Test: Sample Questions and Case Studies

Question 1- F1

Which TWO of the following are MOST likely to help reduce tax avoidance and evasion?


Read more
Incorrect

Question 2 - E1

Which of the following technology trends is unlikely to raise ethical issues?


Read more
Incorrect

Question 3 - P2

S is evaluating two possible locations for its new factory. Location A is close to a large city which has a great deal of unemployment and so labour can be recruited easily. It is close to transport links and land is more expensive. Location B is in a more remote site where land is cheaper. The factory will have a high ecological footprint, with emissions that are barely within the maximum permitted by law. Question: Which TWO of the following statements are TRUE?


Read more
Incorrect

Question 4 - F2

KL has announced that it wishes to sell one of its subsidiaries, F, because of its poor liquidity position. On 31 December 20X3 (the last day of F’s financial year end), the directors of KL purchased inventory from F at a price of $2 million and paid in full. This inventory has originally cost F $1.2 million. The directors of KL intend to reverse this sale in January 20X4. Which of the following statements in respect of this transaction is true?


Read more
Incorrect

Question 5 - P3

H has started to offer a new service in response to pressure from environmental campaigners. Up to five years ago, many of the components sold by H contained toxic materials. Recent legislation in Europe requires components to be recycled in specific ways to minimise any environmental damage. H has told customers that when they purchase new components they can give the old components to H and then the company will recycle them in accordance with the new legislation. This service has provided some publicity for H and has featured in its recent social and environmental report. However, a review of H’s recycling procedures by its internal audit department identified that many components, including some that contain toxic materials, are simply thrown away by H’s staff rather than being recycled. Which of the following statements are correct?


Read more
Incorrect

Question 6 - Strategic Level

Cast employment practices dilemma Judith, your manager at Cast, reads an extract from a recent news article to you: “Recent revelations about Cast's employment practices have tended to undermine the company's reputation. Practices mirror its status as a family-owned company whose shareholders view every penny spent on staff welfare as a personal cost. Most of Cast's staff are employed at the company's large distribution centres where goods are packed and shipped to customers. The pace of work is relentless, with employees required to pack and label 100 items per hour in order to keep pace with their daily quotas. The work is badly paid, but the centres are located in areas of high unemployment and employees who leave are replaced quickly and easily. Predictably, Cast's director of human resources responded to the concerns raised by saying that the employees were free to work wherever they wished and that Cast met all relevant rules concerning minimum wage and health and safety.” Judith continues: “People think that we pay badly, but the law sets a statutory minimum wage and we pay a good 10% more than that to even our worst-paid staff. The directors are furious that we have been portrayed like this. They want to argue that we are nice people, because we create jobs in an area of high unemployment. I think that we need a bit of a balanced debate inside the company before we start making rash statements to the press. I want you to put together a discussion of the ethical implications of Cast's employment practices.” Which TWO of the following statements are TRUE?


Read more
Incorrect
Please choose your answers and then press "Submit Answers".

May 2015 - Management Case Study Variant 1

This excerpt is based on the Management Level case study related to Flote, one of the world’s largest transport companies. The primary business is in shipping and managing the movement of shipping containers. 

You’ve just received an email from the head of Flote’s Public Relations department, referencing a statement posted the previous day on a popular social media site:

“I see that Flote have bought themselves the world’s largest container ship. That makes it even more difficult for us to tell how profitable the company really is. It is impossible to compare depreciation charges with the other shipping companies as it is. Now we’ll have to trust Flote to estimate the useful life of a brand new class of ships that nobody has ever operated before.

The information in the accounting policies note was never very useful as it was. The company states that ‘depreciation is charged to the statement of profit or loss on a straight-line basis over assets’ useful lives’. We are told that the useful lives of ships are generally 20 to 25 years. Which is it – 20 or 25? What rate will be used for the new ship? One of Flote’s closest competitors makes a similar statement, but claims that its ships have lives of 20 to 30 years. Hasn’t Flote ever heard of maintenance?

I think that we should be concerned here because the directors are clearly more excited about having the largest and latest ships than about providing shareholders with value for money. They can justify anything they like because they produce the accounting numbers. However, have they forgotten that they cannot control the market’s reaction?”

Consider what business issues could arise as well as what are the ethical concerns.

All you know about this shareholder is that he or she is an individual rather than an institutional investor. Several other shareholders already commented on this post, stating that they agree with it.

The Head of PR has asked you to explain the ethical issues that could arise if Float’s Public Relations department posts a strong denial of the points made in this blog.

You should consider what may be the most relevant principles from CIMA in addressing the dilemma and what the next steps should be.

There are many resources to help you further your understanding of the importance of ethics in management, as well as the growing emphasis on ethical corporate culture and related good governance and sustainability issues. These will help bring to life the issues that will arise in exams, as well as add context to your working life and ongoing CPD.   

View resources

Related Content