
1006

Item Answer
Justification
Answer 28 INHERENT LIMITATIONS

(a) (i)
(ii)
(iii)
(iv)
B
A
B
A
(b)
A and F
Answer 29 FRAUD AND ERROR

(a)
(b) (i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
B
B
B
B
A
A
B
B
(c)
C and D
Answer 30 MONEY LAUNDERING

(a)
(b) (i)
(ii)
(iii)
(iv)
B
A
B
C
Tutorial note: Mightys refusal to deal with Bron did not Do or disclose anything
which might prejudice an investigation into money-laundering activities and did
not therefore commit a tipping off offence.
Answer 31 BLAKE AND MOUTON

(a) (i)
(ii)
(iii)
(iv)
(v)
B
A
C
D
E
(b) (i)
(ii)
(iii)
(iv)
(v)
E
D
A
C
B
1007

Item Answer
Justification
Answer 32 ASHRIDGE MODEL

(a) (i)
(ii)
C
B
(b) (i)
(ii)
(iii)
C
A
B
Answer 33 SELECTION PROCESS

(a)
C, D
Although job analysis is an aspect of recruitment it is performed before a vacancy is

advertised and the selection process starts. Retention rates are a measure of the
effectiveness of the process.
(b)
A, B
Especially for junior positions, many applicants may have little, if any, relevant
experience. (Even if experienced, comparing experiences is likely to be too
subjective.) Formal qualifications (e.g. university degree) and development
potential (e.g. to pass ACCA exams) provide more objective criteria.
(c)
The others are measures of effectiveness (not efficiency).
(d)
The other attributes are also covered by Rodgers Seven-Point Plan.
Answer 34 RECRUITMENT ADVERTISING

(a) (i)
(ii)
(iii)
(iv)
B
B
A
A
(b)
A headhunting agency is most suitable for most senior management positions.

Temp agency is unsuitable as the vacancy is not temporary. A staff notice board is
aimed at internal candidates. A recruitment fair is more suitable for finding
applicants for a quota of similar positions rather than a one-off vacancy.
Answer 35 DIVERSITY AND DISCRIMINATION

(a) (i)
(ii)
(iii)
(iv)
(v)
(vi)
(b)
1008
B
A
B
A
A
B
A and B
C and D do not unfairly discriminate. The benefits in C are available to every

director or manager (and to all other employees should they become a
manager/director). Although long service (loyalty) awards in D may discriminate
against younger workers they do not unfairly discriminate. (They are widely used
to motivate staff, etc and generally thought to be good for the workforce as a
whole.)

Item Answer
Justification
Answer 36 DISCRIMINATION AND EQUAL VALUE

(a) (i)
(ii)
(iii)
(iv)
(v)
C
D
C
A
B
(b) (i)
(ii)
If there are important practical differences it cannot be like work. Work that is
different can be benchmarked as equal.
B and D
Answer 37 ROLE THEORY

(a)
Style of work dress is a sign of role.
(b)
B and D Individuals and groups may display high (or low) ambiguity tolerance. Introverted
individuals are detached, solitary and private. Communication channels and
leadership will be exhibited only in groups.
(c) (i)
(ii)
(iii)
(iv)
B
C
A
D
Answer 38 BELBIN TEAM ROLES

(a) (i)
(ii)
(iii)
(iv)
C
D
F
E
Tutorial note: A is resource investigator and B is finisher-completer.
(b) (i)
(ii)
(iii)
(iv)
C
E
F
A
Tutorial note: Perfectionism and indecision are weaknesses in the
completer-finisher and team worker roles, respectively.
Answer 39 MOTIVATION
(a) (i)
(ii)
(iii)
(iv)
C
A
B
D
(b)
Specific hygiene factors referred to are salary, working conditions and security.
1009

Item Answer
Justification
Answer 40 MOTIVATION THEORIES

(a) (i)
(ii)
(iii)
(iv)
A
A
B
B
(b) (i)
(ii)
(iii)
(iv)
(v)
E
A
D
C
B
(c)
A, D, E Secondary needs are the psychological and social needs; the primary needs are
physiological.
Answer 41 APPROACHES TO LEARNING

(a) (i)
(ii)
(iii)
(iv)
(v)
B
A
A
A
B
Tutorial note: Behaviourist concerns stimulus response; cognitive
concerns information processing.
(b) (i)
(ii)
D
C
Tutorial note: Kolbs experiential learning cycle is typically expressed
by four (or five) stages (concrete experiences, reflective observation,
abstract conceptualisation and active testing).
Answer 42 TRAINING MANAGER

(a) (i)
(ii)
(iii)
(iv)
(v)
(vi)
B
A
C
C
A
B
(b) (i)
(ii)
C
B
Simulation is an imitation of real practical experience.
Answer 43 PERFORMANCE ASSESSMENT

(a) (i)
(ii)
(iii)
B
F
D
(b)
A, E
(c)
A, C
1010

Item Answer
Justification
Answer 44 PERFORMANCE AND PAY REVIEWS

(a)
B, C
(b)
Increased staff turnover and lack of goal congruence are disadvantages to the
employer rather than the employee.
Answer 45 PERSONAL DEVELOPMENT PLANNING

(a)
A, C
B, D and E are objectives of counselling, coaching and mentoring, respectively.
(b)
C, E
The other objectives are unsuitable as they are either non-specific (e.g. ensure)
or they would not be relevant to a practice nurse (e.g. home visits would be made by
health visitors).
Answer 46 CONFLICT
(a) (i)
(ii)
(iii)
A
B
C
(b)
A, F
(c)
Answer 47 ORGANISATION LEVELS

(a) (i)
(ii)
(iii)
B
C
A
(b) (i)
(ii)
(iii)
C
A
B
(c) (i)
(ii)
(iii)
(iv)
(v)
(vi)
C
B
B
A
C
A
Answer 48 STRUCTURED AND UNSTRUCTURED

(a) (i)
(ii)
(iii)
(iv)
A
A
C
C
(b) (i)
(ii)
(iii)
(iv)
A
C
A
C
(c)
A and B
1011

Item Answer
Justification
Answer 49 COMMUNICATION FLOWS

(a) (i)
(ii)
(iii)
(iv)
C
A
A
B
(b) (i)
(ii)
(iii)
(iv)
E
A
e-mail might also be appropriate (but was not offered as an option and would
probably be a follow-up, rather than first instance).
Such a serious matter requires a formal announcement to those affected in person.
(Formal letters would follow to those absent from the meeting and to confirm
details.)
A final warning must be formal and written.
Answer 50 NETWORKS
(a) (i)
(ii)
(iii)
(iv)
C
B
D
A
(b) (i)
(ii)
(iii)
(iv)
D
C
D
A and B
Answer 51 CORPORATE BEHAVIOUR

(a) (i)
(ii)
(iii)
(iv)
(v)
(vi)
A
D
B
C
F
E
(b)
B, D, E, F
Answer 52 ETHICAL DILEMMAS

(a) (i)
(ii)
(iii)
(iv)
D
A
B
C
(b)
B, C, D
(c)
1012

TEST 1 ANSWERS
Tutorial note: A reference to the relevant Study System session is provided against each justification.
Item Answer
Justification
1.1
The budget setting process identifies all links between the departments to be
identified. (10)
1.2
The age of an individual will have very little impact on the way that individual is
going to be managed, controlled, briefed, supervised and reviewed. (6)
1.3
Resource, individualism, uncertainty, dynamism and bureaucratic are not cultural

types per Handy. (7)
1.4
The other statements relate to the human relations theory and the modern school.
(16)
1.5
Belbins team roles are chairman, shaper, plant, monitor/evaluator, resource

investigator, implementer, team worker, finisher and specialist. (19)
1.6
The description relates to a process theory (explains how motivation occurs given
an individuals personal needs and goals). Maslow and Herzberg are content
theories (i.e. on what stimulates, sustains and regulates good directed behaviour).
McGregors XY theory is a process theory that considered two extremes, X and Y,
and the range of behaviour patterns in between. (20)
1.7
A is correct because an audit is about planning a systematic approach to verifying

that accounting systems are being operated correctly and that transactions are
processed appropriately at a pre-agreed threshold materiality level.
The objective of an external audit is for a professional auditor to evaluate or
measure a subject matter that is the responsibility of another party against identified
suitable criteria, and to express a conclusion (opinion) offering a level of assurance
about the subject matter for the intended user.
Therefore, from the above statement there are no absolute guarantees. Only a
measure of confidence can be expressed by the external auditor.
1.8
Data rights cover: processed fairly, specified and lawful purposes, accurate and up
to date, not kept longer than necessary, processed in accordance with the rights of
the data subject, protection from harm, not transferred to lower level countries. (3)
1.9
Responsibility and accountability have no direct link to wealth maximisation.

Financial and physical resources do not by themselves mean wealth maximisation.
1.10
The five forces model concentrates on the competitive nature of an industry and
therefore attractiveness of a market. Attractiveness in this context means the overall
industry profitability. (3)
1.11
Although external, shareholders have a legal connection with the company and are
therefore connected (same as suppliers, customers). Internal stakeholders are
managers, employees and directors. External would be governments, communities,
external auditors. Conflict is not a stakeholder category. (2)
1013

Item Answer
Justification
1.12
Ad hoc deal with one off situations (A), C and D relate to specific examples of a
standing committee audit and remunerations committees. (8)
1.13
Deontological ethics is based on the concept of duty. Meta ethics is the study of
ethical behaviour, relativism is context dependent and subjective, instrumentalist is
based on use to further other objectives rather than as an end in themselves. (26)
1.14
B is irrelevant as the error has been corrected. C once approved the auditor will
issue their report. D would relate to an unqualified opinion. (11)
1.15
By the experience of markets. (1)
1.16
Books of prime entry are the sales, purchases, cash received, cash payments, petty
cash day books and the journal. (13)
1.17
B most accurately reflects the definition of internal control given by COSO and the
APB. Internal controls will not ensure the external audit is carried out correctly;
management are accountable to the shareholders for the implementation and
maintenance of internal controls and internal controls cover all information not just
that for management. (14)
1.18
Taken directly from the Chartered Institute of Marketings definition the

management process that identifies, anticipates and supplies
customer needs
efficiently and profitably (1)
1.19
Cyclical and seasonal would not be appropriate as the scenario clearly states that the
unemployment arises from a permanent reduction in employment. Frictional arises
through imperfect communication of available jobs in the market place of which
there is no indication in the scenario.
1.20
The board of directors is ultimately responsible for overseeing the running the
business. (14)
1.21
B and C are subsets of strong internal control. With B, only those employees who
are known to have carried out fraud should be sacked. Sacking only on suspicion of
fraud may result in unfair dismissal cases. Paying good money to employees will
not reduce fraud when opportunity, motive and rational arises. (15)
1.22
Best candidates are only likely to be found by using specialist recruiter to look
internally and externally (typical use for a head hunter). (How often do you meet
CFOs on the metro?) (17)
1.23
The learning cycle is concrete experience, observation, reflection, abstract concepts,

applying/testing. (21)
1.24
Coaching is about developing a persons skills and knowledge so that their job
performance improves. (23)
1.25
All channel is a combination of the various other communication patterns and is

usually best for dealing with complex problems. (25)
1014

TEST 2 ANSWERS
Item Answer
Justification
2.1
Value for money indicators and efficiency measures are commonly used in not-forprofit organisations such as local authorities. While local authorities have become
more exposed to commercial pressures in recent years, it is difficult to judge their
performance by the use of conventional financial and non-financial performance
measures. It is therefore necessary for these bodies to consider their results in
relation to what they have delivered to the community against the resources
consumed. By contrast, the private accountancy college, the retailer and the
pension fund rely heavily on performance and profitability measures. (1)
Tutorial note: Questions in the F1 exam are not restricted to private sector
organisations questions on any part of the syllabus may require candidate to
consider issues from a not-for-profit or public sector perspective.
2.2
A, B and D all relate to formal structures. (6)
2.3
Level 2 relates to espoused vales, level 3 to basic assumptions and values. (7)
2.4
In joining together to increase their power, high interest low power groups may
move to become high power, high interest groups. (2)
2.5
Adairs theory is usually depicted as three interlocking circles representing task,

group and individual showing the belief that some leaders have the natural ability to
lead, but the leadership skills can also be developed by focusing on the actions
necessary to achieve the task, maintain the group and develop the individual. To do
this it is necessary to achieve a balance between actions in respect of the three
circles. Statement 1 is therefore true.
The four styles identified by Ashridge are tell, sell, consult and join (representing
autocratic, persuasive, participative and democratic styles). Leadership style cannot
be static and must often reflect the circumstances in which the leader takes
decisions and acts. There is no single correct style. As the Ashridge model is not
prescriptive in this respect, statement 2 is therefore false. (16)
2.6
KWS facilitates the creation, integration and dissemination of business knowledge

and is mainly used by professional or technical employees (e.g. engineers,
designers, researchers, doctors, lawyers, etc). (6)
2.7
Using the titles given, the CEO and directors would not specifically need to know
how committees run. The company secretary is more administration and support.
The Chair would need to know exactly what the procedures are and how to apply
them they are in charge of the committee. (8)
2.8
Human rights is a fundamental ethical issue for all corporate codes of conduct. (26)
2.9
Microeconomics analyses the market behaviour of individual consumers and

entities in an attempt to understand the decision-making process of those consumers
(households) and entities. (5)
1015

Item Answer
Justification
2.10
According to Bruntland, the term sustainability refers to the ability of

organisations to meet their present needs without compromising the future.
Activities ii, iii and v are the only activities that meet that definition. The other
activities are not feasible in the longer term as they are limited by time or do not
replace the resources used (e.g. water). (9)
2.11
Of the four countries, Northland and Eastland both experienced negative economic
growth. However, Northland had a high level of price inflation, while Eastland was
able to contain price inflation at a more modest rate. The higher increase in the rate
of unemployment in Northland supports the impression that its economy is
experiencing stagnation. (4)
Tutorial note: Stagflation is an economic condition in which a country has a very
low or negative rate of economic growth, defined by the percentage change in
national income in a given period, concurrent with a high level of price inflation.
The economic indications most relevant to the question are therefore the percentage
change in GDP, which is a measure of economic growth, and the change in
consumer prices, which is a measure of price inflation.
2.12
A, C and D all relate to companies with share holdings. Local authorities do not
issue shares. (10)
2.13
The objectives of the IASB are to:
develop, in the public interest, a single set of high quality understandable and
enforceable global accounting standards;
promote the use and rigorous application of those standards; and
bring about convergence of national accounting standards. (12)
2.14
The authorisation must relate to agreeing the quantity to be despatched to that

ordered. (13)
2.15
Product, price, promotion, place PLUS people, processes, physical evidence. (1)
2.16
By definition of internal audit (Institute of Internal Auditors). An independent,

objective assurance and consulting activity designed to add value and improve an
organisations operations. It helps an organisation accomplish its objectives by
bringing a systematic, disciplined approach to evaluate and improve the
effectiveness of risk management, control, and governance processes. (11)
2.17
From the scenario cost leadership and growth are not appropriate. Although the
company is innovative, the glove seat is used as a differentiator to make the
company stand out from the crowd. (3)
2.18
Stages are identify strengths and weakness (SWOT), set goals for each, develop
action plan. (23)
2.19
Sets the tone of an organisation, influencing the control consciousness of its

management and employees. It is the foundation for effective internal control,
providing discipline and structure. Strongly relates to how management (and
governance) has created a culture of honesty and ethical behaviour, supported by
appropriate controls to prevent and detect fraud and error. (14).
1016

Item Answer
Justification
2.20
Allows physical access to the systems. (14)
2.21
Young = age, natural blond implies white, attractive is against anybody who would
be considered ugly = equal opportunities. (18)
2.22
A is just a bad debt, B is cut-off, C is diversion fraud. (15)
2.23
Auditing is not just about passing exams. Theoretical knowledge will come from
textbooks, but the practical application of knowledge, skills and attitude can only
come from practical experience. (21)
2.24
By description analytically (rather than creatively) intelligent; sober, unemotional,

prudent; dissects ideas and spots flaws; provides a logical eye, make impartial
judgements where required; weighs up the teams options in a dispassionate way;
brings team down to earth; lacks inspiration or the ability to motivate others;
possibly aloof, tactless but necessary.
2.25
For example, 1 = Exceeds all expectations; 5 = Total failure. (22)
1017

TEST 3 ANSWERS
Item Answer
Justification
3.1
Variability, intangibility, perishability, simultaneity, ownership. (1)
3.2
After sales service is one of the five primary activities in Porters model.
Administration (Steve) and information technology (Sam) indicate support roles.
Sunnys responsibilities (for dealing with suppliers of inventory and capital
equipment) imply procurement, a support role. (3)
3.3
Task = flexibility, individual tasks, team working based on capability to complete

task. Power = control from centre, web style. Person = Individual is key, structure
serves an individual. (7)
3.4
Shareholders, directors and auditors are stakeholders, therefore Mendelow. (4)
3.5
In order to reach the correct decision, all information that is not relevant to the
emergency situation should be eliminated from the pilots screens. Critical
information should be concise so the pilots know exactly what is going on.
Completeness can imply information overload; the information may be understood
and provide confidence but it can still be too much. Volume also implies
information overload. (24)
3.6
The rest relate to the Chairman. (8)
3.7
Objectivity = not allowing bias, conflict of interest, or undue influence of others to

override professional or business judgements. Thus they must be independent to be
able to achieve objectivity. (26)
3.8
The carbon footprint is the part of the environmental footprint that specifically
relates to greenhouse gases. The social footprint is a measurement and reporting
method that quantifies the impact of an organisation on people. Recycling footprint
is a specific measure of the ability of an entity to use recycled materials and to
produce recyclable products. As with the carbon footprint, it can be incorporated
into some environmental footprint metrics. (3)
3.9
Although each organisation may fit into B, C or D, only the term supra-national
bodies cover all three. (3)
3.10
Toughness and the desire for material wealth and possessions clearly indicate the
chest-beating, my car is bigger than your car masculinity mentality. (7)
3.11
Stage 4. Stage 5, post-industrial, follows as the country switches from industrial to

service economies. (3)
3.12
The evolutionary view considers conflict to be a positive force that is necessary for
effective performance. The happy family view relates to complete harmony and
loyalty in the workplace (no friction, no frustration, no conflict). Conflict is seen as
dysfunctional resulting in excessive emotional or physical stress. The traditional
view considers conflict to be a behaviour intended to obstruct the achievement of
goals desired by others. It is often included as part of the explanation of the Happy
Family view. (23)
3.13
GDP = consumption + investment +government spending +/- balance of payments.

All of these factors must be at market value the final price paid. (4)
1018

Item Answer
Justification
3.14
Materials, labour and overheads are all production costs. Management accounting
covers all areas of cost and decision making. Financial accounting deals with IFRS
and is external orientated. Treasury deals with cash. (10)
3.15
CEO runs the whole business, CIA is internal audit, CCO deals with all laws and
regulations. (10)
3.16
It is not the auditors job to tell the directors what to do. Only material errors need
adjusting and if the directors refuse to do so they can still approve the financial
statements (although the auditor would qualify their opinion). If asked to do so by
the CFO, they may not show a true and fair view. True and fair is the over-riding
criteria. (12)
3.17
A will not discover if the employee has been removed from the payroll. B would
not identify if the authorised document had been correctly entered by the wages
dept. D is impractical. (14)
3.18
It is no good having promotion, price and a product if it is not widely available to

buy (unless there is a deliberate policy to create uniqueness and exclusivity which
is not indicated in the scenario). (1)
3.19
As the team members who left appear to be reasonably senior (as they have been
promoted to managers) other team members may now start to jostle for the
positions. As two new external employees have joined the team, they may naturally
feel that the vacant positions are theirs. (19)
3.20
Monitoring controls concerns receiving feedback that the controls are operating as
intended. The management letter is part of this feedback. (14)
3.21
Window dressing is making things look better that what they are (e.g. over stating
assets and under stating liabilities cut-off). Cash siphoning is the diversion of
cash (e.g. approving a bank loan to a company that does not exist). Ponzi schemes
involve receiving capital investment and paying interest back from further capital
received. Teeming and lading basically involves stealing cash and covering the
theft by an apparent correct transaction (e.g. bad debt write off). (7)
3.22
An understanding of the various definitions of corporate governance will eliminate

A, B and D in the vast majority of codes (SoX being an exception) legally binding
is not an appropriate concept (as most codes are principles based) and they are topdown driven so start with the actions and awareness of directors and senior
management, not administration.
3.23
A supervisor is generally a junior manager who is part of the work team/group and
who carries out part of the work process themselves. They are a manager at the
coalface. (16)
3.24
Sell, as the smokers in the managers team would probably resent being told what to
do. Non-smoking rules can be very emotive with smokers. Consult and join are not
options. (16)
3.25
Plant = individualistic, thoughtful, source of ideas. Implementer = conservative,

organising ability, trustworthy, administrator. Chairman = presides, co-ordinates,
balanced, disciplined. (19)
1019

TEST 4 ANSWERS
Item Answer
Justification
4.1
Anthonys triangle relates to the strategic, tactical and operational strata in an

organisation. Maslow relates to motivation, Carroll to corporate governance and
Woodcock to team development. (6)
4.2
Herzberg argues that job security, working conditions and the level and quality of
supervision are all hygiene factors. He also argued that pay is a hygiene factor,
particularly basic pay. He did concede that if the level of salary implied status, then
it could be a motivator. Many (e.g. Vroom) would argue that in certain
circumstances pay can also be used as an incentive or a motivator. (20)
4.3
Removing product features is unlikely to give a competitive advantage and would

not entail the use of information systems or technology. Improving efficiency and
economy could easily be achieved through the use of IS, but does not relate to
differentiating the product from those of competitors in the eyes of the customer. A
differentiated product or service could use IS and offer unique (IS) features that are
valued by customers. (3)
4.4
In an entrepreneurial structure the owner/manager takes all the strategic decisions

therefore decisions are made quickly and are congruent with the organisations (the
entrepreneur) goals. (6)
4.5
Based on the work of Hofstede, the description of the emerging nation indicates a
society with high individualism. (7)
4.6
(ii) a rise in interest rates will probably increase cost of borrowing, making
investment project less profitable. A fall in interest rates should increase
investments. (i) and (iv) are likely following a fall in the rate of interest as
borrowing becomes cheaper.
(iii) is likely as governments become wary of fuelling inflation. In addition, as
private sector investment is likely to increase and borrowing becomes cheaper, this
could add to inflationary pressures. (4)
4.7
In a person culture, the individual is the central point. Sir Johns chambers exist
only to serve him. Power is by consent and any power base is through expert
individuals who do what they are good at (e.g. legal research) and are listened to by
Sir John on that basis. (7)
4.8
McGregor put forward the concept of a whole range of the behaviour patterns of
people in organisations. The two opposite extremes were referred to as Theory X
and Theory Y. Theory X people dislike work, need direction and avoid
responsibility. Theory Y people are at the opposite end of the continuum and find
work as natural as rest and play. B relates to the work of Herzberg and C to that of
Maslow. (20)
4.9
MIS provide managers with pre-determined (by the manager) information they
require for monitoring day-to-day performance, maintaining co-ordination and
providing background information about the entitys operations. Reports may be
made on a template basis (i.e. regular management accounts) and variance analysis
or on an exception basis (i.e. show all inventory items with less than seven days
production capacity). (24)
1020

Item Answer
Justification
4.10
Good quality information should be accurate, complete, concise, cost beneficial,

understandable, relevant, timely, from a source that can be trusted and uses the right
communication channel. It is not always necessary that the information is produced
quickly. Often information (even from a trusted source) will be uncertain. The cost
of acquiring and processing the information should be less than the benefits received
from using it. (24)
4.11
Connected stakeholders are also external (e.g. suppliers are primarily connected but
also external). Directors, non-executive directors, executives, employees and the
company secretary are all internal; bankers, trade unions and auditors are either
connected or external. (2)
4.12
Employees are entitled to be able to carry out their work in relative safety and in
conditions that are not detremental to their health. Whistleblowing is an action
rather than a specific legislative requirement. It can occur in any situation (e.g. A, B
or D). (3)
4.13
The more sensitive demand is to a price change the more elastic it is said to be. Car
drivers consider the use of their cars for driving to work to be essential. The price of
the congestion charge is not considered to be a factor, demand is inelastic. (5)
4.14
The purpose of a steering committee is to oversee a major project, generally IT

based. It is involved in deciding how to allocate scarce resources (e.g. manpower),
planning for future system development and ensuring that the time, cost and quality
constraints are met. (8)
4.15
The audit committee and remuneration committee consist of 100% non-executive

directors. Risk committees can be a mix of directors, but if no risk committee exists
its role should be undertaken by the audit committee. No executive director should
have any role in determining their own or any other executive directors
compensation. (8)
4.16
The production function relies primarily on management accounting rather than

financial accounting. Purchasing relates to quantity, quality, price and delivery of
material resources and services for use in an organisation and relates more to
financial accounting than management accounting. Procurement is another term for
purchasing. Marketing relates to buying another term for procurement and
purchasing. (1, 10)
4.17
Value for money (VFM) deals with the 3Es. Achieving objectives, competive
resources and the max/min philosophy are all apscets of VFM. IT/IS audits deal
with all aspects of IS in an organisation; operational audits are control orientated and
risk management provides assurance that business risks are being appropriately
identified and managed. (11)
4.18
The directors of an entity must approve the financial statements only if they are
satisfied that they give a true and fair view of the assets, liabilities, financial position
and profit & loss. The auditors provide an independent opinion to the shareholders
on the trurth and fairness of the financial statements. The tax authorites and the
company secretary have nothing to do with the preparation of the financial
statements. (12)
1021

Item Answer
Justification
4.19
Purchase requisition, purchase order and purchase invoice.

primarily related to the purchase cycle. (13)
4.20
The attitude, awareness and actions of the board of directors and management. (14)
4.21
Objectivity implies fairness, without prejudice or bias, conflict of interest or

influence of others to override professional or business judgements. To have
objectivity, the professuional accountant must be independent. (26)
4.22
The website is the place where customers can search for a product, research it and
buy it if they wish. Most similar websites are also used for advertising or promoting
additional products (e.g. customers who purchased XYZ also purchased ABC and
STU). Similarly, if an item is purchased the company can promote additional or
new products through e-mail (given as part of the login procedures in order to buy
an item). The website also initiates the process of selling with the taking of an order
and the receipt of cash (credit card payment). (1)
4.23
Under corporate governance codes, an entitys directors are required to maintain a

sound system of internal control. At least once annually they should conduct a
review of the effectiveness of the internal control system. Internal audit provides
assurance to the directors that the controls in place have been operating effectively
throughout the year (usually on a 24/7 basis of continuous monitoring). Internal
audit (as well as external audit) are not responsible for the prevention or detection of
fraud, that responsibility is the directors. Client money always belongs to the client
and must be accounted for seperately. It is not an asset of the professional
accountant. (9, 11, 15)
4.24
Probing questions are used to obtain more detail on a subject or answer that has
already been raised by the interviewee (either in the interview on on an application
form/CV). Open questions require the interviewee to provide detail and explanation
(e.g. Why did you decide to become an accountant?) they cannot be answered
(as a closed question) with a simple yes or no. Reflective questions do just that,
they reflect back and check the interviewers understanding (e.g. Let me just
consider that last point you made so it was your father who first suggested you
become an accountant. (17)
4.25
The full steps are: concrete experience, observation, reflection, formation of abstract
concepts, applying/testing.
1022
Requisitions are

SAMPLE QUESTIONS
Tutorial note: The examiners feedback on questions identified (in the examiners reports) as being
amongst the worst attempted in past examinations is summarised in the commentaries.
Item Answer
Commentary
Most candidates knew that Janet did not portray the attributes of the resource
investigator, but unsuccessful candidates were almost equally divided between the
monitor-evaluator and the shaper. The attributes of Belbins team roles are
described thoroughly in the study materials.
The Secretary is the officer responsible for liaison between the company and the
registration body. The Chairman is the director responsible for ensuring the proper
functioning of the board of directors. It is therefore essential that these roles be
segregated. Only 20% of candidates identified this as the key.
Nearly 40% of candidates selected B as the correct answer. Although this is a
principle underpinning sound corporate governance, combining the roles of
Chairman and CEO would not impact on the flow of information between the
registration body and the company.
A and D are clearly incorrect, as the company Secretary is often also a director, and
in many companies the CEO is also the company Secretary.
Most candidates eliminated option A, but 55% of candidates chose either C or D.

Candidates generally missed the point that substantive tests are concerned with
confirming the accuracy of the figures.
The theory put forward by Honey and Mumford proposes four distinctive learning
styles that may be preferred by individuals in training situations. The theory
enables those responsible for education and training to consider the preferred
learning styles of those for whom they are responsible.
The scenario clearly identifies Joseph as a theorist, in that he learns in a logical and
systematic manner and prefers to see a framework in which the ideas put forward
may be seen. Further evidence of this is his aversion to being put on the spot
(which an activist might actually prefer).
Mendelows grid considers the relationship between the level of power and the level
of interest that stakeholders may hold. The grid identifies four situations, trading
off high/low power and high/low interest. By using Mendelows grid, companies
can map the positions of various stakeholders and formulate their strategies for
dealing with the interests of each.
In this scenario question it is clear that Walter had a high level of interest but little
power. Mendelow suggests that such stakeholders should be kept informed. By
inheriting a large block of shares in the company, his power has increased and he
must be regarded as a key player.
1023

Item Answer
Commentary
It is an established principle of corporate governance that the directors of listed

companies should appoint an audit committee comprising independent nonexecutive directors. The most important word in the question is initially.
Although external auditors have a statutory verification role and the board of
directors is ultimately accountable for the companys financial statements, the audit
committee has a vital initial scrutiny role with respect to the draft financial
statements.
At this level of the ACCA qualification, candidates are not expected to have a
detailed knowledge of standing committees, but it is important that they understand
the broad roles of such committees.
7
By analysing costs and revenues through the use of marginal costing or related
techniques, the marketing department will know the extent to which discounts will
erode profit margin or contribution.
Analysis of costs and revenues cannot help the marketing department to
differentiate the technical features of products from those of competitors, as the
accounting information provided does not identify such information either for
competitors or the company itself.
Likewise, analysis of costs and revenues serves little purpose in relation to targeting
socio-economic groups, as this requires qualitative assessment of customer needs
and buyer motivation.
Production bonuses are not ordinarily decided by the marketing department.
It is a generally accepted principle that organisations should hold only data that is
necessary for operational purposes, and should not store data that goes beyond such
purposes.
It is impractical for most organisations to provide regular detail updates on personal
data held, and arguably of little importance to most data subjects, who in many
jurisdictions have a statutory right of access if they wish to obtain such information
from a data user.
It is also impractical for data users to enter into regular dialogue with data subjects
in order to check and update the data, though many organisations do so for the
purpose of marketing. It is undesirable for organisations to automatically delete all
data after a specified period of time, as it is usually appropriate that some data is
held for long periods while other may be retained for just a single transaction.
In this context, a check digit is usually a number included in an account number that
is calculated from the other numbers in it.
For example, it could be digit 2 plus digit 5 divided by digit 3. If an operative
makes a transcribing error, the check digit helps to identify the input error. Check
digits are not used for the other three purposes.
1024

Item Answer
Commentary
10
A sense of identity can be brought about by common objectives in both a team and a
group. Likewise, bonding and loyalty can apply to both. Distractor C is more
tricky, in that a working team usually has an appointed leader, but it is not
impossible for leaders to emerge, especially when working groups are loosely
configured.
11
Selected by 34% of candidates.

The question is a good example of the necessity to remember stages of the various
models encountered in the course of study for paper F1. To some extent, answering
this type of question correctly is dependent on a good memory.
12

Making the public more aware of the potential dangers of additives is an attempt to
affect social trends. A boycott of certain products, if effective, will lead to lower
sales revenues and therefore lower profits, bringing pressure to bear on the
companies concerned. This is clearly an economic influence.
Distractors C and D should have been ruled out quite quickly, as there was nothing
in the question to suggest that technological factors were relevant.
13
National legislation requirement companies

to report to government and
shareholders. This is to ensure that limited companies adhere to certain minimum
standards. In many countries an underlying purpose of this is to protect prospective
and existing investors in the company and to minimise the possibility of tax evasion.
Codes of corporate governance are now used extensively in countries that
principles-based approach. Such codes are not underpinned by legislation
voluntary in nature. Companies and other organisations are expected to
with the provisions of the codes or to explain to shareholders why they
doing so.
adopt a
and are
comply
are not
International Financial Reporting Standards (IFRS) seek to achieve consistency in

reporting across international frontiers. They affect the content and presentation of
the company accounts, but it is up to governments and their agents to decide on the
requirements for preparation and filing of accounts.
14
Meredith Belbins theory suggests that team effectiveness is maximised when team
members fulfil a balanced mix of roles. Her theory identifies nine team roles and
sets out the characteristics of each.
The indicators in the prompt that confirm Grant as a completer-finisher include the
phrases keen eye for detail, identifies minor details that others miss, always
meets his deadlines and reluctant to involve others. These are consistent with
Belbins descriptions of the contributions that the completer-finisher can make, as
well as possible weaknesses.
Like the completer-finisher, the implementer (or company worker) is disciplined
and reliable but is typified by being prepared to take concepts and ideas and then
put them into practical effect. The monitor-evaluator considers all alternatives and
often displays good judgement, but may lack personal drive. The shaper is good
under pressure and challenges the team to achieve its goals.
1025

Item Answer
Commentary
15
Distractor A is plausible, but in many companies the acceptance of the position by

the applicant is followed by taking up references, and sometimes other enquiries
that cannot be carried out until the company knows that the applicant is prepared to
take the job. Only then will the company and the applicant know that a contract
will come into effect. Also, even when the applicant accepts the position, there is
no certainty that a labour contract will actually be signed.
Distractors C and D are weaker. If the company waits until a few weeks after the
actual starting date, both the new employee and his or her colleagues may be
exposed to risk if the former is unaware of the health and safety policies. Most
companies rightly give high priority to health and safety issues, so this would be
totally unacceptable. Distractor D fails for the same reason as distractor A. There is
no certainty that the job will be offered or accepted.
16

The distractors are all key stages of the budgetary process, which starts with setting
objectives and moves through a sequence of preparation, action and review. Having
prepared budgets for each area of responsibility, managers have to measure the
outcomes in order for proper analysis and review to take place. It is not possible to
analyse variances until actual outcomes are known, nor is it possible to review the
outcomes and plan appropriate actions.
17

The government of Arkana is faced with a situation in which a greater proportion of
the population will be in older age groups in the future (a real life problem currently
affecting many nations).
A reduction in income tax rates and an increase in personal allowances will increase
disposable income in the short-term, which may in turn encourage citizens to invest
more for the future. Maintenance of low interest rates would have a similar effect to
the fiscal policy changes, though with a slightly longer time lag. However, such
expansionary measures are not guaranteed to achieve the long-term objective of
reducing pressure on national finances.
Targeted support for elderly low income families increases the pressure on national
finances in the short-term. In the long-term, such changes could be changed by
successive governments.
Tax incentives to invest in personal pension arrangements have the effect of freeing
up disposable income but only for the purpose of investment in retirement benefit
schemes which may help to reduce long-term dependence on state pensions as a
source of income, thereby reducing the public pressure to maintain or enhance state
personal pension provision.
1026

Item Answer
Commentary
18
Remuneration has several roles, and different elements of remuneration packages

should be targeted at fulfilling these roles. An effective remuneration package
should reward excellent long-term performance, which can be achieved by building
in rewards such as shares, share options and pension benefits linked to performance.
The package should also provide a competitive basic salary and fringe benefits,
without which the organisation will not attract and retain persons of the right
calibre.
Directors should focus their efforts on promoting the success of the organisation in
the medium to long-term (usually 3-5 years). If incentives are provided for shortterm performance, those who formulate policies could implement measures that will
provide lucrative rewards in the short-term, but harm the company in the longer
term. Offering attractive bonus-driven packages, assessed over 1-2 year periods,
makes this more likely.
Most experts on corporate governance agree that across-the-board pay and
incentives awards are inappropriate as they fail to acknowledge differentials in the
performance of individual directors.
It is also generally acknowledged that although executive directors remuneration
should be made up of basic pay and incentives, non-executive directors should be
remunerated by fees only.
Tutorial note: Approaching this from identifying what you know to be incorrect
would remove options 2 & 4. This leaves D.
19

The answer to this question could be deduced from the last two sentences in the first
paragraph. As only one non-executive director had adequate knowledge of financial
matters, but would only serve on the Audit Committee every other year, this would
result in the committee having no financial expertise whatsoever.
Candidates should know that one role of this committee is to challenge the accuracy
and transparency of financial statements, while another is to ensure that there are
adequate systems of internal controls in place. Neither of these roles can be
discharged to an appropriate standard without the audit committee having the
expertise to do so.
It is possible to arrive at the correct answer by deduction. As the Chairman is
usually an independent nonexecutive director, there is nothing in law or best practice
suggesting that he or she should not also concurrently serve as chairman of the audit
committee. Option B is clearly wrong, as it is desirable for the members of the audit
committee to be independent, and executive directors cannot, by definition, be
independent.
Most candidates knew that D was incorrect, though annual retirement by rotation is
a feature of best practice under some corporate governance regimes.
Tutorial note: Regardless of what options A, B and D say, the current
arrangements cannot work. So clearly the answer is C.
1027

Item Answer
Commentary
20
Candidates must read the question carefully in order to arrive at the correct answer.
Many may have assumed that the level of defects on after sales service costs were an
indicator of effectiveness of increasing expenditure, while these were only measures
relating to the effectiveness of quality controls. The costs of servicing, repairing and
running vehicles driven by the engineers related to overheads rather than the
effectiveness of after sales service.
By increasing expenditure on after sales service, existing customers should be more

satisfied, which should result in future sales increasing to this group of customers,
and a lower level of migration of existing customers to alternative suppliers or
substitutes. The pass rate for this question was 20%.
21

Many candidates chose option A, but this was clearly incorrect from the phrase
marketing environment as the figures produced by Jens related only to the
companys own performance over time. The only external data mentioned in the
statement was the total market size. It would therefore be impossible to carry out a
comprehensive analysis based on Jens work alone.
The product lifecycle is a useful marketing theory applied to analyse revenues (and
sometimes profits) over time. Better candidates would have identified the fact that
Jens produced figures relevant to 12 quarters, which would have led to the correct
answer.
Option B could not be correct, as buyer behaviour could not be analysed from the
information Jens produced. Likewise, the marketing department would not be able
to determine which methods of promotion had been most effective without having
financial information on the costs of each method of promotion and on consumer
responses to each of them.
1028
Accountant in
Business
Specimen Exam applicable from June 2014
Time allowed: 2 hours

This paper is divided into two sections:
Section A ALL 46 questions are compulsory and MUST
be attempted
Section B ALL SIX questions are compulsory and MUST
be attempted
Do NOT open this paper until instructed by the supervisor.

This question paper must not be removed from the examination hall.
The Association of Chartered Certified Accountants
Paper F1
Fundamentals Level Knowledge Module
Section A ALL 46 questions are compulsory and MUST be attempted

Please use the space provided on the inside cover of the Candidate Answer Booklet to indicate your chosen answer to
each multiple choice question.
1
The major purpose of the International Accounting Standards Board (IASB) is to ensure consistency in ___________.
Which two words complete the sentence above?
A
B
C
Financial control
Corporate reporting
External auditing
(1 mark)
The leadership style that least acknowledges the contribution that subordinates have to make is ___________.
Which word correctly completes the sentence above?
A
B
C
Authoritarian
Autocratic
Assertive
(1 mark)
In relation to the management of conflict, which of the following approaches will maximise the prospect of
consensus?
A
B
C
D
Acceptance
Negotiation
Avoidance
Assertiveness
(2 marks)
Darragh has been appointed to the management team of a professional football club. His role includes coaching,
mentoring and counselling young players who have just signed contracts with the club for the first time.
The following are his main activities:
1
2
3
4
Helping the young players to settle in during their first week

Identifying each players key skills and encouraging them to develop new skills
Advising the players on addressing personal issues, such as managing their finances
Helping the players to anticipate opponents reactions
Which of the following matches the correct role to carry out in each of the four activities?
A
B
C
D
1.
1.
1.
1.
Mentor 2. Counsellor 3. Coach

Mentor 2. Coach 3. Counsellor
Mentor 2. Coach 3. Counsellor
Counsellor 2. Mentor 3. Coach
4.
4.
4.
4.
Counsellor
Coach
Mentor
Counsellor
(2 marks)
In order to ensure that the policies of an organisation are consistent with the public interest, on which of the
following should the directors of a company focus?
A
B
C
The long-term welfare of the shareholders

Compliance with legal requirements and codes of governance
The collective well-being of stakeholders
(1 mark)
Martin is an experienced and fully trained shipbuilder, based in a western European city. Due to significant economic
change in supply and demand conditions for shipbuilding in Martins own country, the shipyard he worked for has
closed and he was made redundant. There was no other local demand for his skills within his own region and he
would have to move to another country to obtain a similar employment, and could only find similar work locally
through undertaking at least a years retraining in a related engineering field.
Which of the following describes the type of unemployment that Martin has been affected by?
A
B
C
D
Structural unemployment
Cyclical unemployment
Frictional unemployment
Marginal unemployment
(2 marks)
Which of the following is the MAIN function of marketing?

A
B
C
D
To
To
To
To
maximise sales volume

identify and anticipate customer needs
persuade potential consumers to convert latent demand into expenditure
identify suitable outlets for goods and services supplied
(2 marks)
The following are sanctions used against companies for potentially unlawful actions:
1
2
3
4
Investigation of its financial affairs by a government department or agency

Imposition of a fine by the governments company registration body
Refusal of the external auditor to sign the financial accounts
Suspension of dealings in securities by the stock exchange
Which of the above are the consequences of a listed company failing to file its accounts?
A
B
C
D
1
1
2
3
and
and
and
and
2
3
4
4
(2 marks)
[P.T.O.
The overall average age of a population in a country is directly dependent on two demographic factors: Birth rate and
death rate.
Assuming equal rates of change, which of the following must lead to an overall ageing of the population?
A
B
C
D
Birth rate
Rising
Falling
Rising
Falling
Death rate
Rising
Rising
Falling
Falling
(2 marks)
10 Gils is conducting an appraisal interview with his assistant Jill. He initially feeds back to Jill areas of strengths and
weaknesses of performance but then invites Jill to talk about the job, her aspirations, expectations and problems. He
adopts a non-judgemental approach and offers suggestions and guidance.
This is an example of which approach to performance appraisal?
A
B
C
D
Tell and sell approach

Tell and listen approach
Problem solving approach
360 degree approach
(2 marks)
11 What is the primary responsibility of the external auditor?

A
B
C
D
To
To
To
To
verify all the financial transactions and supporting documentation of the client
ensure that the clients financial statements are reasonably accurate and free from bias
report all financial irregularities to the shareholders of the client
ensure that all the clients financial statements are prepared and submitted to the relevant authorities on time
(2 marks)
12 The following are examples of business information:

(1) Annual forecasts of revenues and costs for a department
(2) Product development plans for the next 23 years
(3) Targets agreed by key managers at their performance appraisal interviews
Which of the above would be classified as tactical information?
A
B
C
1, 2 and 3
1 and 3 only
2 and 3 only
(1 mark)
13 Wasim is the Customer Services Manager in a large leisure park. The forthcoming weekend is going to be the busiest
of the year, as it is a public holiday. Wasim has to cope with several absentees, leaving him short-staffed in public
areas of the park. His manager has told him that he expects him to catch up with some administrative reports that
were due last week. Wasim also has to arrange for six new staff to be trained, who will be arriving imminently.
In order to manage his workload most effectively, what should Wasim do?
A
B
C
D
Prioritise the tasks in relation to the most important business outcomes

Deal with the reports that the manager insists be prepared
Train the new recruits
Carry out some of the work that the absentees would normally do
(2 marks)
14 In order to discharge their duties ethically, finance directors must ensure that the information published by their
organisations provides a complete and precise view of the position of the business, without concealing negative
aspects that may distort the readers perception of its position.
This duty describes which of the following ethical principles?
A
B
C
D
Probity
Honesty
Independence
Objectivity
(2 marks)
15 Which of the following is a purpose of the International Federation of Accountants?

A
B
C
D
Agreement of legally binding financial reporting standards across all member accountancy organisations
Prevention of international financial crimes, such as money laundering and insider dealing
Promotion of ethical standards in all member organisations
Development of universally applicable detailed rules to deter inappropriate behaviours
(2 marks)
16 The following government policies can be used to expand or slow down the level of economic activity.
1
2
Taxation
Public expenditure
Which of the following combinations of policy would maximise expansion of the economy?
A
B
C
D
Increase 1 and increase 2

Increase 1 and reduce 2
Reduce 1 and increase 2
Reduce 1 and reduce 2
(2 marks)
[P.T.O.
17 Neill works as the procurement manager of JL Company, a large services company.

Information provided by Neill is most relevant to which of the following elements of the marketing mix?
A
B
C
D
Physical evidence
Distribution (or place)
Price
Processes
(2 marks)
18 In relation to employee selection, which type of testing is most appropriate for assessing the depth of knowledge
of a candidate and the candidates ability to apply that knowledge?
A
B
C
Intelligence testing
Competence testing
Psychometric testing
(1 mark)
19 Malachi has been asked by his manager to obtain information about ABC Company, which is bidding for a contract
offered by Malachis company in the near future. The two statements which he will be using as his sources are the
statement of financial position (SOFP) and the statement of profit or loss (SOPL). The information he is required to
obtain is as follows:
1:
2:
3:
4:
The equity of the company

Operating costs as a percentage of turnover
Long-term borrowings
Liquidity
Which of the following correctly matches the above items of information with the financial statements in which
they would be found?
A
B
C
D
1
SOFP
SOPL
SOPL
SOFP
2
SOPL
SOFP
SOFP
SOPL
3
SOPL
SOFP
SOPL
SOFP
4
SOFP
SOPL
SOFP
SOPL
(2 marks)
20 Linh owns a busy restaurant. She has had complaints from regular customers about diners failing to control their noisy
and unruly children, which is spoiling their dining experiences.
Which of the following courses of action would be regarded as a pluralist solution to this problem?
A
B
C
D
Setting aside a separate section of the restaurant for families with children
Not accepting bookings from families with children
Advising customers that the restaurant is a family restaurant before they book
Taking no action, assuming that those who complain will always be a minority
(2 marks)
21 Which of the following is data protection legislation primarily designed to protect?

A
B
C
All private individuals and corporate entities on whom only regulated data is held
All private individuals on whom only regulated data is held
All private individuals on whom any data is held
(1 mark)
22 The system used by a company to record sales and purchases is an example of which of the following?
A
B
C
D
A transaction processing system

A management information system
An office automation system
A decision support system
(2 marks)
23 The following are stakeholders of a business organisation:

1.
2.
3.
4.
Manager
Customer
Executive Director
Supplier
Which of the above are CONNECTED stakeholders?

A
B
C
D
1, 2 and 3
2 and 4
2 and 3 only
3 and 4
(2 marks)
24 In an economic environment of high price inflation, those who owe money will gain and those who are owed money
will lose.
Is this statement true or false?
A
B
True
False
(1 mark)
25 Role playing exercises using video recording and playback would be most effective for which type of training?
A
B
C
D
Development of selling skills

Regulation and compliance
Dissemination of technical knowledge
Introduction of new processes or procedures
(2 marks)
[P.T.O.
26 Renata has attended a leadership development course in which she experienced a self-analysis exercise using the
Blake and Mouton managerial grid. The course leader informed her that the results suggested that Renata
demonstrated a 91 leadership style.
What other conclusions may be drawn in relation to Renatas leadership style?
1.
2.
3.
4.
She
She
She
She
A
B
C
D
1
2
1
2
maximises the involvement of her team

demonstrates little concern for people in the team
balances the needs of the team with the need to complete the task.
is highly focused on achieving the objectives of the team.
and
and
and
and
2
4
4
3
(2 marks)
27 The implementation of a budgetary control system in a large organisation would be the responsibility of the internal
auditor.
Is this statement true or false?
A
B
True
False
(1 mark)
28 The following are duties of either internal or external auditors:

(1) Confirming that the financial accounts present a true and fair view
(2) Confirming that there are appropriate policies for preventing and detecting fraud
(3) Confirming that the financial accounts have been prepared in accordance with legal requirements
Which of the above are the roles of an external auditor?
A
B
C
2 and 3
1 and 2
1 and 3
(1 mark)
29 Professional accountants must demonstrate integrity at all times.

Which of the following best describes the meaning of integrity?
A
B
C
Applying consistently high moral values

Maintaining a neutral and unbiased view on all business decisions
Providing timely and accurate information free from errors
(1 mark)
30 The following are either characteristics of a co-operative or of a public limited company:

(1)
(2)
(3)
(4)
Maximising the excess of income over expenditure not a primary objective

Members can vote according to the number of shares owned
Shares can be bought and sold through personal transactions of the members
All members are invited to attend the annual general meeting and participate in decisions at the meeting
Which of the above are the characteristics of public limited companies?

A
B
C
D
2, 3 and 4
2 and 3 only
2 and 4 only
3 and 4 only
(2 marks)
31 A company has advertised for staff who must be at least 188 metres tall and have been in continuous full-time
employment for at least five years.
Which of the following is the legal term for this practice?
A
B
C
D
Direct discrimination
Indirect discrimination
Victimisation
Implied discrimination
(2 marks)
32 Which one of the following statements is correct in relation to monetary rewards in accordance with Herzbergs
two-factor theory?
A
B
C
D
Pay increases are a powerful long-term motivator

Inadequate monetary rewards are a powerful dissatisfier
Monetary rewards are more important than non-monetary rewards
Pay can never be used as a motivator
(2 marks)
33 In a higher education teaching organisation an academic faculty is organised into courses and departments, where
teaching staff report both to course programme managers and to subject specialists, depending on which course they
teach and upon their particular subject specialism.
According to Charles Handys four cultural stereotypes, which of the following describes the above type of
organisational structure?
A
B
C
D
Role
Task
Power
Person
(2 marks)
[P.T.O.
34 Which pattern of communication is the quickest way to send a message to all intended recipients?
A
B
C
D
The
The
The
The
circle
chain
Y
wheel
(2 marks)
35 Kelly wants to explain a business problem to Pawel on the telephone.

Who will be involved in encoding the communication that takes place?
A
B
C
Kelly
Pawel
Kelly and Pawel
(1 mark)
36 Which of the following types of new legislation would provide greater employment opportunities in large
companies?
A
B
C
D
New
New
New
New
laws
laws
laws
laws
on health and safety

to prevent discrimination in the workplace
making it more difficult to dismiss employees unfairly
on higher compensation for employer breaches of employment contracts
(2 marks)
37 What is the responsibility of a Public Oversight Board?

A
B
C
D
The
The
The
The
establishment of detailed rules on internal audit procedures

commissioning of financial reporting standards
creation of legislation relating to accounting standards
monitoring and enforcement of legal and compliance standards
(2 marks)
38 Adrian is the manager of a call centre. Consultants have advised him that by reorganising his teams to complete highly
specific tasks the call centre will be able to increase the throughput of work significantly, as well as increasing the
number of sales calls made to the public. The reorganisation proposals are unpopular with many workers, who feel
that their jobs will become tedious and repetitive.
The proposal to reorganise the work of the call centre utilises principles put forward by which school of
management thought?
A
B
C
The administrative school

The empirical school
The scientific school
(1 mark)
10
39 The aggregate level of demand in the economy is made up of government expenditure, __________, __________ and
net gains from international trade.
Which of the following correctly completes the sentence above?
1.
2.
3.
4.
Savings
Taxation
Investment
Consumption
A
B
C
D
1
2
3
1
and
and
and
and
3
3
4
4
(2 marks)
40 In the context of marketing, the four Ps are price, promotion, __________ and __________.
Which TWO words correctly complete the above sentence?
1.
2.
3.
Product
Positioning
Place
A
B
C
1 and 3
1 and 2
2 and 3
(1 mark)
41 Which one of the following is a potential advantage of decentralisation?

A
B
C
Risk reduction in relation to operational decision-making

More accountability at lower levels
Consistency of decision-making across the organisation
(1 mark)
42 FKT Company is considering the introduction of a code of ethics following media criticism of its selling practices.
Which of the following is most important when deciding on the content of the proposed code of ethics?
A
B
C
D
The
The
The
The
minimum acceptable standards of behaviour and conduct of employees (KEY)

legal requirements affecting the sales of core products and services
main issues of concern to customers who have made complaints
generally accepted standards by other companies operating in the same sector
(2 marks)
11
[P.T.O.
43 Ahmed is preparing his personal development plan. He is particularly concerned about how others see him.
In order to analyse this aspect of his personal development plan further, Ahmed should consider which of the
following?
A
B
C
Problems and strengths

Strengths and opportunities
Strengths and weaknesses
(1 mark)
44 Jackie leads an established team of six workers. In the last month, two have left to pursue alternative jobs and one
has commenced maternity leave. Three new staff members have joined Jackies team.
Which one of Tuckmans group stages will now occur?
A
B
C
D
Norming
Forming
Performing
Storming
(2 marks)
45 In the context of fraud, teeming and lading is most likely to occur in which area of operation?
A
B
C
D
Sales
Quality control
Advertising and promotion
Despatch
(2 marks)
46 Which of the following statements is true in relation to the average revenue function of a business in a perfect
market?
A
B
C
It is diagonal
It is horizontal
It is vertical
(1 mark)
12
Section B ALL SIX questions are compulsory and MUST be attempted

1
Here are four short references to the function of management:

A
B
C
D
There are essentially five functions of management that apply to any organisation
Individual and group behaviour at work is a major factor in productivity.
Management is the development of a true science of work.
The manager of a business has one basic function economic performance.
Required:
(a) Identify the description above which is associated with each of the following theorists, by selecting A, B, C,
D or None.
(i)
(ii)
(iii)
(iv)
Peter Drucker
Elton Mayo
Henry Mintzberg
F W Taylor
(2 marks)
(b) Below are listed five functions of management.

A
B
C
D
E
Planning
Organising
Managing
Monitoring
Motivating
Required:
Write down which two of the above are those functions identified by Fayol by selecting TWO of the letters
from (A, B, C, D, E).
(2 marks)
(4 marks)
13
[P.T.O.
(a) XYZ Company installed a computer system to handle its main accounting functions including accounts
receivables, accounts payables and payroll. Management has a number of concerns about access to the system
and are considering a number of controls to overcome those concerns.
The following are types of control they are considering:
A
B
General control
Application control
Required:
Classify the following as either A (General control) or B (Application control):
(i)
(ii)
(iii)
(iv)
Locking the computer room to prevent access to non-employees.

Limiting access to the payroll system by making it password protected.
Taking backup of data files each evening and holding backup copies off-premises.
Providing basic IT training to the entire staff to prevent errors in using the system.
(2 marks)
(b) A company has considerable cash collections on a regular basis. The cashier receives the cash, records it and
then banks it at the end of each day. Since a single person is responsible for access to cash, the financial director
is concerned that fraud and error may occur in cash handling and recording. He proposes use of appropriate
internal controls to prevent any such errors or misappropriations.
The following are specific examples of internal controls used in business:
A
B
C
D
Segregation of duties
Induction and training
Authorisation limit
Internal audit
The following sentences contain gaps which specify the appropriate internal control which could be used to
prevent fraud and errors.
Fraud and errors in handling cash can be prevented through
process a complete transaction.
since no one individual could record and
Required:
(i)
Select the correct internal control which appropriately fills gap 1 above; i.e. select A, B, C or D.
(1 mark)
Even if such a measure were introduced, the possibility exists that staff could act together to perpetrate fraud and
bypass this control. This can be prevented through
as it would ensure awareness of the heavy sanctions
2
to be imposed in cases of dishonesty.
(ii) Select the correct internal control which appropriately fills gap 2 above; i.e. select A, B, C or D.
(1 mark)
(4 marks)
14
There are a number of ways of developing staff on a one-to-one basis within organisations. Each has its own strengths
and weaknesses and is appropriate in different work situations.
Examples of types of development include coaching, mentoring, counselling and appraising.
Required:
(a) For each type of development below, which work situation is most appropriate?
A
B
An interview to help another person to identify and work through a problem.

A longer term relationship in which a more experienced person encourages an individuals personal and
career development.
An approach whereby a trainee is put under the guidance of an experienced employee who shows the
trainee how to perform tasks.
An interview, the aim of which is to review performance and identify training and development needs.
(i)
(ii)
(iii)
(iv)
Coaching. Select ONE of A, B, C or D

Mentoring. Select ONE of A, B, C or D
Counselling. Select ONE of A, B, C or D
Appraising. Select ONE of A, B, C or D
(2 marks)
(b) An organisation uses mentoring as a form of one-to-one personal development.

A
B
C
D
E
F
G
Determine remuneration
Decide promotions
Career and personal development
Resolve a grievance
Demonstrating how to perform
Using experienced staff for training
Providing a role model for an employee
Required:
Which TWO of the above are benefits of this approach? Select TWO from (A, B, C, D, E, F, G).
(2 marks)
(4 marks)
15
[P.T.O.
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 charitys 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
B
C
Required:
For each of the following, indicate whether they are internal, connected or external stakeholders.
(i)
(ii)
(iii)
(iv)
Donna and Dietmar. Select one of A, B or C

Members of the management committee. Select one of A, B or C
The four building companies. Select one of A, B or C
Local residents. Select one of A, B or C
16
(2 marks)
(b) Complete the following sentences about Sport-4-Kidz stakeholders, with reference to Mendelows grid.
The local residents exert
(i)
and should be

A
B
C
D

(ii)

A
B
C

kept satisfied
kept informed
Write down A, B, or C.
The building companies exert
and should be
(iii) Select which ONE of the following fills Gap 3:

A
B
C
D

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

kept satisfied
kept informed
Write down A, B, or C.
(2 marks)
(4 marks)
17
[P.T.O.
Accounting bodies set out a code of ethics to establish ethical behaviour requirements for professional accountants.
(a) The following are qualities you might see in a professional at work:
Integrity
Honesty
A
Trustworthiness
B
Expertise
C
Professional
behaviour
D
Confidentiality
Respectfulness
F
Objectivity
Required:
Write down which of the FOUR boxes from (AH) contain fundamental principles of ethical behaviour from
the IFAC (IESBA) and ACCA codes of ethics.
(2 marks)
(b) The following are desirable characteristics of professions and vocations:
A
B
C
D
E
F
G
H
Acting in the public interest

Highly skilled
Ethical codes of conduct
Governance by association
Highly valued services
Training requirement
Process of certification
Qualification by examination
Required:
Select FOUR of the characteristics from the list above, which distinguish a profession from an occupation.
(2 marks)
(4 marks)
18
Company A is an accountancy professional body which has a tall structure and a high level of centralisation. The span
of control is very narrow. Subordinates have minimal latitude for self-determination or to influence decision-making
and mainly concentrate on carrying out highly prescribed and defined roles.
Company B is a financial services company which gives a wide ranging role to its traders and promotes cultural values
such as assertiveness, risk appetite, and a high degree of competition between employees. The employees are usually
young and unmarried, and work and socialise together for long hours at a frenetic pace.
Company C is a research and development company where the business is divisionalised by product. Staff work very
flexibly and often need to communicate laterally to achieve objectives through ad hoc projects and collaboration. There
are no formal rules about reporting structures, or about set starting or finishing times. Staff are rewarded on the basis
of creativity and innovation.
Company D is a family company which is highly controlled by the owners and the CEO is the main shareholder. There
is a very low staff turnover, but employees are expected to be very loyal to the company and are often required to
work long hours and carry out tasks outside their normal range of duties. Relationships between employees and
managers are very informal and close and the rights of employees and their overall interests are strongly defended by
the owners when challenged.
The following are dimensions used by Hofstede to classify types of organisational culture:
A
B
C
D
Power distance
Uncertainty avoidance
Individualism
Masculinity
1. High
A1
B1
C1
D1
2. Low
A2
B2
C2
D2
Required:
(i)
For Company A select which combination of dimensions apply from the grid above. (For example A1)
(1 mark)
(ii) For Company B select which combination of dimensions apply from the grid above. (For example A1)
(1 mark)
(iii) For Company C select which combination of dimensions apply from the grid above. (For example A1)
(1 mark)
(iv) For Company D select which combination of dimensions apply from the grid above. (For example A1)
(1 mark)
(4 marks)
End Question Paper
19
Answers
Fundamentals Level Knowledge Module, Paper F1

Accountant in Business
Specimen Exam Answers
Section A
1
The IASB aims to promote consistency in corporate reporting by creating financial reporting standards to which major
businesses are expected to adhere.
The Ashridge model identifies four styles: autocratic; authoritarian; consultative; laissez-faire (or participative). The first of
these is the least participative.
Negotiation gives the best opportunity for the two sides in a conflict to converge their positions. The other options either
involve backing down, forcing a position, potentially increasing conflict, or leaving the issue unresolved.
Mentors usually help staff on broader work related development, including orientation and induction. Coaches work on
developing specific skills of the job itself, while counsellors work with people on a personal level, perhaps if they are having
non-work related or emotional problems.
The board of directors are responsible for the well being of a wide group of constituencies, including shareholders, but also
employees and other internal, external and connected stakeholders.
Because of the particular circumstances of the scenario where someone is made redundant from an industry in decline where
skills cannot be easily transferred, where re-training might take a long time or where work is not available in the short term
within a reasonable geographic proximity, this is classed as structural unemployment.
The basic principle that underlies marketing is that it is a management process that identifies and anticipates customer needs.
The other distracters in the question refer to specific activities undertaken by a marketing function.
The normal sanctions in such a case is that fines are imposed on companies by the registration body of the company and,
where listed, the company may be delisted by the stock exchange authorities. Although the option wasnt included, sanctions
against responsible directors may also be imposed.
The ageing population trend is caused by a decreasing birth rate and a decreasing mortality rate.
10 B
The tell and listen approach encourages input from the individual, promoting participation in the process by the appraisee.
11 B
The external auditor has to ensure that the financial statements of the organisation truly reflect the activities of the business
in the relevant accounting period. This assessment should be independent and therefore free from subjectivity on the part of
the management of the client organisation.
12 B
Annual targets and management forecasts from performance appraisals indicate medium term planning horizons which are
both tactical in nature, whereas product development plans for 23 years are longer term strategic objectives.
13 A
An employee with a range of tasks or objectives to achieve and pressures to achieve them to set deadlines, should always
prioritise tasks in accordance to business importance. Deciding on other criteria such as pressure applied by colleagues,
whether someone is absent or not or simply because a task is urgent may damage wider business objectives.
14 D
A professional accountant acting in accordance with fundamental ethical principles is demonstrating objectivity when they
give a complete and precise view, which by implication means that negative aspects should not be concealed or positive
aspects accentuated.
23
15 C
IFAC has no legal powers against businesses, nor does it set financial reporting standards. It is an accounting association
member body which promotes educational and ethical standards of behaviour amongst its member bodies, through a code
of ethics and behaviour, but does not prescribe detailed rules on this.
16 C
Increasing taxation leaves individuals with less disposable income for expenditure within the economy thereby slowing
economic activity. The same effect is caused by a reduction in government expenditure. Therefore economic activity can be
stimulated by reducing taxation and increasing government expenditure.
17 C
Information on purchase costs of finished goods or raw materials is important in establishing the price of a product. In terms
of the marketing mix, this information is most relevant to the price element as prices should be set at least to cover cost and
give an acceptable level of profit.
18 B
As the test is needed to test specific skills, competence testing is most appropriate. Intelligence and psychometric tests are
intended to assess innate ability or psychological traits, which are more general.
19 D
The key correctly matches the information required to the particular financial statement in which they are to be found.
20 A
The pluralist solution is to cater for the needs of more than one stakeholder group without seriously compromising the interests
of any individual group. Therefore setting aside a special area for families with children while having an adults only section
would achieve this. The other options involve adversely affecting the rights of one or other group of stakeholders in some way.
21 B
Data protection legislation is formulated to protect the interests of data subjects who are private individuals. Not all data is
regulated.
22 A
A transaction processing system enables all sales and purchase transactions to be recorded by volume and category.
23 B
is correct because customers and suppliers deal closely on a transactional basis with the organisation, but are not internal
stakeholders like managers and executive directors.
24 A
Where price inflation is high the value of money reduces consistently over time. Those who owe money (debtors) therefore
pay back less capital in real terms, and interest rates seldom adjust adequately to compensate for this.
25 A
Role playing exercises are most effectively used for skills development, including sales training. Other common business
applications include effective selection interviewing and performance appraisal interviewing.
26 B
The Blake and Mouton managerial grid enables leadership styles to be categorised on a nine point scale with reference to
concern for production and concern for people. Renata is therefore highly concerned with the task and much less interested
in her team as individuals.
27 B
The implementation of a budgetary control system would be the responsibility of the financial controller in many organisations.
The internal auditor is not responsible for implementing systems, but is involved in monitoring the effectiveness of these
systems.
28 C
The external auditor is responsible for ensuring that financial reports portray a true and fair view and comply with legal
disclosure requirements. External auditors are not responsible for ensuring that systems exist to prevent fraud.
29 A
Integrity is about honesty and applying morality to business and professional behaviour. A person acting with integrity should
not be corruptible. Neutrality in the making of business decisions does not indicate morality nor does producing accurate
work, which is more about professional competence.
24
30 B
Only shareholders have voting power related to the number of shares that they own. Members of a co-operative organisation
can vote but will only have one vote. Co-operatives may be owned by members, but ownership stakes cannot be exchanged
between members unless the members belong to limited companies.
31 B
To discriminate against someone on the grounds of characteristics which are predominately associated with their sex, gender,
nationality or religion is illegal. As women are generally shorter than men, to restrict admission on the basis of height,
indirectly discriminates against women. The other options are either direct discrimination, or other illegal and undesirable
employment practices.
32 B
According to Herzberg, money is a hygiene factor (or dissatisfier). Although it is a powerful short-term motivator, it is
questionable whether each individual increase in monetary reward will have a major long-term effect. According to Herzberg,
A reward once given becomes a right.
33 B
The task culture is appropriate where organisations can accommodate the flexibility required to adjust management and team
structures to address the tasks that must be fulfilled. This is very common in large consultancy firms.
34 D
The wheel facilitates transmission of the message directly to all receivers and therefore transmits most quickly.
35 C
Both parties in a two way communication link will need to encode messages and both have to decode them for them to be
understood. The other options imply that only one party encodes messages.
36 B
Equal opportunity policies widen opportunity and enlarge the potential pool of employees to recruit from. The other options
either indirectly or directly reduce the potential for staff turnover and therefore limit the number of job vacancies available at
any point in time.
37 D
The primary aim of a public oversight board is to eliminate or minimise any actual or potential breaches of legislative
requirements and to ensure compliance with regulations applicable to organisations within their terms of reference.
38 C
Scientific management principles consider the ways in which the factors of production (land, labour, capital and the
entrepreneurial function) can be combined to maximise efficiency in production. The founding principles are based on the
work of Frederick Winslow Taylor. The reorganisation of the call centre follows these principles.
39 C
The components of effective demand in the economy are consumer spending, investment by enterprises, central and local
government expenditure and the net gains from international trade.
40 A
The four Ps are Product, Price, Promotion and Place.
41 B
Decentralisation devolves authority to lower levels and gives more autonomy to individuals and teams. Decentralisation on
the other hand increases risk as there is less control over individual and group behaviour and decision-making. Allowing more
freedom to act independently leads to less consistency across the organisation.
42 A
Compliance with legal requirements may not eliminate unethical behaviour. The issues of concern to those who complain
may not be fully representative of issues of concern to customers in general. Other companies in the sector may not be
concerned about ethical behaviour.
43 C
Using SWOT analysis, the way to conduct this analysis would be for the individual to consider their own strengths and
weaknesses and how they could affect the impression given to others. The other options are external factors to the individual
so would not directly affect the opinion that others would have of that individual.
44 B
As new members are about to join the group, essentially the group is reforming which is the start of a new group development
process. The other options are all later stages in group development as identified by Tuckman.
25
45 A
Teeming and lading involves the theft of cash and is a type of fraud that is carried out by manipulating transactions. There
would be most potential for this fraud within the sales department where cash may be received and remitted.
46 B
The demand curve of a company in a perfect market is horizontal, because they can sell as much as they want at a given
market price and nothing at all at a price set higher than the prevailing market price.
Section B
1
(a)
(i)
(ii)
(iii) None
(iv) C
Rationale: The individual writers given in the key are associated with the relevant management theory
(b)
A and B (Fayol identified these two functions)
(a)
(i)
(ii)
(iii) A
(iv) B
(b)
(a)
(i)
(ii)
(i)
(ii)
(iii) A
(iv) D
(b)
C and G
(a)
(i)
(ii)
(iii) C
(iv) B
(b)
(i)
(ii)
(iii) D
(iv) C
(a)
A, E, F, H
(b)
A, C, D, G
(i)
A1
(ii)
D1
(iii) B2
(iv) C2
26

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Revision Question Bank

REVISION QUESTION BANK

For Examinations to August 2015

REVISION QUESTION BANK ACCOUNTANT IN BUSINESS (F1)

THE BUSINESS ORGANISATION

Organisation and Industry

STAKEHOLDERS IN BUSINESS ORGANISATIONS

The Ultimate Football Club

THE BUSINESS ENVIRONMENT

THE MACRO-ECONOMIC ENVIRONMENT

THE MICRO-ECONOMIC ENVIRONMENT

Demand and Supply

Handy and Hofstede

COMMITTEES IN THE BUSINESS ORGANISATION

GOVERNANCE AND SOCIAL RESPONSIBILITY

ACCOUNTING AND FINANCE

Finance and Tax

ACCOUNTANT IN BUSINESS (F1) REVISION QUESTION BANK

EXTERNAL AND INTERNAL AUDIT

REGULATORY ENVIRONMENT OF ACCOUNTING

FINANCIAL SYSTEMS AND PROCEDURES

INTERNAL CONTROL AND SECURITY

Fraud and Error

LEADERSHIP, MANAGEMENT AND SUPERVISION

Blake and Mouton

RECRUITMENT AND SELECTION

EQUAL OPPORTUNITIES AND DIVERSITY

Diversity and Discrimination

INDIVIDUALS, GROUPS AND TEAMS

Role Theory and Groups

MOTIVATING INDIVIDUALS AND GROUPS

REVISION QUESTION BANK ACCOUNTANT IN BUSINESS (F1)

Sample Questions (ACCA)

TRAINING AND DEVELOPMENT

Personal Development Planning

INFORMATION WITHIN BUSINESS

COMMUNICATION WITHIN BUSINESS

ETHICS AND ETHICAL BEHAVIOUR

Accountant in Business Specimen Paper (ACCA)

ACCOUNTANT IN BUSINESS (F1) REVISION QUESTION BANK

REVISION QUESTION BANK ACCOUNTANT IN BUSINESS (F1)

Indicate the organisation(s) which have each of the following characteristics, by

Aim is wealth maximisation

The following are types of industry:

ACCOUNTANT IN BUSINESS (F1) REVISION QUESTION BANK

Complete the following definition according to Kotler.

Select which of the following fills Gap 1:

Select which of the following fills Gap 2:

The following are characteristics that may be used to describe products:

Identify which ONE of the following departments in a business organisation is likely to

REVISION QUESTION BANK ACCOUNTANT IN BUSINESS (F1)

The following are types of stakeholder:

Club manager. Select one of A, B or C

Complete the following sentences about UFCs stakeholders, with reference to

Select which ONE of the following fills Gap 1:

high power, low interest

ACCOUNTANT IN BUSINESS (F1) REVISION QUESTION BANK

Select which ONE of the following fills Gap 2:

treated as a key player

Select which ONE of the following fills Gap 3:

high power, low interest

Select which ONE of the following fills Gap 4:

treated as a key player