Question 1

COM is a well established company in the construction industry The company was founded by the Mac family 30 years ago and several family members still serve on the Board The company obtained a listing five years ago The Board has an appropriate balance between executive and non-executive members It also has audit remuneration and nomination committees The average age of board members is 68

COM is profitable but profit margins have been falling steadily and this year's revenues are lower than it was achieved last year The Board recognis thai it does not have a long term strategy in place and has been losing business to newer, more aggressive competitors

Which THREE of the following statements are correct?

Options :

A : The remuneration committee should consider incentives such as share options to encourage the Board to focus on COM-s long term strategy

B : The nomination committee should have had a succession plan in place for directors.

C : The nomination committee should be operating for the benefit of the directors.

D : The audit committee should have alerted the Board to the impact of falling profit margins

E : The non-executive directors should have challenged the lack of long term strategic planning

Answer: A,B

Question 2

H Ltdis a company providing postal and courier services to small businesses. Customers pay a monthly or annual subscription fee to use the service, plusaverysmall fee for each item delivered.

A year ago, H employed a newsalesteam. Their remuneration is dependent on the number of new customers they sign up. Sales increased dramatically in the first six months, but nowdifficulties are emerging such as new customers dropping their subscription once the initial period has expired; subscriber direct debits being returned unpaid; subscribers going out of business and other similar issues.

Which of the following would be appropriate to help resolve these problems?

Options :

A : Alter the pricing structure in order to increase the price for sending each item but decrease the subscription element of the fee.

B : Ensure that a credit check is carried outbefore a subscriber is accepted.

C : Reduce the rate of commission payable to any sales person who fails to sign up at least an agreedminimum number of customers each month.

D : Alter the commission arrangements so that commission is payable only when the subscriber signs up for a second year.

E : Preparing a monthly report for sales persons detailing the performance of each new customer they have signed up over the previous year.

Answer: A,B,D

Question 3

You are theManagementAccountant for a company which supplies baked food to a string of retail outlets; biscuits, cakes, savoury snacks etc.

You discover that a trainee employee, who is responsible for cleaning out the delivery vans has been taking damaged goods and packets which have reached their sales expiry date and has been selling them to friends. These products would otherwise have been discarded as waste.

The trainee in question is the nephew of one of the senior managers.

What is the correct course of action?

Options :

A : Have a quiet word with the trainee and ask him to stop.

B : Have a quiet word with the senior manager, the trainee-s relative and askthem to deal with it.

C : Document the facts and escalate to the trainee-s manager.

D : Do nothing, the product was designated as waste anyway.

Answer: C

Question 4

Which of the following is an ethical dilemma?

Options :

A : A company is considering giving poorly-paid staff a generous pay rise.

B : A company is deciding whether to issue debt or equity.

C : A company is deciding whether to make a substantial bonus payment to its directors by means of cash or shares.

D : A company must decide whether to settle a claim from an employee who appears to have fabricated a workplace injury. The company want to avoid the cost of defending the claim.

Answer: A

Question 5

R is a company running gas-fired power stations in Western Europe. The Risk Committee hasjust received a reportthata power station built to the same design and specification in a developing country has recently collapsed. The causes of the collapse are unclear,but if something similiar were to happen in Europe the consequencesfor Rcould be catastrophic.

Which of the following actions being considered by the Risk Committee are ethical?

Options :

A : Commission a reputable firm of structural engineers to carry out a review of all power stations owned by R.

B : Decide that the information available to date is too uncertain to take any action for now.

C : Send experts employed by R to the site of the collapse so that they can gather information first hand on what happened.

D : Issue a press release confirming that all R-s power stations are 'entirely safe'.

E : Attempt to increase the level of insurance cover against this type of eventuality.

F : Draw up contingency plans in case some ofR-s power stations need to be shut down.

Answer: A,C

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