Group: B

F1 Set 1 Answer

1. Correct Answer: True

The accounting statements drawn up by a management accountant are often prepared and
presented very differently from those of the financial accountant. They are prepared for internal
decision-making purposes.

2. Correct Answer: Considering future education, training and development needs and
Assessing future prospects in the organisation

An appraisal is also used to identify potential such as future education, training and development
needs, and assessing future prospects in the organisation.

3. Correct Answer: A: Northland

Stagflation is the situation which arises where there is a combination of unacceptably
high unemployment and unacceptably high inflation. Northland shows extremely high inflation
(27.5%) and high unemployment.
Southland has high inflation but lower unemployment, Eastland has low inflation and
lower unemployment. Westland has higher unemployment but has low inflation. Therefore they
are not experiencing stagflation.

4. Correct Answer: A: The Y

This is an example of the Y pattern of communication. Adam has only one line of
communication up to Boris which is at the bottom of the Y shape. The fact that Boris, Chow and
Dev are not connected to each other results in the overall Y shape in this reporting pattern.

5. Correct Answer: C: A theorist

According to Honey and Mumford, theorists seek to understand basic principles and to take an
intellectual, 'hands-off' approach to learning. They prefer training to be designed to allow time
for analysis.
Group: B

6. Correct Answer:
The absence record of Cheryl, an employee
The accountant's opinion of Abdul, the finance director

Personal data is information about a living individual, including expressions of opinion about
him/her, but not data about organisations.

7. Correct Answer: Statement of profit or loss and Statement of cash flows

The main reports a company produces for external purposes are the financial statements.
The main financial statements are the statement of profit or loss, the statement of financial
position and the statement of cash flows.

Budgets and variance reports are internal reports which companies prepare to help them
run and manage their business.

8. Correct Answer: Am I being loyal to my manager?

When faced with an ethical dilemma an individual need to consider three aspects:

Transparency do I feel comfortable with others knowing about my decision; is my

decision defensible?

Effect have I considered all parties who may be affected by the decision, and
have I taken into account all factors or mitigating circumstances?

Fairness would a reasonable third party view my decision as fair?

Loyalty to a manager is not an appropriate question to ask because it might have been the
individual's manager that placed them in the ethical dilemma in the first place.
Group: B

9. Correct Answer: A: Implementer

The implementer is disciplined and reliable, conservative and efficient. Strengths and
weaknesses are exactly as described for Desmond.

10. Correct Answer: C, D: A shareholder and A supplier

An executive director is an internal stakeholder and a pressure group is an external stakeholder.

The two connected stakeholders are a shareholder and a supplier.

11. Correct Answer:

Urgent
Important

Time is a scarce resource. One of the problems managers have in allocating their time comes
from determining what tasks are important and distinguishing these from urgent tasks.

12. Correct Answer: A: Complements

Complements are goods which tend to be bought and used together.

13. Correct Answer:

Creativity and innovation is encouraged
A variety of solutions to problems is introduced

Constructive conflict leads to positive results. In this case creativity and innovation is
encouraged, and a variety of solutions to problems is introduced.
Group: B

14. Correct Answer: C: A reasonable prospect of detecting irregular statements or records

External auditors should design and implement audit procedures that give a reasonable prospect
of detecting irregular statements or records.

An external audit is not intended to identify every inconsistency or error, nor will it provide a
systematic check of every transaction. Sampling the records will form part of the audit tests, but
is not an objective of the external audit.

15. Correct Answer: A: Matrix structure

A matrix structure is a hybrid - in this case mixing functional and product structures, leading to
dual responsibility.

16. Correct Answer: A: A sense of achievement

Intrinsic rewards are those which arise from the performance of the work itself. They are
psychological rather than material and relate to the concept of job satisfaction.

17. Correct Answer

The higher level of motivation that can be achieved by people working together in No
a team

The ability of a team to produce more than the sum total of individual output of Yes
members

Synergy refers to people working as a team being able to produce results greater than they are
capable of working individually. While the statement about motivation could be a correct
statement it is not a definition of synergy.
Group: B

18. Correct Answer:

Independence
Social responsibility

Work must be completed without bias or prejudice (independence), and accountants have a
public duty as well as that to their employer/client (social responsibility). Courtesy is a personal
rather than professional quality.

19. Correct Answer: C: National legislation

The requirement for limited liability companies to keep proper records and books of account is
usually dictated by national legislation such as the UK Companies Act.

20. Correct Answer: B: Commitment to customers

Customer's buying decisions may be influenced by a range of ethical considerations.

Factors such as paying suppliers a fair price (the 'Fairtrade' commitment), using organic
ingredients and whether or not the company tests its products on animals can all be important
ethical considerations potential customers may have when choosing whether or not to buy a
company's products.

21. Correct Answer:

Rate of pay
Leave entitlement

Rate of pay and leave entitlement are examples of standing data. Unlike net salary they are not
subject to constant change.
Group: B

22. Correct Answer: A, C

Constructive criticism
Free and open communication

Members of an effective team have a free and open style of communication. They also provide
each other with feedback in the form of constructive criticism and show an active interest in
work decisions.

23. Correct Answer: A

Making positive judgements about the suitability of interviewees based on the subconscious
influence on the interviewer of the interviewee's personal traits

The halo effect occurs when an applicant has one of the characteristics or traits required for the
position, and the interviewer subconsciously gives this undue weight and decides that the
applicant has the other characteristics or attributes as well.

24. Correct Answer: C: A local authority

The local authority is a not-for-profit organisation and so will rely most heavily on value for
money and efficiency indicators rather than information on performance and profitability.

25. Correct Answer: B: Divisional

This is an example of a divisional structure where a business is divided into autonomous regions
or product businesses.

26. Correct Answer: B: Unfair dismissal

Unfair dismissal is dismissal without good reason.

Group: B

27. Correct Answer: D: Counsellor

Counselling is a way of helping a person to help him or her self. Therefore Joanne's role is that
of a counsellor.

28. Correct Answer:

Norms of behaviour
Attitudes

The first level contains the observable, express or explicit elements of culture - behaviour
artefacts and attitudes.

29. Correct Answer:

Growth of the service sector and Increase in the average age that women decide to have
children

The growth of the service sector and increase in the average age that women decide to have
children have been cited as reasons for the increasing participation of women in the labour force.

30. Correct Answer: False

The existence and significance of any threat will depend on the nature, value and intent of the
offer. A professional accountant must first weigh all specific facts and circumstances and
conclude that the risk is trivial and inconsequential before accepting a gift or hospitality.

31. Correct Answer: B: To the shareholders

The external auditors report to the shareholders on the stewardship of the directors.
Group: B

32. Correct Answer: B: Order processing and distribution

The increased use of broadband will mean that more customers will be using the internet to place
orders. So the business process most affected will be order processing and distribution.

33. Correct Answer: C

The shareholders as a collective body

The external auditors report to the members of the company and so owe a duty of reasonable
care and skill to the shareholders as a collective body.

34. Correct Answer: A

Set priorities and schedule the work according to these priorities

In order to work effectively Stephan should set priorities and schedule the work according to
those priorities.

35. Correct Answer:

To advise them of all purchase orders

To confirm the validity of invoices received from suppliers

The purchasing department advises the payables ledger staff of purchase orders and confirms the
validity of invoices when they are received from suppliers. It is the cashier's role to inform the
payables ledger team and purchasing department of payments made.
Group: B

36. Correct Answer: C: Lose-lose

Lose-lose means that neither party gets what they really wanted, and includes the notion of
compromise, as in this case.

37. Correct Answer: B. Place

TECA Co is making a decision on the location of its business. Therefore the correct answer is
'place'.

38. Correct Answer: D

Define the precise training objectives

Once training needs have been identified the next step is to translate these needs into training
objectives.

39. Correct Answer

IFAC is responsible for preparing and publishing global accounting standards False

IFAC is responsible for promoting ethical education standards True

40. Correct Answer: A: A just-in-time system that will reduce inventories of raw materials

A procurement manager is responsible for purchasing. Therefore the system most relevant to a
procurement manager is to do with ordering inventories. A just-in-time system is a system for
ordering inventories that will reduce inventories of raw materials.
Group: B

41. Correct Answer: D: Instill in team members an understanding of their need to adapt
their values, attitudes and behaviours over time

Heifetz said that in order to facilitate change effectively leaders should instil in team members an
understanding of their need to adapt their values, attitudes and behaviours over time.

42. Correct Answer: B : Reappoint the non-executive directors and explain the reasons for
its actions in the annual report

A principles-based approach to regulation means that it is up to the company to decide how to

act in this case so it cannot approach the government for permission. As DEF Co believes that it
is in the best interests of the company and its shareholders to reappoint these non-executive
directors then it should do so. However as this is in breach of the code of practice DEF Co
should disclose this breach and explain its reasons in the annual report.

43. Correct Answer: B: Norming

The group is going through a period of settling down which according to Tuckman's theory is the
norming stage.

44. Correct Answer: A: Statement 1 only

Statement 1 can be used as a definition of ethics: ethics are a set of moral principles to guide
behaviour.

Statement 2 is not true. A course of action may not be illegal, but it may still be unethical for
example, where some finance companies sell high interest consumer loans to vulnerable people
who then struggle to repay the loans and the interest.

Clearly companies and individuals have to comply with legal standards and regulations, but the
notion of ethical behaviour denotes moral principles and social responsibility as well as legal
compliance.
Group: B

45. Correct Answer: B: Systems audit

A systems audit is designed to assess the overall effectiveness of the organisation's internal
controls.

46. Correct Answer: A: From a role culture to a task culture

The civil service is currently 'a highly controlled, bureaucratic structure'. This is a role culture.
Hai wants to make it focus on results which is a task culture. Therefore Hai is seeking to change
the civil service from a role culture to a task culture.

47. Correct Answer:

1. Internal stakeholders have a direct, close and ongoing relationship with the organisation. This
is often contractual in nature, such as contracts of employment with employees at all levels. They
reside inside the company and tend to benefit directly from their contributions to company
growth. As such they include executive directors and managers, but not non-executive directors.
2. Connected stakeholders have an ongoing business relationship with the business while
remaining somewhat detached. They have an economic or contractual relationship with the
organisation. As such they include suppliers and customers, but not regulators or professional
bodies.
3. External stakeholders have no direct link to the organisation, but are influenced by (or can
influence) their activities. As such they include pressure groups, but not customers or providers
of finance.
4. Opportunities and threats arise from the external environment faced by an organisation, and so
external stakeholders are relevant. Strengths and weaknesses arise from within the organisation.
5. Stakeholders with low power but high interest cannot influence strategy directly, so do not
need to be kept satisfied. However, they could influence more powerful stakeholders, perhaps via
lobbying, so should be kept informed.
6. Stakeholders with high power and high interest can influence, and may even participate in,
decision making. Strategy must be acceptable to them – they are the key players.
7. Planning at the strategic level has a longer-term view than at tactical or operational levels, so
three to five years would be appropriate.
Group: B

8. Stakeholders may influence other stakeholders, and positions change – the key players of
today may not still be key players tomorrow. Thus, consensus is a sensible approach.

48. Task 1
Correct Answer

A divisional structure splits an organisation into autonomous units or regions, each with its own
responsibility for profit/loss and each properly delegated authority. The description of XXX Co
fits this definition, with divisions for each product group.
A matrix structure splits an organisation in two ways, usually a functional split on one axis and a
product/customer/project split on the other. Employees have more than one line of authority. The
description of YYY Co fits this definition, with regional divisions and cross-regional project
teams.
A virtual organisation comprises individuals/teams/companies/etc. which are geographically
dispersed. The organisation has no (or minimal) premises and mainly exists electronically on the
internet. The description of ZZZ Co fits this definition.

Task 2
Correct Answer
Item 2 - The norms of personal and interpersonal behaviour, and the customs/rules about
acceptable/unacceptable behaviours, are observable elements of culture at the first level of the
model.
Item 4 - Artefacts are concrete expressions of culture such as architecture, internal design, dress
codes and symbols. These are observable elements of culture at the first level of the model.
Item 5 - Attitudes are the determinants of collective behaviour, such as greeting styles, business
formalities and ceremonies. These are observable elements of culture at the first level of the
model.
Group: B

Task 3
Correct Answer
The technostructure comprises analysers who seek to standardise and optimise business
processes and outputs – they look for the best way to complete any job

49. Correct Answer

1. The external auditor is appointed by the shareholders, to provide assurance on the stewardship
of directors. He/she must be independent of the directors.
2. The external auditor is appointed from one annual general meeting to the next, so his/her
contract term is fixed. The need for independence rules out a contract of employment.
3. The shareholders appoint the external auditor to report back to them in general meeting.
4. The primary purpose of the external auditor’s report is to express his/her professional opinion
based on evidence collected. He/she cannot provide absolute assurance or guarantees.
5. The main element of the external auditor’s opinion is whether or not the financial statements
show a fair presentation of financial position and performance. The external auditor cannot state
that the financial statements are accurate in all respects.
6. Substantive tests aim to detect material misstatement or fraud in the financial statements. They
are concerned with the correctness of transactions and account balances.
7. Compliance tests check that the organisation’s system of internal controls is operating
effectively and as prescribed.
8. Objectivity is one of the fundamental principles of the ACCA’s Code of Ethics and Conduct.
It means not allowing bias, conflict of interest or undue influence of others to override
professional or business judgements.
Group: B

50. Correct Answer

1. Adair’s model is known as action-centred or functional, reflecting its practicality as a tool for
developing leaders in industry and commerce.

2. Adair’s model is a practical tool, thus it focuses on what leaders need to actually do (as
opposed to trait theories which focus on what they need to be).

3. Trait theories are based on the idea that leaders are born, not made. They suggest that there are
certain personal qualities that are common to successful leaders.

4. Adair’s theory is based on 3 variables (his 3 interlocking circles) – task needs, group needs
and individual needs. There is a need for balance between achieving the task, maintaining the
group/team and developing the individual.

5. Blake and Mouton produced a grid based on two dimensions of leadership – concern for
production and concern for people. A leader who focuses excessively on achievement of the task
shows high concern for production but minimal concern for people – a ‘produce or perish’
mentality.

6. In the Blake and Mouton model, a leader who focuses excessively on staff needs and
developing satisfying relationships will pay little attention to results – the ‘country club’ style.

7. In the practical Adair model, team briefings are essential to foster teamwork and motivate
individuals.

8. The action-centred approach is explicitly consultative/participative, believing this to be more

effective than the autocratic and hands-off extremes.
Group: B

51. Correct Answer

Counselling is an interpersonal interview where one person helps another to help himself/herself.
Jacques thus has a counselling role, helping tenants to resolve their financial difficulties.

Coaching involves a trainee being put under the guidance of an experienced employee, who
shows the trainee how to perform tasks and helps them develop specific skills. Ki thus has a
coaching role, helping the negotiators to build on their strengths and overcome their weaknesses.

Counselling is an interpersonal interview where one person helps another to help himself/herself.
Larissa thus has a counselling role, helping employees to overcome personal difficulties.

Mentoring involves an experienced person helping to foster an individual’s personal and career
development. It tends to be more informal than coaching, and is less concerned with specific
skills. Maureen thus has a mentoring role with the new employees.

52. Correct Answer

Task 1: A familiarity threat may arise from previous dealings or association with an individual,
group or organisation. In this case, Raj knew the manager from his schooldays and had a pre-
conceived opinion that he would not be involved in any irregular behaviour.
Intimidation threats arise from fear of the consequences of taking a decision. Raj has made it
clear that he is anxious to sign off the audit visit on the day in question, so Sam may feel
pressurised to provide an early resolution by accepting Raj's view that the branch manager
should be trusted.
Group: B

Task 2: The board of directors is accountable for the effectiveness of internal control systems,
and for this reason it would be acceptable for the internal auditors to report to the board. The
board of directors should also comprise a proportion of non executive directors to provide an
additional degree of independent scrutiny, making it a suitably objective forum to report to.
The board of directors is accountable for the effectiveness of internal control systems, but in
most large organisations this responsibility is delegated to an audit committee. This committee
should always be made up entirely of independent non executive directors, making it a suitably
objective forum to report to.