ICAEW BTF EXAM ALL QUESTIONS AND 100% CORRECT ANSWERS!! What are Mintzberg's 5 basic components of an organisation, and what do they do? Technostructure: designs systems and standardises work Strategic apex: those at the top (board, etc.) Middle li

ICAEW BTF EXAM ALL QUESTIONS AND 100% CORRECT ANSWERS!! What are Mintzberg's 5 basic components of an organisation, and what do they do? Technostructure: designs systems and standardises work Strategic apex: those at the top (board, etc.) Middle line: middle management Operating core: front line workers Support staff: cleaning, catering, etc. What are the ACIANA criteria for good information security systems? Availability, confidentiality, integrity, authenticity, non-repudiation, authorisation Difference between data and information? Data is simply distinct pieces of information, can take many forms. Information is the output of whatever system is used to process data - e.g. a computer system. It has structure to it. What are the CATIVA criteria for good information processing? Completeness, accuracy, timeliness, inalterability, verifiability and assessability What is the definition of risk and uncertainty? Risk is the variation in an outcome while uncertainty denotes a lack of information With regards to internal controls, what are the managers responsible for? What about the board of directors? Managers are supposed to implement the controls and monitor them. The board of directors are responsible for policy making, reviewing effectiveness and reporting to shareholders. What are the types of finance activities for a company and what are their responsibilities? Finance function (overarching) Management accounting: budgeting, decision making, performance measurement, capital budgeting, pricing -- internal Treasury management: cash budgets, long-term finance decisions, managing financial risk, management of working capital Financial reporting: financial statements, tax, provision of information to external regulators -- external What are the key features of an organisation? Social arrangement that pursues collective goals, controls its own performance, and has a boundary separating it from its environment What are Mintzberg's 5 Ps of strategy? Plan - for example a budget Ploy - like a manoeuvre in a competitive game Pattern - something you tend to do Position - matching internal and external factors Perspective - what is your attitude to the environment? What are the stages of the rational planning model? SWOT analysis (internal and external) Corporate appraisal Mission, goals and objectives GAP (difference between the appraisal and the mission) Strategic choice Implementation -- review and control (feedback loop) What is cost leadership, differentiation, and focuses? Cost leadership simply about producing at the lowest cost in the industry as a whole (note that not necessarily charging the lowest prices Differentiation about providing a product or service that the industry believes to be unique Focus/niche means restricting activities to one section of the market (can have both a cost focus niche and differentiation niche) When would we use a SWOT analysis? At the corporate appraisal stage What is risk exposure? Simply a measure of the way a business is faced by risks, whether financial/business/etc. What are the fundamental and enhancing qualitative characteristics of financial reporting? Fundamental: relevance and faithfulness of representation Enhancing: understandability, comparability, verifiability and timeliness What is tactical information? What about operational, strategic, and planning? Helps deal with short-term issues and opportunities. Operational is to do with the day-to-day, strategic information has longer term concerns, and planning information is explicitly to do with plans. When would we like to use a management information system? To help us make STRUCTURED decisions. These can be reduced to a series of rules which, if followed, will lead to the correct decision being made. What are the factors for a balanced scorecard model? What are some example metrics? Customer: satisfaction, returns rates, etc. Internal business processes: product quality, failure rates, etc. Innovation and learning: employee retention, time to market for new products, etc. Financial: gross margin, net margin, etc. What is a fundamental accounting principal with regards to assets and liabilities? When in doubt, understate assets and overstate liabilities What does integrity imply? Professional responsibility Is anyone allowed to say they are an accountant and offer a full range of accountancy services? No - while accountant is not a protected term, there are some things (like insolvency/statutory audit) that require certification What is the FRRP and what do they do? Financial reporting review panel - they investigate departures from accounting standards by large companies such as those listed on LSE For the AGM of a public company, which committees must be represented by their respected chairs? Can the chairman be a member of the remuneration committee? Audit, remuneration and nomination He may be a member, but cannot chair the committee Who is responsible for reviewing arrangements about disclosures of wrongdoing in a company? The audit committee When should lead or reviewing audit partners be rotated according to the Sarbanes-Oxley act? According to the act, where does responsibility for the company's internal financial controls lie? Every 5 years. Responsibility lies with the CEO and CFO. If listed in the USA must comply with the act What is a mission, vision, goal, and plan? Mission lays out the purpose of an organisation (create value for shareholders), as well as how they will do it and what their values are Vision involves some element of looking forward to a future state Goal can be qualitative (aims) or operational and quantitative (objectives). Objectives should be SMART - specific, measurable, achievable, relevant and time bound. Plans state what should be done to achieve an operational objective, standards (targets) specify a desired level of performance. How does delegation work? You transfer the power, authority, and responsibility. However, the accountability always lies with the delegater. What are three management roles and examples, what about leadership styles? Informational role (minister/MP), interpersonal role (to do with charisma), decisional role (more traditional management). Exercising authority (traditional power), autonomy (giving more freedom), leadership (inspiring effort from others, more innate). What are examples of different business cultures (Ray Quinn)? Human relations culture (inward looking and flexible) - IT department Internal process culture (inward looking and controlling) - call centre Open systems culture (outward looking and flexible) - media company Rational goal culture (outward looking and controlling) - supermarket What are the implications of Taylorism for organisational management? Main motivator is high wages Managers job is just to tell people what to do Workers jobs are to do what they are told and get paid Essentially people are like machines! What are Herzberg's motivating factors? How do they relate to the Maslow hierarchy of needs? Hygiene factors are like at the bottom of the hierarchy, if they are absent they will demotivate. Motivating factors are towards the top, these are required for positive motivation. Hygiene factor is like health and safety, motivating factor is like a sense of achievement. What are stages of group formation? Forming, storming, norming, performing What are Belbin's ream roles? Leader - like a strategist, not imposing Shaper - like a deputy, may be aggressive and challenging Plant - thoughtful and thought provoking - plants seeds and ideas Evaluator - the sanity check Resource investigator - acts as bridge to outside world Company worker - practical and efficient, actually does the work Team worker - deals with relationships within the team Finisher - enforce deadlines What are the 4 Cs of HRM? What are hard and soft approaches? Commitment, competence, congruence, cost-effectiveness (short term) Hard approach emphasises the resources element of HRM (Taylorism). Soft approach emphasises the 4 Cs. Difference between IT support and delivery? Support is things like anti-virus and password controls, delivery is things like payroll and circulation reports. What are the sales orientation, product orientation, and production orientation? Sales - just push the product they are available Production - maximise output, not that bothered about the customer Product - Product comes before necessarily considering customer need What are the 4 Ps? What do they relate to? Product, Price, Promotion, Place These are the key components of the marketing mix What are push and pull marketing techniques? Push - e.g. trade journal (encourage intermediary to stock product) Pull - e.g. advertising (persuade the ultimate customer to buy) What are the additional 3 Ps of the services marketing mix? People, Processes, Physical evidence What are 3 types of research? Pure research Applied research Development What are Mintzberg's 6 building blocks of organisational development? With examples Strategic apex - generally the board Middle line - middle management Operating core - workers Technostructure - standardise processes and document (e.g. HR) Support staff - cleaning, catering, etc. How can we relate Mintzberg's building blocks to types of business structure and the external environment? Strategic apex - simple/entrepreneurial - strategic apex Technostructure - simple static - machine bureaucracy (government) Operating core - complex static - professional bureaucracy (big 4) Middle line - simple/static/diverse - divisionalised Operating core - complex dynamic - Adhocracy/innovative What is the matrix business structure? Suitable for complex/high-tech industries. Flexible structure that is easy to rearrange. Different leads for different projects - lattice structure. Can lead to conflicting demands on staff time/allocation. What is the span of control? What are tall and flat businesses? What are three characteristics a wide and flat organisation are likely to exhibit? The number of people reporting to one person. Businesses that are tall generally have a narrow span of control, those that are flat generally have wide spans of control. Tall businesses include hospitals, flat businesses might be an editorial team at a newspaper. Greater need to delegate, better communication between strategic apex and operating core, large spans of control. What are mechanistic and organic structures? Mechanistic structures are like bureaucracies, large technostructure and standardisation. Organic organisations like a combination between adhocracy and professional bureaucracy. Good example is google, committed and competent staff with shared values and culture. What are Mintzberg's 5 Ps of strategy? What are 3 levels of strategy? Plan - e.g. a budget Ploy - tactics Pattern - consistency of behaviour Position - how business relates to its environment Perspective - attitude/way of looking at the world Corporate (executive level), Business (Tactical level), Functional (operational) What is an alternative to strategic planning? Emergent approach - basically the opposite of rational planning. Examples might include viagra/adult friend finder. How might we approach strategic options generation? What about strategic options evaluation? Porters generic strategies, Ansoff's product/market strategies Stakeholder analysis, risk analysis How might we evaluate static environments? What about dynamic ones? What about aspects of the environment more generally? 4 Ss - static, single, simple, safe 4 Ds - dynamic, diverse, difficult, dangerous PESTEL analysis: political, economic, social, technological, ecological, legal What are Kotler's four kinds of competitor and response profiles? Brand competitors (coke/pepsi) - basically the same Industry competitors (tesco/spa) - similar industry profile Generic competitors (Ipad/Thomas cook - compete for same income) Form competitors (match/lighter) - satisfy the same need Response profiles: - laid back (no response) - tiger (aggressive response) - selective (reacts to some but not all) - stochastic (unpredictable) What are the 9 Ms of a typical resource audit? Machinery Make-up Management MI Markets Materials Men Methods Money Analysing Porter's value chain, what are primary activities and supporting activities? Primary activities (inbound logistics, operations, outbound logistics, marketing and sales, service) Supporting activities (firm infrastructure, human resource management, technology development, procurement) What is the BCG matrix, what should a company do in each quadrant? Low market share and high growth - question mark. Should harvest or build. High market share and high growth - star. Should build. High market share but low growth - cash cow. Should hold or harvest. Low market share and low growth - dog. Should hold or divest. How can we analyse stakeholders attention? Level of interest high and power held high - these are key players, e.g. the funders. Care lots about these people. Level of interest high but power low - this might be the public. Perhaps we keep them informed but they can't necessarily hurt us. Level of power high but level of interest low - this might be the regulator. We basically don't want to mess things up with them. Level of interest low and level of power low - we don't care! What are Porter's three generic competitive strategies? Cost leadership: producing at the lowest cost in the industry Differentiation: provision of a product or service that the industry believes to be unique Focus (or niche): restrict activities to one section of the market. Can have a cost focus niche or differentiation niche. What is Ansoff's matrix of product/market strategies for growth? Existing product in an existing market - market penetration New product in an existing market - product development New market for an existing product - market development New product in a new market - diversification What is the SAF criteria for evaluating strategies? Suitability -- are we capable? Acceptability -- are the shareholders happy? Feasibility -- do we have enough money? How can we break down risk? Business risk and non-business risk. Business risks are specific to the business and its choices rather than more general. Non-business risk can be broken down into financial risk (credit and market risk), and operational risk (general risk everyone faces to do with processes/people/law/etc.) What are 4 key risk concepts that determine the scale of risk? Exposure - measure of the way a business is faced by risk Volatility - how the factor to which a business is exposed is likely to alter Impact - what loss will be suffered by the undesired outcome? Probability - how likely is that outcome to occur? What is involved in the risk management process? Awareness and identification, analysis (probability*impact) then response and control. How might we respond to different types of risk? High probability and impact - avoid (don't do) High probability but low impact - reduction (make less likely) Low probability but high impact - sharing (transfer through insurance) Low probability and impact - accept (do nothing) What are key differences between crises and disasters? A crisis impacts on customers, employees and other stakeholders, it therefore impacts externally. Can have a financial crisis (go bust), PR crisis (major cock-up), or strategic crisis (out of touch). By contrast, disaster typically doesn't have a direct impact on stakeholders. Disasters can lead to a crisis if left unchecked. A good example might be a fire at an office or factory. Disasters threaten business operations but can be mitigated with good contingency planning. What are the key characteristics of good information? ACCURATE: accurate, complete, cost-beneficial, user-targeted, relevant, authoritative, timely, easy to use What are the 4 Vs of big data? Which is unique to big data? Volume, Velocity, Variety, Veracity Key point is the velocity which is unique What is the distinction between structured and unstructured data? Structured - obtained with a particular purpose in mind (e.g. survey) Unstructured - obtained without a particular purpose (e.g. captured data from smartphones, or user generated data like tweets) What are the two underlying assumptions that financial information must be prepared under? What does the IASB say are the key qualitative characteristics of useful financial statements? Accruals basis accounting and going concern. Understandability, relevance, reliability, comparability. What is a management information system? How does it differ from an information management system? MIS converts data from mainly internal sources into information enabling managers to make better decisions. An example would be management accounts. Information management systems are more general. What are types of information management system and their uses? Executive support system: pools internal and external sources, allows senior managers make strategic, unstructured decisions. Decision support system: like an analytical model, e.g. net present value calculation Expert system: captures human expertise in a limited domain of knowledge to allow users to benefit, e.g. credit rating system Knowledge work systems: facilitate creation and integration of new knowledge, e.g. intranet Office automation system: increases workplace productivity, e.g. Microsoft office AI: self-learning information processing What are key controls for information security? Physical access: personnel, doors locked, etc. Integrity: data verification, data validation (check digits, range checks, limit checks) Backup: disaster recovery plan/regular backups/cloud storage Logical access system: basically passwords, need to know identity /authentication of the user Personnel selection: job rotation, review and supervision What is the overarching function, and three sub-functions, of the finance department? Overarching function of recording financial transactions (ledgers, entry books, etc.) Sub-functions: Management accounting (internal audience, pricing, budgeting, decision making, etc.) Treasury management (getting money for the business, cash budgets, finance decisions, managing risk, forex, etc.) Financial reporting (external audience, financial statements, tax, external regulation How do not for profit organisations measure their performance? The three Es (efficiency, economy, effectiveness) What are critical success factors and key performance indicators? Give an example of a pizza place. Critical success factors are generic things an organisation must do well to succeed. Key performance indicators are how we measure the achievement of CSFs. For example, a pizza place might have the CSF of speed of service, and a KPI may be number of complaints, mystery shopper results, how many times they had to give free pizza, etc. How can we distinguish debt holders and equity holders in terms of risk and return? Debt holders face lower risk but lower returns (debt often secured by fixed/floating charges, rank higher to receive capital back) Equity holders face higher risk but can enjoy higher returns What are key benefits of financial inter-mediation? Small amounts deposited by savers can be combined. Short-term savings can be transferred into long-term borrowings, search costs are reduced and risk is spread. What are key different forms of money transmission? General clearing - mainly cheques, takes 3-4 days Electronic funds transfer (EFT) - mainly debit/credit cards BACS - type of EFT that deals with salaries, standing orders, diret debits CHAPS - same day clearing for large payments SWIFT - similar to CHAPS but for international payments What is a primary and secondary bank? Primary: normal retail banks. Operate cheque accounts and deal with clearing. Secondary: merchant banks, generally deal in debt, do not take part in clearing. What are the two bodies of the bank of England that ensure financial stability? Financial Policy Committee - macroprudential responsibility for identifying, monitoring, and taking action to reduce risk (e.g. bank capital/equity ratios) Prudential Regulation Authority - supervise safety of regulated firms (deposit taking institutions, insurers and investment banks) What is the legal relationship between the bank and its customer? What are the 4 elements? Receivable/payable relationship Bailor/bailee relationship Principal/agent relationship (cheques) Mortgagor/mortgagee relationship What are some key duties and rights of the bank? Duties: honour cheques, repay amount deposited on demand, provide bank statement, confidentiality, reasonable notice of account closure Rights: charge reasonable fees, use customers money in a legal and morally acceptable way, be repaid overdrawn balances on demand, be indemnified against possible losses What are some key money market financial instruments? Treasury bills: very secure and liquid, but low returns Deposits: slightly higher risk and return than treasury bills (though not much) CDs (certificates of deposit): large, fixed term, tradable Gilts: longer term government debt, larger range of maturities and rates based on money market rates Bonds: company debt, decent liquidity, higher risk and return Commercial paper: similar to bonds, but for large companies How may a business access finance? - National stock markets - Banking system (primary and secondary banks) - Bond market (large organisations, large amounts of money) - Leasing - Debt factoring (usually smaller businesses, great for cashflow) - International markets (can raise money in different currencies, mitigate forex risk) What are some advantages and disadvantages of sources of debt finance? Overdraft: good because flexible and interest cost can be low since only paid when overdrawn. Bad because is risky as must be repaid on demand, can be expensive if permanently in overdraft Debt factoring: good because gets cash right away, and low risk. However, can be a bad deal How might a business finance itself throughout its growth? - First savings, small scale. - More growth, remortgage and leasing - Become ltd, perhaps share issue - Business angel/VC investment, loans and debt factoring - Very large now, secured debt and issue more shares - Multinational company, become plc How do bills of exchange and letters of credit help to reduce exchange risk? What other ways are there to mitigate this risk? A bill of exchange is drawn up by the exporter and sent to the buyers bank. The bank accepts the obligation to pay the bill, meaning payment is guaranteed. The seller may then sell/discount the bill to a third party in return for cash now (provides liquidity and mitigates risk of irrecoverable debt. Letter of credit provides a payment method where the exporter makes a deal with the buyer and a participating bank before the sale takes place. Seller (exporter) receives immediate payment less some discount, and the buyer gets a credit period before paying. Can also get more straightforward export credit insurance. What are the three basic aspects of the professional accountants work? Maintaining control and safeguarding assets Financial management Financial reporting What are criteria for ICAEW membership? 2 A levels or equivalent, 450 days training with an approved organisation, professional examinations, certificate of suitability of membership, admission and subscription fees. To maintain membership must obey rules and regulations, undertake continuing professional development. For public practice: must hold a practicing certificate, code of ethics, and be covered by professional indemnity insurance. What are the reserved areas of practice? According to the companies act, what does being a qualified chartered accountant allow you to be appointed as? - Statutory audit - Investment business - Insolvency practice - Probate Note that accountant is not a protected term. According to the companies act this qualifies you to be company secretary if the company is listed. What are the 5 fundamental ethical principals? Confidentiality, Objectivity, Professional competence and due care, Integrity, Professional behaviour What is IFAC and its aims? What are the UK members? What is the CCAB and who are the members? IFAC is the international federation of accountants - aims to protect public interest by ensuring high quality practices in accounting. Members are basically every UK accounting body. CCAB is the consultative committee of accountancy bodies. UK members are ICAEW, ICAS, Chartered accountants Ireland, ACCA, CIPFA. Notably CIMA is not a member since the focus is generally more on audit since accounting more regulated by the FRC. What area the three elements of regulation in the accounting profession? - Government legislation - The profession (self regulation) - Oversight mechanism (FRC) What is the PO team, and what do they have statutory power over? An organ of the FRC, main responsibility for supervision of auditing profession, statutory monitoring of the quality of auditing. Also has some non-audit areas where is makes recommendations: education, training, standards, ethical matters, professional conduct, etc. ICAEW and CCAB members have commitment to consider PO recommendations and either implement them or give a reason why they have not. With audit, the PO team can change audit procedures of firms, make recommendations for regulatory action, and refer matters to the PD team. What are the two main branches of the FRC? Conduct committee: professional oversight, professional discipline, corporate reporting review, audit quality review Codes and standards committee: actuarial policy, audit and assurance, accounting and reporting policy, corporate governance. Who are the audit and assurance council and what do they do? Part of the codes and standards committee of the FRC. Develop standards for auditing and assurance services and ethical standards relating to independence, objectivity, etc. Who are the corporate reporting committee and what do they do? Part of the conduct committee within the FRC. Responsible for public interest in large companies, look at departures from the companies act and can apply to court for orders of remedial action. Note that the corporate reporting review committee performs a similar role to the financial reporting review panel (FRRP). They are basically the same. What does the professional oversights team oversee? Audit and accountancy, as well as regulation of the actuarial profession by the professional actuarial bodies. Who are the audit quality review committee and what do they do? Part of the conduct committee of the FRC. Like the CRR and FRRP, they are responsible for public interest in large companies. However, they have a specific audit focus. What is the professional discipline (PD) and what do they do? Part of the conduct committee of the FRC, an independent investigative and disciplinary body for accountants and actuaries in the UK. Operates independent disciplinary scheme that covers members of all the major accounting bodies in the UK. Deals with cases that affect the public interest and there needs to be a ruling about misconduct. What is the actuarial policy team and what do they do? Part of the codes and standards committee within the FRC. Concerned with improving and establishing actuarial standards (generally technical stuff). How are financial services regulated in the UK? What are some smaller financial regulators that might affect the work of professional accountants? Twin peaks regulatory regime: Prudential Regulation Authority (PRA) which is part of the Bank of England, and the Financial Conduct Authority (FCA) which is an independent body. These financial bodies are relevant because they deal with regulation of financial instruments, investments, etc. Also, UKLA is part of the FCA and regulates all companies listed on public exchanges in the UK. Smaller regulators include the financial ombudsman and the pensions regulator. What is the professional standards department? How is it different from the PD? Professional standards department (PSD) is part of the ICAEW, responsible for dealing internally with complaints against members. A complaint that is very serious will be passed onto the FRC's PD which is the overarching discipline body. What is the ICAEW complaints and disciplinary procedure? What does the disciplinary committee have the power to do? The professional standards department has a number of steps in dealing with an issue: - Conciliation: try to find a practical solution without resort to formal investigation - Investigation Committee: gather evidence on the issue from the affected parties, if proven the accountant might accept a disciplinary order or a caution - Disciplinary Committee: if misconduct is serious, not enough to accept disciplinary order or a caution. More serious punishment (could be struck off) Disciplinary committee fine the firm, exclude ICAEW membership, or even take away the firms practising certificate. Note that there is an appeals committee consisting of 3 chartered accountants, one non- accountant member, and legal chairman. On what grounds may a client make a complaint against an ICAEW member? There are three key ones. Breaking the ICAEW code or departing from regulation Departing from ICAEW guidance Bringing the ICAEW into disrepute. What is the principal role of corporate governance? To protect the stakeholders of a company. Key issues involve domination of the board by a particular interest, inadequate controls, lack of independent scrutiny, overemphasis on short- term profitability. What are the 4 broad perspectives on the objectives of corporate governance? Corporate perspective: simply we want to maximise the wealth of the shareholders. Public policy perspective: ensure the company meets objectives of shareholders plus interests of other stakeholders and the public at large. Most broad perspective. Stakeholder perspective: all about aligning the interests of shareholders and companies with those of other stakeholders. Decisions will enhance perception of the business in the eyes of all stakeholders. Stewardship perspective on corporate governance: we act in the best interests of the company, we are stewards of the company resources. What are the contrasts between bank-based and market-based financial systems? What is an example of each? Bank based: France and Germany. - Households bear little risk and allocate more assets towards cash equivalents, comparatively more government regulation and banks are highly concentrated and integrated. - Bank lending most important source of business finance after retained earnings. - Markets are volatile and speculative because companies are dependent on bank finance. (since interest rate constant but profits fluctuate) - Less home ownership. Market based: UK and USA - Households bare more risk, greater access to investments in physical assets (house) - Institutional shareholders have great deal of influence (lots of indirect investment) - Markets more important than banks for long-term finance, comparatively unregulated and fragmented. - Banks have less close relationships with the businesses they lend to What are the five main principals for companies of the UK corporate governance code? What is the disclosure principal that companies must meet under UKLA rules? Leadership Board effectiveness Accountability/Audit Remuneration Investor relationships Must either comply or explain why not. What is the makeup of a typical company board? Who do these rules apply to? Executive and non-executive directors. NEDs should make up at least 50% of the board. Note that the 50% rule only applies to FTSE 350 companies, otherwise the minimum is two NEDs. Chairman responsible for running the board, ensuring open and constructive debate, and ensuring shareholder views are heard and communicated effectively with the board. For FTSE 350 companies, when should board members be re-elected? What about for other companies? Every year. Other companies executive directors should be re-elected at first AGM then at least every three years after that. Non-execs re-elected every year if served for more than 9 years. What three committees support sound corporate governance? Audit committee: at least three independent non-exec directors (two for smaller companies). Review financial statements and recommend external auditors, set policy for non-audit services. Remuneration committee: same as for audit committee. Recommend remuneration package for executive directors, significant part of package should be performance related. Nomination committee: at least three members, majority of whom must be independent non- executive directors. Recommend appointments of both executive and non-executive directors. What are two main types of board structure? Unitary board (UK) - basically does everything Dual/supervisory board (Germany) - management board who run the company, supervisory board elected by shareholders and employees. Represents shareholders and employees. What is the stewardship code? Similar to the UK corporate governance code, except for institutional investors (e.g. pension fund). What are the Nolan principles for business values? Integrity Objectivity Accountability Openness Honesty What are the further business values of the institute for business ethics? (FRTTT) Fairness Responsibility Trust Transparency Truth What are statutory requirements for all companies in addition to values? Equal opportunity for all No discrimination on any grounds Freedom of information What are the attributes and behaviours of ethical leaders? Openness Courage Fair mindedness Ability to listen Honesty Is having more opportunity to delegate a key opportunity of a flat business or a narrow business? Flat business Define a risk-seeking attitude An investment should not be undertaken if there is an alternative investment offering a higher risk What order should an organisation respond to risk? Avoidance, reduction, sharing (transfer), then acceptance If a company automates jobs, and borrows, do both these increase finance risk? What are the types of finance risk, are they general? Yes, since they decrease liquidity (this is a type of financial risk). Finance risk is general as it applies to all businesses. Types of finance risk include liquidity risk, gearing, default, and credit risk. What are the elements of business risk? Strategy, enterprise, product, economic (e.g. having your product respond badly to a downturn), technology, property. What are on the cyber essentials scheme of the UK government? Implement access controls, install internet gateways, use patch management software, malware protection, secure configuration. According to the IASB framework, when is financial information useful? When it both influences the decisions of users of the information and establishes management accountability. What are ways in which big data can create value for a business? Transparency, performance improvement, market segmentation and customisation, decision making, innovation, and risk management. What are the three main components of a company control system? Measurement of performance and comparison against targets, establishment of standards or targets to express planned performance, follow-up action to correct adverse results What is the main concern of the suppliers of an entity and the shareholders as readers of the financial statements? Primary concern of suppliers is liquidity, primary concern for shareholders is risk and return What is the fiduciary relationship between a bank and the customer? The bank is expected to act with good faith towards the customer What trading risk is the inability to finance the credit given to customers? Liquidity risk (not credit risk) Which part of the bank of England is responsible for the stability and resilience of the whole UK financial system? The Financial Policy Committee (not the FCA) What are the key controls which can ensure information security? Prevention - stop happening Detection - for example logs, can find out when changes have been made Deterrence - e.g. contract Recovery procedures - e.g. backups and checkpoint programmes Correction procedures - instituting stricter controls to ensure vulnerability is dealt with Threat avoidance - changing the design of the system Good data should be ACCURATE, what are these concepts? Accurate, complete, cost-beneficial, user-targeted, relevant, authoritative, timely, easy to use. Which role would usually process sales invoices and reconcile cash and bank. Which role would plan and prepare budgets and appraise potential investment projects? Financial accountant would do the first two, management accountant would do the last two. Difference between independence of mind and independence in appearance? Independence of mind is about your actual objectivity. Independence in appearance means avoiding situations where someone else could reasonably question your objectivity. How long must you have traded before being listed on London stock exchange? 3 years. Are you allowed to be chairman of two FTSE 350 companies? What about director of one and chairman of another? Can potentially have two chairman roles, however must show that you have available time. Cannot be director of one and chairman of another. What are the two main chapters of the Competition Act 1998, and what do they concern? What is the key distinction between anti-monopoly legislation and market regulation? Chapter 1: anti-competitive agreements such as collusion, price fixing, etc. Chapter 2: abuse of a dominant position such as a monopoly Anti-monopoly legislation is there to promote competition, while market regulation compensates for a lack of competition. Market regulation by itself does not promote competition. Which of these statements relating to the Disciplinary Tribunal (FRC) are true? No member can be an officer or employee of any of the professional bodies or FRC. Tribunal is not normally open to the public. First statement is true, important that the panel is totally independent. Second statement is false, tribunal is normally very open and transparent. What are the three main parts of the financial system? Securities, Intermediaries, Markets. Additional elements may include regulators, governance structures, etc. Who is responsible for promoting high standards of corporate governance in the UK? If a member of FTSE 100, is compliance with the code a statutory requirement? FRC No, compliance with the code would still not be a statutory requirement When may a non-executive director be classified as independent, even if they have worked for the organisation in the past? If they left at least 5 years ago Who actually votes to appoint the external auditor? For the audit committee, who may be considered to be on it? The shareholders - however usually this is on the recommendation of the audit committee Must be independent NEDs with at least one who has recent and relevant financial experience What will a rise in factor costs for a product be associated with? A contraction in both demand and supply What does an organisational chart show? The span of control in a company, as well as the scalar chain. What is the difference between product class, product form, and brand? Illustrate with reference to computers. Computer is a product class. Product form would be something like a laptop computer. Brand is then more specific like a dell computer. Difference between tactical information, planning information, operational information, and strategic information? Tactical information help deal with short-term issues and opportunities Planning information specifically involves helping those in the planning process Operational information is concerned with day-to-day issues Strategic information has longer term considerations Does a control total address both completeness and accuracy? What is the characteristic that determines both if information is good quality and valuable? Yes Whether or not it is relevant What type of new share issue would normally be underwritten? Rights issue What are three market imperfections associated with financial markets? Information asymmetry, transaction costs, insider dealing. When the remuneration committee creates a new incentive scheme, who must approve it? The shareholders What are theory X and theory Y? What other theories might we compare them to? Theory X is like scientific management. Means that generally people dislike work and lack ambition, they prefer to be led. Requires a system of coercion and control with punishment. People will be motivated by wages. Theory Y is like the top of Maslow's hierarchy or Herzberg's motivating factors. Commitment to objectives driven by rewards, self-actualisation is the most important. People like responsibility and to expand their intellectual potential which is only partly used.