Accountant in Business (AB) (Answers to test-3) (Sep19-Aug20)

Answers to practice test-3:

Section A:
1. Proficiency test (2 marks)
A proficiency test would be the most appropriate selection method to prove that
the typists have the ability to perform the tasks. Psychometric test does not show
the ability to do the job. Interviews are time-consuming selection method,
therefore less appropriate in a particular situation.

2. Spreadsheets (1 mark)
A spreadsheet is like a big sheet of paper divided into rows and columns, with
built in calculator. Any calculations/formulae will automatically update when data
is changed. A database is more concerned with the storage of data.

3. Preconceptions of the receiver (2 marks)

Psychological noise results from preconceived notions we bring to conversations,
such as racial stereotypes, reputations, biases, and assumptions. When we
come into a conversation with ideas about what the other person is going to say
and why, we can easily become blinded to their original message.

4. Public companies are subject to a greater degree of separation between

those who manage the company and those who own it (2 marks)
Corporate governance is of special importance to public companies because of
the greater degree of separation between those who manage the company and
those who own it. Public companies are subject to a higher degree of regulation
than other types of commercial organisation and they have ethical responsibilities
to all their investors equally. Other types of business organisation are not subject
to corporate governance at all e.g. sole traders and partnerships.

5. Tell and listen (2 marks)

This is a tell and listen appraisal style, under which the manager tells the
subordinate how he has been assessed and invites him to respond.

6. Distribution of surplus profits in proportion to purchases (1 mark)

Co-operative businesses are owned and run by their workers or customers, who
share the profits. The other points are features of non-governmental organisations
(NGOs).

7. Diagonal (1 mark)
Diagonal communication occurs between people in different departments and of
different ranks.
Accountant in Business (AB) (Answers to test-3) (Sep19-Aug20)

8. Phishing (2 marks)
The scenario describes 'Phishing'. The other options are other forms of cyber-
attacks. Here is the main differences between them:
Phishing is the fraudulent practice of sending emails purporting to be from
reputable companies in order to induce individuals to reveal personal information,
such as passwords and credit card numbers. Ransom ware is a type of malicious
software designed to block access to a computer system until a sum of money is
paid. Distributed denial-of-service (DDoS) attack is a malicious attempt to disrupt
normal traffic of a targeted server, online service or website by overwhelming the
target or its surrounding infrastructure with a flood of internet traffic. Hacking is
the gaining of unauthorized access to or control over computer network security
systems for some illicit purpose.

9. A birth rate of 12 per thousand and a death rate of 10 per thousand (2 marks)
The largest increase in the long term will occur with the largest positive difference
between birth and death rates, that is a birth rate is 12 per thousand and the
death rate is 10 per thousand.
10. It evolves over time and can change rapidly (2 marks)
The informal organisation has the advantage of being able to evolve over time
and can change rapidly if necessary, where the formal organisation may have
rigid set procedures and lengthy lines of communication. Communication flows in
any direction (upward, downward, horizontally) and is usually faster compare to
the formal organisation.

11. System (1 mark)

The fault lies with the formal communication system - memoranda need to be
delivered more promptly.

12. Pragmatist (2 marks)

As George likes to base his opinions on what works in practice, he is a
pragmatist. George is impatient with theory and so is not a theorist. A reflector
likes to observe and think about things, so George is not a reflector either. An
analyst is not one of Honey and Mumford's learning styles.

13. 1, 2 and 3 (2 marks)

When faced with an ethical dilemma, a professional accountant could consult with
the appropriate people within his organisation, which may include the directors or
the audit committee. If the matter cannot be resolved internally, the accountant
should then seek professional advice either from a relevant professional body or a
legal adviser.

14. Yes/No (2 marks)

Handy's power culture is shaped by one individual, which means that a business
where a founding family member exerts significant influence does typify Handy's
power culture, while one that relies on specialist expertise does not.
Accountant in Business (AB) (Answers to test-3) (Sep19-Aug20)

15. It takes account of job context (1 mark)

On-the-job training uses real work tasks as learning experiences, so the training
is automatically given appropriate context and a ''hands-on'' approach. Focus on
learning away from interruptions is a feature of off-the-job training.

16. Reduced levels of taxation (1 mark)

Cuts in taxation would stimulate demand in the economy because companies
and households would have more after-tax income to spend or invest. A policy of
high interest rates and strict credit controls, vice versa, make borrowing process
more difficult and expensive, so that companies have to raise prices for its
goods/services leading to fall in consumer demand.

17. Tactical (2 marks)

Anthony's hierarchy suggests that managers exercise business control at the
tactical level, whereas those charged with governance and the board of directors
exercise business control at the strategic level.

18. The bargaining power of customers may be reduced if products can be

differentiated effectively
Threat of new entrant is lower when existing suppliers derive purchasing
economies of scale (2 marks)
As far as products are perfect substitutes, customers are indifferent which goods
to purchase and can easily switch from one supplier to another (high bargaining
power). Once producers can differentiate its products by some unique features,
the customers will prefer one supplier to another (bargaining power reduced).
If existing suppliers derive purchasing economies of scale, they are able to
supply goods at lower prices compare to new entrants, thereby create significant
difficulty for new companies to compete with them.

19. Access to a database is password protected (1 mark)

A non-discretionary control is one provided automatically by the system and
cannot be overriden.

20. Chairman and Company secretary (2 marks)

Correspondence between a company registration body and the company is sent
to the company secretary. The chairman is responsible for ensuring that essential
administrative requirements come to the attention of the board. Therefore the
chairman and the company secretary should be different people.

21. Resources are scarce, especially capital funding for new projects (2 marks)
Work methods and working styles vary significantly between departments
Conflict often arises when resources are limited or scarce, because individuals or
groups feel they have to compete for these resources. They feel that if someone
gets the resources, there may be none left for them. Conflict can also arise as a
result of differences and incompatabilities in work methods and working styles.
Staff (or departments) can get frustrated by the differences between the way they
are working and the ways others are working. By contrast, the alignment of goals
and staff not being overly busy are likely to reduce the scope for conflict. Conflict
often arises if individuals or teams have their own goals or interests which are
Accountant in Business (AB) (Answers to test-3) (Sep19-Aug20)

incompatible with others, rather than if they are aligned. And conflicts are more
likely to develop if people feel under pressure and highly stressed.

22. Suppliers and Customers (2 marks)

The connected stakeholders are suppliers and customers. Employees and
managers are internal stakeholders.

23. Tax reference number issued by the tax authority (2 marks)

Standing data is permanent data that does not change, such as employees’
names, addresses, dates of birth, dates of starting employment, employees’
numbers, rates of pay and tax code (tax reference number issued by the tax
authority).

24. Proficiency test (1 mark)

This is the definition of a proficiency test - is the individual currently able to
perform a specific task/operation. Aptitude is about future potential, intelligence is
not task specific.

25. 2 and 4 - Specific and Measureable (2 marks)

Goals set by individuals need to be SMARTER: S – Specific, M – Measurable,
A – Attainable, R – Realistic, T - Time-Bounded, E – Ethical, R – Recorded.
26. Objectivity (1 mark)
According to the code of ethics, a threat to the fundamental principle of objectivity
may arise.

27. BTH Co's wages and salaries cost schedules

Variance reports for wages and salaries (2 marks)
The operations director is specifically interested in the impact that recruiting extra
staff is having on staff costs. These staff costs will primarily be wages and salary
costs, so looking at the wages and salary schedules will allow the director to see
what BTH Co's actual staff costs currently are. Reviewing the variance reports for
wages and salaries will then allow the director to see how the current actual costs
compare to the budgeted figures. BTH Co's administration costs as a whole are
likely to include a number of other costs apart from staff costs. In this case, the
director is looking specifically at staff costs, so reports specifically about this area
will be more useful to him than reports about a wider area of costs.

28. True (1 mark)

The statement is true and is consistent with the alternative term for Blockchain,
being distributed ledgers. Blockchain is a data structure that holds transactional
records in chain (records stored in the forms of blocks, which are controlled by no
single authority). Such system ensures security, transparency, and
decentralization and most commonly used for transactions made in bitcoin or
another cryptocurrency.
Accountant in Business (AB) (Answers to test-3) (Sep19-Aug20)

29. Recalling faulty products before customers become aware of the faults
(1 mark)
A proactive strategy means taking full responsibility for actions, taking action to
deal with situations before they are forced to.

30. Name and address

Rate of pay (1 mark)
Standing data does not change in the short term - an employee's name/address
and rate of pay meets this definition, whilst gross pay to date increases each
week/month.

31. Perfect complements (2 marks)

Perfect complements have a cross-elasticity of demand of -1, whereas perfect
substitutes have a cross-elasticity of demand of 1.

32. Interpersonal (1 mark)

The interpersonal role may be as figurehead, leader or liaison, dependent on
formal authority or position.

33. 1 and 3 only (2 marks)

Openness involves giving people full and complete information, and the reasoning
behind any decisions - in this case, that the decline in sales had made the job
cuts necessary. And although the managing director could not give exact
numbers, he tried to give as much information as he could about the extent of the
redundancies. Respect involves treating people with dignity and adopting a
professional manner. Rather than leaving people to wonder about the rumours,
the managing director addressed the issue directly, even though the news was
not good for the staff. Accountability involves taking responsibility for any actions
or advice given. The scenario does not give any indication that the managing
director says he feels responsible for the situation, so accountability should be
rejected as an option here.

34. The external auditor's procedures should provide reasonable assurance

that misstatements arising from fraud will be detected (2 marks)
The external auditor does NOT have any responsibility to ensure that ALL internal
systems are capable of detecting EVERY type of fraud, nor he/she is responsible
to prevent and detect fraud (as there are some types of fraud which is very
difficult to detect, e.g. in case of collusion). Thus, responsibility for preparation of
financial statements, as well as fraud prevention and detection fully lies with the
directors. However, it would be incorrect to state that the work of the external
auditor has nothing to do with fraud prevention, as it is the main reason for
arranging audit check. Therefore, the primary responsibility of the external auditor
is to provide reasonable assurance that misstatements arising from fraud will be
detected (providing professional and independent opinion of the financial
statements, but not an absolute assurance from fraud and full responsibility for
the financial statements).
Accountant in Business (AB) (Answers to test-3) (Sep19-Aug20)

35. Interest - Low level

Power - High level (2 marks)
According to Mendelow's grid, the organisation aims to keep a stakeholder
satisfied when the stakeholder has high power but low interest.

36. Affinity or common interests (2 marks)

An informal group consists of people who have common interests. Other three
options are features of a formal group.

37. Professional competence (1 mark)

Of ACCA's 5 fundamental principles, professional competence incorporates the
need to stay up to date with technical knowledge.
38. External auditors report to shareholders on the stewardship of directors
(1 mark)
The purpose of external audit is to give a professional and independent opinion
of the financial statements and the way they have been prepared - this includes
whether or not directors have acted properly as agents of the shareholders. The
other two statements are about internal audit (often employees of the company,
add value and improve an organisation's operations).

39. Failure to communicate the potential problem (2 marks)

Failing to meet deadlines and failing to comply with requirements (on grounds of
either quality or quantity) are all potentially ways an employee could be
ineffective. However, in this scenario, we do not know what 'the problem' was in
order to assess whether failures relating to deadlines, quality requirements and
quantity required are relevant or not. The employee's ineffectiveness was in
failing to communicate that there was potentially 'a problem' at all.

40. All personal data held by data users should be adequate for the purposes
of the data user but not excessive (2 marks)
Best practice recommends that all personal data held by data users should be
adequate for the purposes of the data user but not excessive. Other aspects also
contribute to personal data protection, but they are not specifically addressed.

41. Calculating the maximum discounts that sales personnel are permitted to
offer (2 marks)
The analysis of costs and revenues from different products would give details of
the profitability of each range of products and so would assist the marketing
department in calculating the maximum discounts that sales personnel are
permitted to offer, in order to earn desired profit margin. This type of costing
analysis would not help in differentiating the technical features from those of
competitors and would give no information about socio-economic groups who
might buy the products. The marketing department is concerned with sales and
so would have no interest in determining production bonuses.
Accountant in Business (AB) (Answers to test-3) (Sep19-Aug20)

42. Esteem (2 marks)

Maslow's hierarchy of needs consist of the following human needs from the top
downwards: self-actualisation – esteem – social and belonging – safety –
security.

43. Obey the law, and conduct themselves with honesty and integrity
Avoid engaging in any activity where their personal interests interfere, or
appear to interfere with those of the company (2 marks)
The key principles contained within a Code of Ethics include a commitment that
the directors and employees of a company will obey the law and any applicable
regulations, and conduct themselves with honesty and integrity; and they will
avoid engaging in any activity where their personal interest interferes, or appears
to interfere with those of the company.
Another of the principles in a Code of Ethics should be that the company will
respect the rights of their customers, suppliers and competitors, and deal fairly
with them. Sometimes dealing 'fairly' in this way may mean that a company
accepts a lower profit in the short term than it could by acting less ethically. For
example, a company could increase its profits, by reducing the price it pays to its
suppliers. However, such a course of action would not be ethical if it results in low
quality of the goods or hardship for the supplier.
The other companies in the sector may not have a Code of Ethics, and may be
acting unethically. So simply maintaining the same standards as them may not
help a company to act ethically.

44. Rigid supervision may block employee initiative

Decision making and responses tend to be slow (1 mark)
In tall organisations rigid supervision can be imposed, blocking initiative. Decision
making and responses are slow, as the strategic apex is further away. The
advantage of tall organisations is that each manager supervises small group of
employees, therefore has enough time for tight control.

45. Codes of conduct implemented by professional bodies (2 marks)

Ethical standards of behaviour in the accountancy profession are mainly
promoted by codes of conduct implemented by the professional bodies e.g the
ACCA code of conduct. Other three options are related to general ethical rules,
laws and regulations, but not to professional standards of behaviour.

46. No/Yes (2 marks)

A manager can delegate authority but not accountability.
Accountant in Business (AB) (Answers to test-3) (Sep19-Aug20)

Section B:
Question-1:
Task-1: Cyclical Unemployment (1 mark)
Egalitaria is facing serious economic and financial difficulties, meaning that the country
is now at the recession phase of the business cycle. A reduction in consumer demand
has been identified as the cause of the unemployment. This represents a demand-
deficient or cyclical unemployment.

Task-2: Sales Tax (1 mark)

Indirect taxes are collected by intermediaries (e.g. suppliers), as opposed to direct taxes
which are paid directly to the authorities by the individual or entity. Sales tax is an
indirect tax, whilst the others are direct, and therefore could not contribute to the cost-
push inflation.

Task-3: (1 mark each)

Fiscal policy - Government grants and direct tax increases
Fiscal policy seeks to manage aggregate demand in the economy via government
income, expenditure and borrowing. Grants are a part of government expenditure, and
direct taxes are a form of government income.

Monetary policy - Increase in interest rates

Monetary policy looks to control the money supply and the monetary system, in part via
interest rates.

Question-2:
Task-1: Matrix (2 marks)
A matrix structure splits an organisation in two ways, often a functional split on one axis
and a product/customer/project split on the other. Employees have more than one line
of authority. In XYZ Co each of the workers reports to two different managers (a product
manager and a training manager), indicating a matrix structure.
Accountant in Business (AB) (Answers to test-3) (Sep19-Aug20)

Task-2: (1 mark each)

Duplication of effort - Geographic
Geographic structures will tend to encourage duplication of functions which might be
more efficiently centralised in other structures.

Vertical barriers - Functional

Functional structures are usually organised on a hierarchical basis, where information
formally passes up and down a chain. Because communication and decisions have to
pass through many organisational layers this can cause barriers.

Question-3:
Task-1: (0.5 mark each)
Internal Auditor:
 May be remunerated as employees
 Responsible for control systems in the organisation
 Primarily responsible to the audit committee

External Auditor:
 Address the shareholders at the annual general meeting
 Must be licenced or members of a recognised supervisory body

Both: Discharge their duties independently

 Whilst the objectives of internal and external audit have many differences, they
both encompass a need for independence.

 The role of the external auditor is to report to the shareholders at the general
meeting. The internal auditor reports to the audit committee or in smaller
companies, directly to the board of directors, but not to the shareholders.

 It is the role of the internal auditor to maintain the integrity of control systems.
The external auditor will test control systems, and may place some reliance on
them, but is not responsible for them.

 Whilst internal audit may be outsourced, internal auditors are usually employees.
External auditors are never employees, but are external, independent
professionals.

 External auditors must meet licensing requirements, and in most countries must
be members of a recognised supervisory body. There are no such requirements
for internal auditors.

 The internal auditor reports to the audit committee or in smaller companies,

directly to the board of directors. The external auditor is responsible to the
shareholders.
Accountant in Business (AB) (Answers to test-3) (Sep19-Aug20)

Task-2: (1 mark)
Express a professional opinion on the financial statements

The primary responsibility of the external auditor is to express a professional opinion on

the financial statements, not to validate all transactions (they could not check them all)
or to detect or prevent fraud (this responsibility lies with the directors).

Question-4: (0.5 mark each)

Implementer - Jabez
The implementer (or company worker) is described by Belbin as disciplined, reliable,
conservative and efficient, turning ideas into practical actions, but perhaps a little
inflexible and unresponsive to new ideas. Jabez is therefore the implementer.

Shaper - None
The shaper is described by Belbin as challenging, dynamic, and thrives on pressure,
with the drive and courage to overcome obstacles, but can provoke others and hurt
feelings. None of the individuals match this description.

Plant - Melody
The plant is described by Belbin as creative, imaginative and unorthodox, able to solve
difficult problems but tending to ignore details and be too preoccupied to communicate
effectively. Melody is therefore the plant.

Resource investigator - Agnetha

The resource investigator is described by Belbin as extrovert, enthusiastic and
communicative, able to explore opportunities and develop contacts, but tending to be
over-optimistic and lose interest after initial enthusiasm. Agnetha is therefore the
resource investigator.

Coordinator - None
The coordinator (or chairman) is described by Belbin as mature and confident, able to
clarify goals, promote decision making and delegate, but can be seen as manipulative.
None of the individuals match this description.

Monitor-evaluator - None
The monitor-evaluator is described by Belbin as sober, strategic and discerning, able to
see all options and judge accurately, but lacking drive and the ability to inspire. None of
the individuals match this description.

Team worker - None

The team worker is described by Belbin as cooperative, mild, perceptive and diplomatic,
able to listen and avert friction, but indecisive in crunch situations and easily influenced.
None of the individuals match this description.

Completer-finisher - Guna
The completer-finisher is described by Belbin as painstaking and conscientious, able to
search out errors and deliver on time, but reluctant to delegate and with a tendency to
challenge people on the most minor of points. Guna is therefore the completer-finisher.
Accountant in Business (AB) (Answers to test-3) (Sep19-Aug20)

Question-5:
Task-1: (1 mark each)
(X2)
At the point between sender and message, the message is encoded and sent. The
code/language used may be spoken, written, or non-verbal, so may include words,
symbols and gestures.

(X6)
At the point after the receiver receives the message, feedback occurs to communicate
the understanding and reaction of the receiver. The code/language used may be
spoken, written, or non-verbal, so may include words, symbols and gestures.

Task-2: (0.5 mark each)

 Categorising the receiver according to social class – No

Differences in social background may lead to the views of individuals being

discounted because of who they are rather than what they say. Categorising
according to social class may, therefore, be negative and even destructive,
creating barriers rather than overcoming them.

 Taking the receiver's culture into consideration – Yes

The receiver’s culture can have an important bearing on how they relate to a
message and what they understand to be its implications. Taking this into
account should therefore enhance the effectiveness of communication.

 Using technical and complex language – No

The use of technical and complex language will often create barriers rather than
overcome them – people with different backgrounds may not understand jargon,
or even information that is too detailed for their needs, and may not seek
clarification.

 Using gestures to support the spoken word – Yes

Non-verbal communication such as gestures may help set the tone and context
of the spoken word, and in this way help overcome barriers.
Accountant in Business (AB) (Answers to test-3) (Sep19-Aug20)

Question-6:
Task-1: (0.5 mark each)
Gerard – Teleological
Teleological ethics considers whether the consequences of decisions or actions are
beneficial or detrimental. Gerard is concerned about the consequences of Ferenc’s
actions, as he is worried about the organisation losing Francine’s talent.

Hans – Deontological
Deontological ethics is based on duty. Duties may be set out in legislation, contracts,
best practices or commonly accepted behaviours. Hans is concerned with duties
expected by a professional body.

Iain – Teleological
Teleological ethics considers whether the consequences of decisions or actions are
beneficial or detrimental. Iain is concerned about the consequences of disclosure, being
worried that not only Francine but also her colleagues may be adversely affected.

Jane – Deontological
Deontological ethics is based on duty. Duties may be set out in legislation, contracts,
best practices or commonly accepted behaviours. Jane is concerned with the duty of
good faith expected by the employer.

Task-2: (1 mark each)

Objectivity and Confidentiality

The ACCA rulebook defines five fundamental principles: integrity, objectivity,

professional compliance and due care, confidentiality and professional behaviour.

Trust, accountability, respect and openness are common values adopted by

organisations.