F1 Accountant in Business Answers explanation

Mahmood Ahmed Khan

MCQs
1.
a. is incorrect. Systems audit is conducted to review the compliance with and
working of internal controls
b. is incorrect. Transaction audit is conducted to review individual transactions
to identify if there is any fraud or error
c. is incorrect. Probity audit is another name for Transactions audit.
d. is correct. Operational audit is conducted to review the economy,
effectiveness and efficiency of operations. In the scenario, low quality
inventory is being purchased, high prices are being paid, and labor
(purchasing staff) hours are decreasing while fixed payments of staff are
increasing. This means the operations in purchasing departments are not
economic, effective and efficient. Thats why an operational audit is required
2. Companies might have different ways (strategies) to fulfill social responsibility i.e.
different approaches to CSR. Proactive strategy means the company considers
social responsibility at its heart and fulfills it in the first place without anyones
intervention. Reactive strategy means the company considers social responsibility
when others in the industry do so. Defensive strategy means that the company
fulfills its social responsibility to the minimum level to avoid legal penalties or fines.
Accommodation strategy means company fulfils social responsibility to the
minimum but is ready to accommodate if it is asked or it considers or is pressurized
to go above the minimum.
a.
b.
c.
d.

is incorrect
is correct
c is incorrect
d is correct

3. Integrity means being straight forward and honest and avoiding being part of any
illegal activity. Objectivity means conducting assignments as per standards and
avoiding conflicts of interest. Professional competence and due care means
updating professional knowledge on a regular basis so that competent and updated
services can be provided to the client. Confidentiality means respecting the privacy
of client information and not disclosing it to anyone unless the client permits or the
law requires or it is in the public interest. Professional behavior means avoiding
anything that brings disgrace to the auditing profession or the firm or the individual
auditor. In this case Katara is in breach of Professional competence and due care
so the correct answer is(d) None of the above
4. Money laundering is a process of investing criminal proceeds in a business and
rolling it over to hide its criminal source. Placement is when criminal proceeds are
invested in a business, Layering is when it is rolled over in legal business and
Integration is when criminal proceeds are earned as legal proceeds. In this case
Moly wants to rollover 1m earned from misappropriating company accounts in a
casino to hide its criminal source. So it is Layering

F1 Accountant in Business Answers explanation

Mahmood Ahmed Khan

5. Business environment is the surrounding of a business. In other words The

factors affecting a business are collectively called its environment. If the factors
affecting a business change continuously and dynamically and are many in number,
the environment is called Complex and Dynamic environment. Therefore the
correct answer is (c)
6. Vroom explained that a persons motivation can be measured by multiplying the
strength of the need with the expectancy of achieving it. If a person has a high need
for something and fairly believes that what he is doing will lead him to his goals, he
will have high motivation. In this case Ching needs experience of accounts but he
believes that his job cannot make him an accounts expert thats why Chings
valence is high but his expectancy is low.
7. Option a is incorrect. Behavior means acceptable or unacceptable behavior.
Option b is correct. Artefacts are those elements of culture that give its impression
in the first place. Dress codes, company logos, role models and interior designs etc.
are artefacts. Option c is incorrect. Rituals are the collective behavior of a group of
people such as celebrating Christmas. Option d is incorrect. Norms are the ways of
doing things such as paying employees on the 1 st of every month.
8. Barriers in appraisal means such things which are hurdles in achieving its main
purpose i.e. improving organisational efficiency. Appraisal as bureaucracy means
conducting appraisals for formality. Appraisal as an annual event means
establishing improvement targets but not following them up. Appraisal as an
unfinished business means discussing about past performance but not setting
future improvement targets. Appraisal as an informal chat means discussing issues
other than performance. In the case of Finland plc, weaknesses in employees
performance are identified but improvement targets are not set. Also performance
appraisal is motivated by company policy requirements only i.e. formaility.
Therefore the correct answer is b
9. It is an explicit provision in Sales of the goods act that the items in delivery must
match those in sample. So, the correct answer is b
10. David Kolbs learning cycle has four elements. Experience this is when a
person does something. Reflection is when experience is reviewed. Abstract
concepts and generalizations is when conclusion is drawn from experience.
Applying implications of concepts to a new situation is applying the learning from
previous experience to the next. Martins preparation of detailed documents to
avoid his past mistakes is c. Options a, b and d are incorrect
11. Relevance in context of appraisal means appraisal should be relevant to the job.
Serious intent means it should be given due consideration. Fairness means it should
not be biased. Efficient means it should be cost efficient. So the correct answer is d

F1 Accountant in Business Answers explanation

Mahmood Ahmed Khan

MTQs
1.
a. Self-review threat is where an auditor audits his own work. For example
if tax calculations are prepared and audited by the same auditor, this is
self-review and therefore self-review threat. Advocacy threat is where
an auditor advocates (promotes) a client so much that it threatens the
auditors independence. Familiarity threat is where an auditor has
familiarity within the client such as a close friend on clients key
position through which he/she can influence audit. Association threat is
where the same auditor audits a client for a long time. This creates
unnecessary proximity between client and auditor and therefore
threatening auditors independence. The correct answer is iii & iv
b. Deontological ethics is when an auditor makes ethical decision on the
basis of his duty not considering the consequences of his actions.
Teleological ethics is when an auditor considers consequences of his
action to decide in an ethical dilemma. ACCA code of conduct sets the
principals which explain what an auditor should do in an ethical
dilemma considering his professional duty. The correct answers are;
i. Statement (b)
ii. Statement (a)
2.
a. John exhibits Activist learning style
Activists are those learners who prefer learning by doing. They
like group discussions and like to take pressure. They are fast
pace learners
b. Samuel exhibits Theorist learning style
Theorists are those learners who prefer hands off learning
approach. They like research and are deeply concerned with
logics. They are usually slow pace learners
c. April exhibits Pragmatist learning style

F1 Accountant in Business Answers explanation

Mahmood Ahmed Khan

Pragmatists are those learners who learn when they see

practical applications of something and are good in hands on
training
d. Augustus exhibits Reflector learning style
Reflectors are those learners who like to observe others. They
think in their own mind about something and accept it only if
they feel comfortable. They learn at their own pace