INTRODUCTION

1 Introduction
1.1 What is Business and Finance and how does it fit within the
Professional Stage?
Structure
The syllabus has been designed to develop core technical, commercial, and ethical skills and knowledge in a
structured and rigorous manner.
The diagram below shows the fourteen modules at the Professional Stage, where the focus is on the
acquisition and application of technical skills and knowledge, and the Advanced Stage, which comprises
three technical modules and the Case Study.

The knowledge base

The aim of the Business and Finance module is to provide students with an understanding of how businesses
operate and how accounting and finance functions support businesses in achieving their objectives.
Progression to application level
The knowledge base that is put into place here will be taken further in the application level Business
Strategy module, where the aim will be to provide students with an understanding of how businesses
develop and implement strategy.
Progression to advanced stage
The advanced level paper Business Analysis then takes things further again. The aims of Business Analysis
are that students can apply analysis techniques, technical knowledge and professional skills to resolve real-
life issues faced by businesses. In that paper the aim is to ensure that students can provide technical advice
in respect of issues arising in, for example, business decisions and business transformations e.g. mergers and
acquisitions.
The above illustrates how the knowledge base of Business and Finance gives a platform from which a
progression of skills and technical expertise is developed.

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 Business and finance

1.2 Services provided by professional accountants

Professional accountants should be able to:
 identify the general objectives of businesses and the functions and tasks that businesses perform in
order to meet their objectives
 specify the nature, characteristics, advantages and disadvantages of different forms of business
structure
 identify the purpose of financial information produced by businesses and specify how accounting and
finance functions support business operations, including the management of working capital
 specify the role of the accountancy profession and why the work of the profession is important
 identify the role that governance plays in the management of a business and specify how a business can
promote an ethical culture
 specify the impact on a business of the economic environment in which it operates.

2 Specification grid for Business and Finance

2.1 Module aim
To provide students with an understanding of how businesses operate and how accounting and finance
functions support businesses in achieving their objectives.

2.2 Specification grid

This grid shows the relative weightings of subjects within this module and should guide the relative study
time spent on each. Over time the marks available in the assessment will equate to the weightings below,
while slight variations may occur in individual assessments to enable suitably rigorous questions to be set.
Weighting (%)
Business objectives and functions
30
Business structures
The role of finance and accounting 25
The role of the accountancy profession 15
Governance and ethics 15
External environment 15
100

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 INTRODUCTION

3 The learning materials

You will find the learning materials are structured as follows:
 Title page
 Contents page
 Introduction. This includes
– a review of the subject to set the context
– a list of the top level learning outcomes for this subject area entitled 'Services provided by
professional accountants' (set with reference to what a newly qualified accountant would be
expected to do as part of their job)
 The specification grid for Business and Finance
 A brief note about the learning materials
 Study Guide. This includes
– hints and tips on how to approach studying for your CA exams
– guidance on how to approach studying with this Study Manual
– a detailed study guide suggesting how you should study each chapter of this Study Manual and
identifying the essential points in each chapter
 Information on how to obtain help with your studies
 The detailed syllabus and learning outcomes
Each chapter has the following components where relevant:
 Introduction
– Learning objectives
– Practical significance
– Stop and think
– Working context
– Syllabus links
 Examination context
– Exam commentary
– Exam requirements
 Chapter topics
 Summary and Self-test
 Technical reference (where relevant)
 Answers to Self-test
 Answers to Interactive questions

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 Business and finance

4 Study guide
4.1 Help yourself study for your CA exams
Exams for professional bodies such as the ICAB are very different from those you have taken at college or
university. You will be under greater time pressure before the exam – as you may be combining your
study with work. Here are some hints and tips.

The right approach

1 Develop the right attitude

Believe in yourself Yes, there is a lot to learn. But thousands have succeeded
before and you can too.
Remember why you're doing it You are studying for a good reason: to advance your career.

2 Focus on the exam

Read through the Syllabus and These tell you what you are expected to know and are
Study Guide supplemented by Examination context sections in the
Study Manual.

3 The right method

See the whole picture Keeping in mind how all the detail you need to know fits into
the whole picture will help you understand it better.
 The Introduction of each chapter puts the material in
context.
 The Learning objectives, Section overviews and
Examination context sections show you what you
need to grasp.
Use your own words To absorb the information, you need to put it into your
own words.
 Take notes.
 Answer the questions in each chapter.
 Draw mindmaps.
 Try 'teaching' a subject to a colleague or friend.
Give yourself cues to jog your  Try colour coding key points with a highlighter pen.
memory  Write key points on cards.

4 The right recap

Review, review, review
Regularly reviewing a topic in summary form can fix it in your
memory. The Study Manual helps you review in many ways.
 Chapter summary will help you to recall each study
session.
 The Self-test actively tests your grasp of the essentials.
 Go through the Examples in each chapter a second or
third time.

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 INTRODUCTION

4.2 Study cycle

The best way to approach this Study Manual is to tackle the chapters in order. We will look in detail at how
to approach each chapter below but as a general guide, taking into account your individual learning style,
you could follow this sequence for each chapter.

Key study steps Activity

Step 1 This topic list is shown in the contents for each chapter and helps you navigate
Topic list each part of the book; each numbered topic is a numbered section in the chapter.
Step 2 This sets your objectives for study by giving you the big picture in terms of the
Introduction context of the chapter. The content is referenced to the Study guide, and
Examination context guidance shows what the examiners are looking for. The
Introduction tells you why the topics covered in the chapter need to be studied.
Step 3 Section overviews give you a quick summary of the content of each of the main
Section chapter sections. They can also be used at the end of each chapter to help you
overviews review each chapter quickly.
Step 4 Proceed methodically through each chapter, particularly focusing on areas
Explanations highlighted as significant in the chapter introduction or study guide.
Step 5 Take brief notes, if you wish. Don't copy out too much. Remember that being
Note taking able to record something yourself is a sign of being able to understand it. Your
notes can be in whatever format you find most helpful: lists, diagrams, mindmaps.
Step 6 Work through the examples very carefully as they illustrate key knowledge and
Examples techniques.
Step 7 Check yours against the suggested solutions, and make sure you understand any
Answers discrepancies.
Step 8 Review it carefully, to make sure you have grasped the significance of all the
Chapter summary important points in the chapter.
Step 9 Use the Self-test to check how much you have remembered of the topics
Self-test covered.

Moving on...
When you are ready to start revising, you should still refer back to this Study Manual.
 As a source of reference.
 As a way to review (the Section overviews, Examination context, Chapter summaries and Self-test
questions help you here).
Remember to keep careful hold of this Study Manual – you will find it invaluable in your work. The technical
reference section has been designed to help you in the workplace by directing you to where you can find
further information on the topics studied.

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 Business and finance

4.3 Detailed study guide

Use this schedule and your exam timetable to plan the dates on which you will complete each study period
below:

Study Approach Essential Points Due

Period Date

1 Read through Chapter 1 of the Study The definitions of organisations

Manual quickly to obtain the background and businesses
knowledge of which you must be aware.
Stakeholders and their interests
Learn the definitions in the chapter, and
the list of stakeholders and their interests. The nature and desirable qualities
Make sure you are clear about the of objectives
importance of the entity’s primary and
Measuring profitability, activity and
secondary objectives, the SMART
productivity
characteristics of objectives and the three
points of reference for measuring Measuring resource use:
performance. effectiveness, economy and
efficiency
Finally work through the self-test questions
carefully to ensure that you have grasped
the main points in the chapter.
2 Read sections 1 to 9 of Chapter 2 quickly Distinction between management
to get an idea of the principles at issue and governance
when managing a business, then study each
Distinction between power,
section again more slowly, making sure you
authority, responsibility,
learn the definitions and can distinguish
accountability and delegation
between the concepts of power, authority,
responsibility, accountability and delegation. Line, staff, functional and project
You should learn too the distinctions managers, and the management
between the different types of manager, hierarchy
and the four parts of the management
Management process: plan,
process.
organise, control, lead
Once you are happy with this you should
Marketing, especially the elements
read through sections 10 to 13 on the non-
of the marketing mix
finance functions in any business before
studying each section, and their definitions, The determinants of behaviour in
more slowly. Finally you should read at organisations, motivation and
least twice through section 14 on groups
organisational behaviour, and then learn
the main features of as many of the
theories contained in it as you can.
Finally, try the self-test questions at the end
of the chapter.
3 Chapter 3 falls into two parts: Mintzberg’s building blocks
organisational structure and business
Fayol’s classical principles
forms. Start by reading quickly through
sections 1 to 5 to get a good grounding in Mintzberg’s types of business
what is meant by organisational structure structure and their features
and the key issues presented. Next work
Centralisation and
through each of the five sections slowly,
decentralisation
making sure you understand the links
between the topics. Business shapes (tall or flat), the
management hierarchy, span of
Next you should read through sections 6
control and scalar chain
to 10 on the legal forms of businesses

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 INTRODUCTION

Study Approach Essential Points Due

Period Date
quickly to grasp the basic issues, then go Mechanistic
back and study first sole tradership, then structures/bureaucracies
partnership and then incorporation in turn.
Once you are happy that you understand Definitions and features of sole
the factors that help determine which form traders, partnerships and
a business takes, study section 10 on the companies
key decision between trading as a company Advantages and disadvantages of
or partnership. Skim through section 11. each form
Finish your study of this chapter by reading Deciding whether to incorporate
through section 12 on the different types
of alliance very carefully, as this is a key Types of alliance
practical topic.
Finally work through the self-test questions
at the end of the chapter.
4 Chapter 4 is key to this syllabus and you Definitions of strategy and
need to make sure you study the whole of strategic management
it very carefully indeed.
Corporate, business and
Start by reading through sections 1 and 2 at functional strategies
least twice. Make the links back to earlier
Formal v emergent approach
chapters as suggested by the text, to
increase your understanding, then read Strategic decision-making
carefully through section 3, which sets the
Strategic planning process
scene for the rest of the chapter: make
sure you understand Figure 4.2 for the PESTEL analysis
positioning-based view of the strategic
Porter’s five forces
planning process.
Competitor analysis
Next work your way methodically through
each of sections 4 to 10, which follow Porter’s value chain
through each part of the strategic planning
Product life cycle
process. Focus on the essential points
listed here. BCG matrix
The self-test questions at the end of the SWOT analysis
chapter cover the most important points
Stakeholder mapping
learnt so finish the chapter by working
through them. Porter’s generic competitive
strategies
Ansoff’s matrix
Levels of plan

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Study Approach Essential Points Due

Period Date

5 There is quite a lot of detail and Risk, uncertainty and their effects
terminology associated with risk on businesses themselves and
management so you need to study chapter their investors
5 relatively slowly; as you proceed, go back
Attitudes to risk
over what you have covered as often as
you can so that you grasp why the concept Risk classifications
of risk and its management are so
Risk concepts: exposure, volatility,
important to business.
impact and probability
Read through sections 1 to 6 slowly and
Definition of risk management
carefully, focusing on each of the essential
points listed here. Sections 5 and 6 are Risk management process
especially important. Then read through
Crisis management
sections 7 and 8 at least twice: remember
crisis management and planning for disaster Disaster recovery
recovery are extreme forms of risk
management.
Finish the chapter by trying all of the self-
test questions.
6 Chapter 6 covers the importance of good Uses and types of information
financial information and of keeping it
Good ACCURATE information
secure.
Sources of data
Start by reading through sections 1 and 2 at
least twice, making sure you understand Information processing: CATIVA
the different types of information and the
TPS and MIS
different uses to which it can be put. Next
read section 3 carefully, learning the Information security: ACIANA
ACCURATE acronym, then read through
System controls
sections 4 to 6 at least twice to cover data,
information processing (CATIVA), Users of financial information
processing systems and security
Information to support economic
(ACIANA).
decisions
The remainder of Chapter 6 covers
Framework qualitative
financial information specifically, and
characteristics: understandability,
contains many links to other parts of the
relevance, reliability and
Business and Finance syllabus, and indeed
comparability
to other parts of the Professional syllabus.
Start by reading through sections 7 to 9 Limitations of financial information
quickly once, to get an idea of the issues
Effects of poor financial
covered, then go back and work
information
methodically through each section.
The self-test questions at the end of the
chapter cover the most important points
learnt so finish the chapter by working
through them.

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 INTRODUCTION

Study Approach Essential Points Due

Period Date
7 In Chapter 7 you cover what the business’s Tasks of the finance function
finance function is for and how it sets Structure of finance function
about its tasks, especially management
accounting. Management accounting
Read quickly through sections 1 and 2 for The value of information
context, then study section 3 carefully so Financial control processes
that you have an overall picture of the
varied tasks undertaken by the finance
function in a business, and its typical
structure.
Next read through section 4 on
management accounting quickly first, then
go back and work methodically through
each sub-section. You need to learn the
different ways in which management
accounting supports the business achieving
its objectives; in Management Information
you will learn more about the techniques
and computations involved.
Read through sections 5 to 7 quickly, then
devote some time to section 8 on the value
of information, and section 9 on
establishing financial control processes.
Finally try the self-test questions at the end
of the chapter.
8 In Chapter 8 we look in detail at the Useful comparators for
importance of performance measurement. performance measures
Read through sections 1 and 2 at least Qualitative and quantitative
twice. Make sure you understand when (financial and non-financial)
performance measurement is useful measures
(basically, when measures can be compared Internal (management accounting)
with something else) and can distinguish and external (financial reporting)
between qualitative and quantitative performance measures
measures. Make sure as well that you
understand the principles and function of Principles of variance analysis
variance analysis. Profitability measures: ROCE,
Next look through Furlong Ltd’s financial gross and net margin
statements at the end of section 2 before Liquidity/solvency measures:
studying each of sections 3 to 6 slowly and current and quick ratios, debt and
methodically. These look at the gearing ratios, interest cover
profitability, liquidity/solvency, efficiency
Efficiency measures: asset
and investor measures that a person
turnover, inventory turnover ratio
outside a business can calculate from its
and period, receivables collection
financial statements. They can also be used
and payables payment periods, the
by managers to help manage working
cash operating cycle
capital and performance generally.
Investor measures: EPS, dividend
Study section 7 on the limitations of
per share, dividend cover, P/E
financial measures carefully before reading
ratio, dividend yield
through section 8 on the balanced
scorecard at least twice, noting the Limitations of financial measures
additional performance measures it uses Balanced scorecard: ROI, RI,
The self-test questions at the end of the EVA®

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 Business and finance

Study Approach Essential Points Due

Period Date
chapter cover the most important points
learnt so finish the chapter by working
through them.
9 In Chapter 9 we look at how a business Balancing liquidity and profitability
manages its working capital (inventory, Financing current assets:
payables and receivables, and cash). aggressive, average and defensive
First, read through sections 1 and 2 at least positions
twice, making sure you understand the Using ratios to manage working
issues that affect how a business balances capital
the need to make a profit against the
imperative that it should never run out of Cash operating cycle
cash. Then read section 3 very carefully on Solving liquidity problems
the further balance required between using
Managing inventory, payables and
short term and long term finance to fund
receivables
working capital, a decision that is related to
risk. Make sure you follow through the Treasury management: managing
worked example closely. Pay particular cash balances
attention to using ratios to help manage Banking system
working capital, working through the
examples and completing the interactive
question.
After reading through section 4 and
completing the interactive question, you
should then work slowly and methodically
through each of sections 5 to 8. Make sure
that you learn as many of the practical
management techniques available for
working capital management as possible.
Work through each example very carefully.
You can then skim through sections 9 to
11 before trying the self-test questions at
the end of the chapter.
10 In Chapter 10 we switch to the syllabus Importance of accountancy
area that covers the accountancy Professional responsibility
profession. Read through sections 1 and 2
to grasp the main focus of this chapter: the Technical competence
necessity for an individual professional Professional principles (ethics)
accountant to show integrity (professional
Accounting principles
responsibility) and expertise (technical
competence). Then read through section 3 Limits of responsibilities
on professional responsibility and the detail
in section 4 on technical competence: learn
as much as you can of this section.
Read through section 5 before studying
section 6 on professional principles and the
ICAB Code of Ethics, and sections 7 and 8
on accounting principles and standards. In
this paper you need to focus on the range
of principles and their impact on the
professional accountant’s work.
You should read sections 9 and 10
together, to give you a grasp of the varying
roles of the professional accountant and,

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 INTRODUCTION

Study Approach Essential Points Due

Period Date
perhaps more importantly, the limits to
those roles.
Finish the chapter by trying the self-test
questions. These give you a very good idea
of the types of question that you will
encounter in the exam.
11 In Chapter 11 we look at the accountancy Structure of the accountancy
profession as a whole and the way it is profession
regulated. Read sections 1 to 3 quickly then Regulation
again more carefully, making sure you
understand the principles behind how and ICAB disciplinary procedures
why the accountancy profession is
regulated. You must complete interactive
question 1 and learn the answer, which
sets out the aims of regulation of the
accountancy profession. Next, read
through section 6 on disciplinary
procedures against accountants several
times. There is a lot of detail here, about
ICAB’s disciplinary procedures, which you
need to learn.
The self-test questions at the end of the
chapter cover the important points learnt
so finish the chapter by working through
them.
12 Read through sections 1 to 3 of Chapter Agency theory: information and
12 quickly and then again more slowly, accountability
making sure you understand the idea that
Perspectives on corporate
there is a fundamental conflict between
governance
shareholders and directors that needs to
be addressed via corporate governance. Good practice in corporate
Then study section 4 very closely, learning governance: key elements
the five key elements of good governance.
Financial systems
Next, read section 5 on financial systems,
making sure you can see why the OECD Principles
importance of institutional shareholders
Unitary v dual boards
derives from the nature of the financial
system, and why in some countries banks Bangladesh governance structure
dominate. This leads into section 6, where
Business values and business
you must learn the OECD Principles, the
ethics
distinction between unitary and dual board
structures, and the outline of the overall
Bangladesh governance structure.
Read section 7 on business values and
ethics, and the ways in which an ethical
culture can be promoted, very carefully,
before attempting the self-test questions at
the end of the chapter. These give you a
good idea of the types of question you will
encounter in the exam.
13 In Chapter 13 there is a lot of detail on the Comply or explain
Code of Corporate Governance that you
Role of the board

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 Business and finance

Study Approach Essential Points Due

Period Date
need to learn, so read through section 1 Roles of Chairman and Chief
quickly first and then tackle each sub- Executive
section in turn, learning as much detail as
you can. Next, tackle section 2: read it Balance and independence: non-
through, learning the definitions of internal executives
control and the internal control system, Nomination committee
the risk-based approach to this and the
contents of the directors’ statement. Re-election of directors

Next read section 3 on the ISC Statement Remuneration committee

of Principles for institutional investors. You Financial reporting
should learn these, then read through
sections 4 and 5 on the roles of external Internal control
and internal audit in corporate governance. Audit committee
Don't forget to attempt the self-test Institutional shareholders
questions at the end of the chapter.
AGM
Turnbull guidance on internal
control
Shareholder engagement
Roles of external and internal
audit
14 Chapter 14 covers the economic The market mechanism
environment in which businesses operate.
Demand
Read through sections 1 and 2 to gain an
understanding of the market mechanism Supply
(demand and supply) then study section 3
Equilibrium price
on demand very carefully, following
through the worked example and making a Effects of price regulation
good attempt at the interactive questions.
Elasticity concepts and calculations
Make sure you are completely happy with
the demand curve and the factors that Market structures
determine the level of demand (shifts of
Free markets
the curve), including price (shifts along the
curve). Next pay the same degree of Market failure
attention to section 4 on supply and its
determinants, including the sub-section on
the effect of time on supply and demand,
and the interactive question.
Only once you are happy with the
behaviour of supply and demand should
you study section 5 on the equilibrium
price and how changes in various factors
adjust the equilibrium price, the quantity
demanded and the quantity supplied. Try
the interactive question then make sure
you understand the sub-section on the
effects of price regulation.
How far is demand affected by the various
factors considered? The answer to this is in
section 6 on elasticity: price and income
elasticity of demand, cross elasticity of

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 INTRODUCTION

Study Approach Essential Points Due

Period Date
demand, and price elasticity of supply are
all important concepts which you must
understand and be able to calculate, so
study this section very closely. Work
through the example carefully, and
complete the interactive questions.
Read through section 7 on types of market
structure very carefully, learning the
characteristics of each type of structure.
Then study section 8 on free markets,
making sure you are clear about the
arguments for and against completely
unregulated markets, and the reasons why
markets fail. These are highly examinable
topics.
Complete the interactive question then
finish the chapter by attempting the self-
test questions at the end.
15 In Chapter 15 we return to the principles Why business is regulated
of regulation, this time in the context of
Intended outcomes of regulation
businesses rather than the accountancy
profession. Read through section 1 very Responses to regulation
carefully. It draws together quite a few
Regulation of competition
ideas that we have already seen, such as
market failure, protection of the public Government intervention in free
interest and the nature of regulation. Then markets
study section 2 equally carefully,
Insider trading, market abuse,
completing the interactive questions and
fraudulent and wrongful trading,
making sure you understand the intended
and directors’ disqualification
and actual effects of regulation on business.
Sarbanes-Oxley
We then move on to some specific
examples of government regulation of Free trade and protectionism
business: of competition (section 3) and of
externalities (section 4). Study each of
these sections very carefully before paying
equally close attention to section 5, on
direct regulation of people engaged in
business activities.
Skim through section 6 before studying
section 7 on Sarbanes-Oxley carefully, then
pay equally careful attention to
international regulation of and agreements
on trade in sections 8 and 9.
Finish by completing the self-test questions
at the end of the chapter. These give you a
good idea of the types of question you will
encounter in the exam.

Revision phase
Your revision will be centred around using the questions in the ICAB Revision Question Bank.

© The Institute of Chartered Accountants in England and Wales, March 2009 xix
 Business and finance

5 Getting help
Firstly, if you are receiving structured tuition, make sure you know how and when you can contact your
tutors for extra help.
Identify a work colleague who is qualified, or has at least passed the paper you are studying for, who is
willing to help if you have questions.
Form a group with a small number of other students, you can help each other and study together, providing
informal support.
Call +88 (02) 9112672 or 9115340, or email dos@icab.org.bd

Watch the ICAB website for future support initiatives.

xx © The Institute of Chartered Accountants in England and Wales, March 2009

 INTRODUCTION

6 Syllabus and learning outcomes

The following learning outcomes should be read in conjunction with the Ethics Codes and Standards table in
section 6.1 below.
Covered
in chapter
1 Business objectives and functions
Candidates will be able to identify the general objectives of businesses and the
functions and tasks that businesses perform in order to meet their objectives.
In the assessment, candidates may be required to:
(a) state the general objectives of businesses 1
(b) state the general objectives of strategic management and specify the strategic
management process and interrelationship between a business’s vision, mission and
strategic objectives 4
(c) identify the various functional areas within businesses and show how the functions
assist the achievement of business objectives 2, 3
(d) identify the nature and functions of organisational management, human resources
management and operations management and show how these are influenced by
human behaviour 2, 3
(e) show, in a given scenario, the relationship between a business’s overall strategy and its
functional strategies 4
(f) identify the nature and purpose of strategic plans, business plans and operational plans 4
(g) specify how a strategic plan is converted into fully-integrated business and operational
plans 4, 7
(h) identify the main components of the risk management process and show how they
operate 5
(i) identify the key issues in relation to risk and crisis management. 5
2 Business structures
Candidates will be able to specify the nature, characteristics, advantages and
disadvantages of different forms of business structure.
In the assessment, candidates may be required to:
(a) identify different forms of businesses and specify their advantages and disadvantages 3
(b) identify the differences between businesses carried out by sole traders, partnerships,
limited liability partnerships, alliances and groups, and show the advantages and
disadvantages of each of these structures 3
(c) identify the differences between unincorporated businesses and companies, and show
the advantages and disadvantages of incorporation. 3
3 The role of finance and accounting
Candidates will be able to identify the purpose of financial information produced
by businesses and specify how accounting and finance functions support business
operations, including the management of working capital.
In the assessment, candidates may be required to:
(a) specify the extent to which financial information:
 provides for accountability of management to shareholders and other
stakeholders

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 Business and finance

 reflects business performance

 is useful to users in making economic decisions
 meets the information needs of national, social and economic contexts (e.g.
national statistical information) 6,7
(b) specify how accounting and finance functions support businesses in pursuit of their
objectives 7
(c) identify the main considerations in establishing and maintaining accounting and financial
reporting functions and financial control processes 7
(d) identify, in the context of accounting systems, the issues surrounding:
 information processing
 information security 6
(e) specify why the management of a business require information about performance
measurement 6,8
(f) identify the accountant’s role in preparing and presenting information for the
management of a business 7,8
(g) identify the constituent elements of working capital and treasury and specify the
methods by which each element can be managed by the finance function to optimise
working capital and cash flow 9
(h) specify the relationship between a business and its bankers and other providers of
financial products in the context of treasury and cash management. 9
4 The role of the accountancy profession
Candidates will be able to specify the role of the accountancy profession and
why the work of the profession is important.
In the assessment, candidates may be required to:
(a) identify the importance to the public interest of high quality, accurate financial
reporting and assurance 10,11
(b) specify the rationale for key parts of the profession’s work and the links between
technical competence and professional responsibility, including accounting principles,
accounting standards, sound business management and the public interest 10,11
(c) specify the key features of the structure of the accountancy profession, the regulatory
framework within which professional accountants work and the ways in which the
accountancy profession interacts with other professions. 10,11
5 Governance and ethics
Candidates will be able to identify the role that governance plays in the
management of a business and specify how a business can promote an ethical
culture.
In the assessment, candidates may be required to:
(a) state the reasons why governance is needed and identify the role that governance plays
in the management of a business 12
(b) identify the key stakeholders and their governance needs for a particular business 12
(c) identify and show the distinction between the roles and responsibilities of those
charged with governance and those charged with management 13
(d) specify how differences in national and business cultures affect the governance of
businesses 12

xxii © The Institute of Chartered Accountants in England and Wales, March 2009
 INTRODUCTION

(e) identify the roles and responsibilities of the members of the executive board, any
supervisory board, the audit committee and others charged with governance, internal
audit and external audit 13
(f) identify the roles and responsibilities of those responsible within a business for internal
audit and for the external audit relationship 13
(g) specify the policies and procedures a business should implement in order to promote
an ethical culture. 12
6 External environment
Candidates will be able to specify the impact on a business of the environment
in which it operates.
In the assessment, candidates may be required to:
(a) specify the signalling, rewarding and allocating effects of the price mechanism on
business (including the concept of price elasticity) 14
(b) specify the potential types of failure of the market mechanism and their effects on
business 14
(c) specify the principal effects of regulation upon businesses 15
(d) show how the needs of different stakeholders in a business (e.g. shareholders, the local
community, employees, suppliers, customers) impact upon it 15
(e) specify the effects of key international legislation (including the Sarbanes-Oxley Act and
trade restrictions) on businesses. 15

6.1 Technical knowledge

The table contained in this section shows the technical knowledge covered in the CA syllabus.
The level of knowledge required in the Professional stage is shown.
The knowledge levels are defined as follows:
Level D
An awareness of the scope of the standard.
Level C
A general knowledge with a basic understanding of the subject matter and training in its application
sufficient to identify significant issues and evaluate their potential implications or impact.
Level B
A working knowledge with a broad understanding of the subject matter and a level of experience in the
application thereof sufficient to apply the subject matter in straightforward circumstances.
Level A
A thorough knowledge with a solid understanding of the subject matter and experience in the application
thereof sufficient to exercise reasonable professional judgement in the application of the subject matter in
those circumstances generally encountered by Chartered Accountants.

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 Business and finance

Ethics Codes and Standards

Ethics Codes and Standards Level Professional Stage modules

IFAC Code of Ethics for Professional Accountants A Assurance

(parts A, B and C) Business and Finance
Law

ICAB Code of Ethics A Taxation

(schedule ‘C’ of ICAB Bye-laws, members’ handbook) Information Technology
Audit and Assurance
Business Strategy
Financial Reporting
Taxation

xxiv © The Institute of Chartered Accountants in England and Wales, March 2009