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CIMA Fundamentals of Ethics - Corporate Governance and Business Law Sample Questions:

1. Members of private companies often enter into so-called "shareholder agreements". Which of the following elements of a shareholder agreement are NOT true of articles of association?
(i) A shareholder agreement is a private document not open to public inspection.
(ii) All the provisions of a shareholder agreement have contractual force.
(iii) The terms of a shareholder agreement can only be amended by unanimous consent and not by majority agreement.

A) (ii) and (iii) only
B) (ii) only
C) (i) only
D) (i), (ii) and (iii)

2. 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?

A) Tell the client she is unable to do as he asks, but she would be happy to write a letter to the bank explaining his financial position
B) Do as the client asks; her mother's health is more important than her professional standing
C) Tell the client she is unable to do as he asks, but that she knows another accountant who is happy to do that kind of thing
D) Do as the client asks, after all the banks can afford it

3. Which of the following is CORRECT in relation to an alteration of a company's articles of association?
(i) A copy of the resolution and the amended articles must be filed with the Registrar of Companies within 15 days of the date of the resolution.
(ii) The articles of association may be amended by an ordinary resolution with special notice.
(iii) An alteration of the articles cannot discriminate between the majority and minority shareholders.

A) (ii) only
B) (i) and (ii) only
C) (i) only
D) (i) and (iii) only

4. Decklt is a skateboard manufacturer that is ethically run and has a good reputation.
However, it has just transpired that one of their suppliers - with whom they have a good relationship with due to their cheap prices - is involved in a serious fraud case.
What should Decklt do?

A) Stick with the supplier but let the relevant regulatory bodies know that Decklt had nothing to do with their illicit activity.
B) Immediately cut all ties with the company and look for a different supplier.
C) Immediately cut all ties with the supplier and discontinue all products that are made using their materials.
D) Stick with the supplier as they won't be able to find cheaper prices elsewhere.

5. Seller Ltd is a wholesaler of electrical goods which it sells to retailers only Which one of the following statements is correct in relation to the exclusion of the conditions which are implied into contracts for the sale of goods by sections 12 to 15 of the Sale of Goods Act 1979?

A) Seller Ltd cannot exclude section 12 but can exclude sections 13 to 15 where reasonable
B) Sections 12 to 15 of the Sale of Goods Act cannot be excluded in any non-consumer sales
C) As Seller Ltd is only involved in non-consumer sales it may exclude all the conditions implied by sections 12 to 15 of the Sale of Goods Act 1979
D) Seller Ltd may exclude section 12 where reasonable but not sections 13 to 15

Solutions: