Fundamentals of Ethics, Corporate Governance and Business Law
Last Update Sep 21, 2025
Total Questions : 661
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A, B C and D are sole directors and shareholders of EFG Company each holding 25% of the shares in the company. The articles of association
of EFG Company state that "the directors cannot enter into any contract on behalf of the company exceeding $30,000 without the agreement of all the shareholders’’.
B contracted on behalf of the company for $40,000 with Y Company without the agreement of the other shareholders. Which of the following is correct?
1. Y Company may enforce the contract against EFG Company
2. A, C and D may obtain an injunction to stop the contract being canted out
3. B may be liable to EFG Company for breach of duty.
Tee Ltd placed some computers in its shop window with a notice which reaD. "Special offer. Internet-ready computers for sale at £400."
Which of the following is correct?
(i) The notice amounts to an invitation to treat.
(ii) When a customer called in to the shop and offered £350 for one of the computers, he had made a counter offer.
(iii) The shop is obliged to sell a computer to anyone who can pay the price.
In relation to corporate governance, which of the following statements best describes the situation in the UK?
An investigation has been launched against Company G, a supermarket, after suspicions were raised about its treatment of certain employees.
It was later found that Company G were guilty of direct discrimination.
Which of the following are the ways in which Company G were found to be directly discriminating?
Select ALL that apply.
Zed Ltd was incorporated in 2010 and has chosen to use the standard Model Articles of Association. The company is considering appointing Max as a director of the company.
Which of the following is incorrect?
(i) Max cannot be a director of the company unless he holds shares in the company.
(ii) Max cannot be a director of the company if he is an undischarged bankrupt.
(iii) Max cannot be a director of the company if he is subject to a disqualification order.
Which of the following best describes the consequences of being found to be unethical for an individual CIMA member?
An independent audit is important to readers of financial statements because it
Which of the following is correct?
(i) The Court of Appeal is bound by obiter dicta of the Supreme Court.
(ii) The High Court is bound by a Supreme Court ratio decidendi.
(iii) A ratio decidendi of the Court of Appeal is binding on the High Court.
Which of the following accountants have breached CIMA's ethical principle of professional behaviour: Select ALL that apply.
M's client has asked her to 'leave out' a few figures as he is applying for a bank loan and he wants his management accounts to, in his words, 'look better'. If M does as he asks, he promises to pay her double her fee when the loan money comes through. M is tempted by his offer, her mother has been ill and she would love to take her away on holiday. What should she do?
Which of the following cases of dismissal are likely to be deemed automatically fair by an employment tribunal?
Paul is asked to work for a company that runs online casinos, but he has a deep seated conviction that gambling in any form is immoral. This dilemma is an example of a tension between:
You work for a pharmaceutical company. Which of the following corporate issues is NOT related to ethics or social responsibility?
Which of the following statements refer to the remuneration committee? Select ALL that apply.
Which of the following is INCORRECT in relation to directors' duties?
i. Directors who arrange for shares to be offered directly to their supporters in order to prevent a take-over bid are acting lawfully so long as they have the legal power to allot shares in the company's constitution.
ii. Directors may act in breach of their duties and still be complying with the UK Corporate Governance Code.
iii. Directors' duties are owed to the shareholders as a body and enforceable by the company.
Which of the following is an advantage of carrying on a business through the medium of a private company limited by shares?
Tom is a director of XYZ Ltd. The company is considering purchasing Tom's business for £200,000. Which of the following is incorrect?
Which of the following is one of the fundamental principles identified in the CIMA Code of Ethics?
Miss K is a newly qualified accountant working in a highly respected local accountancy firm headed by Mr R, who is a pillar of the community. One night, Miss K is at an out of town bar with friends, when she spots Mr R with Mrs E, a client of the firm. It is obvious they are having a secret affair. Is this an ethical issue?
Which one of the following reasons is not automatically an unfair reason for dismissal?
B Ltd has an issued share capital of 1,000 ordinary £1 shares. The board of B Ltd has resolved to alter the company's articles of association. Which of the following is correct?
(i) The articles may be altered by board resolution.
(ii) The articles may be altered by a written resolution of the shareholders.
(iii) The articles may be altered by a special resolution of the directors.
After the Companies Act 2006, which of the following is correct in relation to a reduction of capital by a public company?
(i) If the reduction results in the company no longer having the authorized minimum capital for a public company, it may be necessary to re-register as a private company.
(ii) The Articles of Association may restrict the company's ability to reduce capital.
(iii) The reduction must be approved by the court.
A business has been registered under the name ABC Ltd. Which of the following types of business organization must this be?
Which of the following statements is correct in relation to the civil law?
Badger has just been offered a job after completing a series of long interviews.
Which of the following would legally form the employment contract between him and his employer:
Members of the accountancy profession are expected to demonstrate certain personal qualities and virtues such as 'respect'
Which of the following is an example of the demonstration of the virtue of respect?
C has just set up her own practice and things are going well. She is also a single parent, so is reliant upon her income to pay her bills and support her family. One of her uncles recommends a new client to her. This client wants C to provide an accountant's report in support of his mortgage application. He insists there is no need for her to see the full details of his income. He suggests that C's uncle would be most displeased if she did not help him, and that she may potentially lose other potential clients.
This is a tension between C's:
Demonstrating politeness and good manners towards others reflects the personal quality identified by the CIMA Code of Ethics as:
J and K are the only shareholders in JK Ltd, each holding 500 fully paid ordinary £1 shares. J is the company's only director and K the company secretary. The company has been placed in creditors’ voluntary liquidation on the grounds that it is unable to pay its debts.
Which of the following is correct?
Which of the following has overall responsibility for enforcing the Health and Safety at Work Act 1974 and its related legislation?
i. The Health and Safety Commission
ii. The Health and Safety Executive
iii. The Health and Safety Inspectorate
According to Carroll's model of CSR, which of the following is TRUE of a company's legal responsibility?
Which ONE of the following in INCORRECT in relation to a Limited Liability Partnership (“LLP”)?
The Global Reporting Initiative (GRI) has produced Sustamability Reporting Guidelines, setting out categories and aspects which should be addressed through sustainable reporting.
Place the GRI categories next to the appropriate aspect of sustamability below.
Which of the 'fundamental principles' of CIMA's Code of Ethics is defined as follows?
"A professional accountant should comply with relevant laws and regulations and should avoid any action that discredits the profession"
Which of the following statements is correct?
(i) The written statement of particulars of employment is the contract of employment and every employee with one month's service is entitled to receive a copy.
(ii) The written statement of particulars of employment is not the contract of employment.
(iii) The written statement of particulars of employment may be the best evidence of the terms of the contract and every employee with one month's service is entitled to receive a copy.
Being offered gifts and hospitality can give rise to threats to compliance with fundamental principles. Which of the following statements is NOT in accordance with the CIMA Code of Ethics?
A group of business associates are about to register X Ltd as a company limited by shares. The associates wish to restrict the company's objects so that the company is only authorized to carry on the business of retailing computer hardware and software. Which of the following is correct?
How many fundamental principles are identified by the CIMA Code of Ethics?
Jimmy wants to sell his scooter, so he puts an advert on the internet with a price of £50.
He quickly gets an offer for the full amount, but then decides that he doesn't want to sell his scooter after all!
The buyer complains and threatens to report jimmy to the police.
This doesn't worry Jimmy as he knows he is not legally obliged to sell his scooter. Why is this?
Faegan and Fabian run their own business selling expensive shoes. The business is a general partnership, so both Faegan and Fabian have equal authority within it.
Recently, the business has grown very large. Because of this, one of their friends suggests getting that they have their accounts audited.
Are they legally obliged to do this?
Which of the following courses of action is NOT part of the process that the CIMA Code of Ethics expects of professional accountants in resolving an ethical conflict?
In the UK the body responsible for establishing ethical standards relating to the independence, objectivity and integrity of those providing assurance services is:
Zed plc wishes to issue £500,000 of shares on terms that the holders will receive a dividend before the other shareholders and they will be bought back by the company in 12 months' time. Which of the following best describes these shares?
Which of the following is correct if a promoter orders goods or services on behalf of a company limited by shares which is not yet registered?
(i) The promoter is personally liable for the order.
(ii) The promoter and the company are jointly liable for the order.
(iii) If the company ratifies the order after its registration, the company is liable and the promoter's liability for the order ceases.
Which of the following is CORRECT in relation to a Limited Liability Partnership (“LLP”)?
(i) An LLP is formed by registration with the Registrar of Companies
(ii) Unlike the articles of a company the internal rules of an LLP are not available for public inspection
(iii) An LLP is liable to pay corporation tax on its profits
The introduction of restrictions on how companies are permitted to advertise to children is a UK government reaction to a tension between:
Which THREE of the following may be external stakeholders in the activities of a nuclear power station?
AB (Wholesalers) Ltd contracted to sell a quantity of television sets to DC (Retailers) Ltd. The contract contained a term excluding liability for any breach of the condition implied by the Sale of Goods Act 1979 that the goods should comply with their description.
Which of the following is correct?
In which of the following business organisations do the members have limited liability and the ability to keep the constitution private?
In the UK, which organization that governs the accounting profession has taken the lead with respect to ethical considerations?
Which of the following statements is correct in relation to a public company limited by shares?
(i) A public company cannot commence trading until it has received a certificate from the Registrar of Companies confirming that it has satisfied the minimum requirements as to authorized and issued share capital.
(ii) If a public company commences trading without a trading certificate, and fails to meet its obligations, the directors may be held jointly and severally liable for those obligations.
(iii) A public company must have a minimum of one shareholder.
Immediately before being placed in creditors voluntary liquidation, Tom, the sole director of Bee Ltd, arranged for the company to make an early repayment of an unsecured loan made to Bee Ltd by his wife Anne. Which of the following is correct?
In which country are accountants legally required to speak up about certain ethical concerns?
Governance denotes the generic way an organization is run with particular emphasis on:
On the basis of the National Minimum Wages Act 1998, what is the age range for the lowest national minimum wage entitlement?
All policies for governance and social responsibility are ultimately rooted in an organization's:
Which of the following describes the aim of corporate governance initiatives?
Which of the following is incorrect in relation to shareholder meetings held by a public company?
T, a Sales Representative of E plc, made an appointment to see you in the hope of persuading you to place a substantial order with E plc. During your discussions, T suggested that you could qualify for a cash bonus in the event of an order being placed.
Which of the following is correct?
(i) Placing an order in these circumstances will place you in breach of your employment and professional obligations.
(ii) If the goods are what your company requires and are priced competitively, you are acting correctly in placing an order and qualifying for the cash bonus.
(iii) You have been placed in a conflict of interest situation and you should not proceed to place an order.
The Remuneration Committee is recognised as a board sub-committee under the Corporate Governance Code Which of the following are objectives of the Remuneration Committee?
1. The Committee should be, and should be seen to be, independent with access to its own external advice or consultants
2 The Committee is required to establish and agree pension provision for all board members
3. The Committee's reporting is clear, concise and gives the reader of the annual report a bird's eye view of policy payments and the rationale behind
them
Being straightforward and honest in all professional and business relationships demonstrates the CIMA Code of Ethics fundamental principle of:
Which of the following requires the approval of 75% of all the company's shareholders who are entitled to vote?
As stated in the CIMA Code of Ethics, the two key attributes of independence used in connection with the assurance engagement are:
Which of the following is NOT a personal quality expected of professional accountants by CIMA?
A business that behaves ethically may experience which of the following benefits; Select ALL that apply.
You work for a pharmaceutical company and have discovered a series of substantial and unpublicized gifts to specific university departments. You investigate further and find that all of the university departments published research into your company's products within a year of receiving the gift. Every piece of research is favorable to your company and none identifies any financial link with your organization. Is this an ethical issue and why?
Which of the 'fundamental principles' of CIMA's Code of Ethics is defined as follows?
"A professional accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgments"
Which of the following is NOT one of the 'seven principles of public life', as defined by the Committee of Standards in Public Life?
F knows from preparing the accounts that the company she works for is going to have to make redundancies due to the recession. She also knows that, despite the recession, the Managing Director continues to enjoy lavish perks and even uses a private jet. What should she do?
Mr A sent an email to Mr B offering to sell him some goods for $1.000 Mr B replied by email stating I'll buy the goods Payment will be made over the next 4 weeks." Mr B has now discovered that Mr A has sold the goods to Mr C. Which of the following is correct?
To which of the following contracts does the Supply of Goods and Services Act 1982 apply?
(i) A contract with a joiner for the manufacture and supply of a cabinet.
(ii) A contract for the hire of a car.
(iii) A contract with a builder to construct an extension to a house.
Cameron runs his own chain of ice cream shops. However, his business recently accrued a lot of debt due to a sharp rise in the price of milk, and he is now forced to shut the whole operation down.
Who is liable for the debt?
Maintaining professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service demonstrates the CIMA Code of Ethics fundamental principle of:
Corporate governance codes may either be rules-based or principles-based
Which of the following statements correctly describes a rules-based approach to corporate governance?
If a claim for unfair dismissal is successful, which of the following orders can be made by an employment tribunal?
i. re-instatement
ii. re-engagement
iii. compensation
Which of the following is normally not an implied term of a contract of employment?
Which of the following is correct in relation to the memorandum of association when registering a company limited by shares?
Louis is the only director in MNO Ltd. Max, Nick and Olga each hold one third of the issued share capital of the company. Louis has proposed an amendment to the company's Articles of Association. Which of the following is correct?
Which of the following is incorrect in relation to the memorandum of association when registering a company limited by shares?
Which of the following is INCORRECT in relation to a claim for wrongful dismissal?
In Germany the two-tier board structure is used by many limited liability companies. A two-tier board structure is made up of a Management Board and which other organ?
X Ltd has entered into a number of contracts with Y Ltd. In which of the following situations could the directors be held personally liable for the debts contracted with Y Ltd?
(i) X Ltd has continued to trade at a time when insolvency appeared inevitable
(ii) X Ltd has become insolvent and is unable to pay its debts to Y Ltd
(iii) X Ltd has contracted for a purpose not specified in its articles of association
Which of the following statements are correct in relation to a misrepresentation?
1. A misrepresentation is a false statement of fact or law but not a mere expression of opinion by someone having no expertise in the subject matter of the contract
2. A misrepresentation renders a contract voidable
3. As a general rule silence can amount to a misrepresentation.
Which of the following statements is incorrect in relation to the revised derivative action under section 260 of the Companies Act 2006?
(i) The action may be brought by a single shareholder.
(ii) The action may be brought in relation to an act of negligence by the directors.
(iii) The action cannot be brought in respect of a proposed act by the directors.
TESTED 21 Sep 2025
