Series: MAY 2021

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CSME – May 2021 – L2 – Q6 – Ethics in Business

Analysis of Mr. John’s actions regarding insider trading based on various ethical perspectives.

Question

Mr John, a professional accountant, is the Chief Executive Officer of a company quoted on the Nigerian Stock Exchange. He also owns about 20% of the company’s shares worth hundreds of millions of Naira. Due to several factors, the company began performing poorly, leading to an unpublished financial report indicating a huge loss. In anticipation of a slide in the company’s share price, Mr. John instructed his stockbroker to sell half of his shares for potential repurchase once the price drops after the financial statements are released. He profited substantially from this transaction.

Required:

a. Analyse the action of Mr. John using:
i. The Model Code (3 Marks)
ii. Critical Theory (3 Marks)
iii. Moral Development of Accountants (4 Marks)

b. Advise Mr. John on the fundamental ethical principles which professional accountants are expected to comply with. (10 Marks)

Answer

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Tags: Critical Theory, Ethical Principles, Insider Trading, Model Code, Moral Development
Level: Level 2

Topic: Corporate Governance, Ethics in Business
Series: MAY 2021

CSME – May 2021 – L2 – Q5c – Risk Management and Corporate Strategy

Relating 'Impact and Likelihood' to 'Objective and Subjective' risk perception using a table.

Question

Risk Assessment is a very important activity in an organisation. With the use of a table, relate ‘Impact and Likelihood’ to ‘Objective and Subjective’ risk perception.

Answer

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Tags: Impact, Likelihood, Risk Management, Risk Perception
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2021

CSME – May 2021 – L2 – Q5b – Risk Management and Corporate Strategy

Explanation of the ALARP principle with the aid of a diagram.

Question

With the aid of a diagram, explain the concept of “As Low as Reasonably Practicable” (ALARP) principle. (5 Marks)

Answer

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Tags: ALARP Principle, Risk Evaluation, Risk Management, Safety Standards
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2021

CSME – May 2021 – L2 – Q5a – Corporate Governance

Discussing four different ways in which agency conflict can arise between stakeholders.

Question

Discuss FOUR of the different ways in which agency conflict can arise. (5 Marks)

Answer

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Tags: Agency Conflict, Earnings Retention, Effort Level, Moral Hazard, Risk Aversion
Level: Level 2

Topic: Corporate Governance
Series: MAY 2021

CSME – May 2021 – L2 – Q4 – Corporate Social Responsibility (CSR)

Explanation of social responsibility levels by Gray, Owen, and Adams, and ethical stances by Johnson and Scholes.

Question

Gray, Owen, and Adams (1996) provided a framework for classifying different groups of people and their views of the relationship between business organizations and society.

Required:

a. State and explain SEVEN levels or positions on social responsibility by Gray, Owen, and Adams (1996). (15 Marks)
b. State Johnson and Scholes FOUR possible ethical stances for a business entity. (5 Marks)

Answer

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Tags: Corporate Governance, Ethical Stances, Social responsibility, Stakeholder Management
Level: Level 2

Topic: Corporate social responsibility
Series: MAY 2021

CSME – May 2021 – L2 – Q3b – Corporate Governance

Explanation of board responsibilities per ICSA guidelines that cannot be delegated.

Question

Using the Institute of Chartered Secretaries and Administrators (ICSA) guidance note, explain responsibilities of board of directors that should not be delegated.

Answer

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Tags: Board Responsibilities, Corporate Governance, ICSA Guidelines, Non-Delegable Duties
Level: Level 2

Topic: Corporate Governance
Series: MAY 2021

CSME – May 2021 – L2 – Q3a – Corporate Governance

Advising on voting rights to protect a shareholder's investment in a struggling company.

Question

A friend of yours, who invested heavily in the ordinary shares of a company that has been struggling in recent years, came to you for advice. He is confused as to what he can do to protect his investment.

Advise him on:
i. How he can use his voting rights as a shareholder to secure his investment. (6 Marks)
ii. Limitations to the use of his voting rights. (4 Marks)

Answer

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Tags: Corporate Governance, Investment Protection, Rights Limitations, Shareholder Voting
Level: Level 2

Topic: Corporate Governance
Series: MAY 2021

CSME – May 2021 – L2 – Q2 – Risk Management and Corporate Strategy

Examination of a risk manager’s role, specific risks managed, and purposes of risk monitoring.

Question

“A risk manager is not a line manager and is not directly responsible for risk management but might help with the management of specific risks.”

Required:

a.
i. Review the statement above within the context of the role of a risk manager. (7 Marks)
ii. Evaluate THREE specific risks that can be managed. (3 Marks)

b. Discuss the purposes of risk monitoring. (10 Marks)

Answer

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Tags: Evaluation, Risk Management, Risk Monitoring, Role of Risk Manager, Specific Risks
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2021

CSME – May 2021 – L2 – Q1 – Strategic Implementation

Assessing Davidson Ltd's key resources, strategic choices, and restructuring to address international opportunities.

Question

Davidson Ltd is an automobile company based in Aba, Nigeria. It has been in
existence for nearly eighty years. The company originally began by supplying
components for small vehicles and was producing equipment during the Second
World War. However, in the nineties, it underwent rapid transformation under
the founder‟s son, Tony. Tony has diversified the company into supplying tricycle
components and spare parts to the Nigerian market. The company now employs
some 500 staff around the country and is well known for the quality of its
workmanship. The company operates under three divisions. One division is
concerned with the manufacture of tricycle components, a second division with
spare parts and the third division undertakes specific one–off work in automobile
and automobile design. The tricycle component division is by far the biggest and
accounts for seventy per cent of the total turnover. The smaller specialist
automobile design division is by far the most profitable in terms of return on
capital employed and it relies a great deal on a senior engineer, Emmanuel, who
has been with the company for more than twenty years.
Recently, the company was invited to send sample components to a Japanese car
manufacturer who is keen to commence operations in Nigeria. These components
are needed within eight months. However, Mr. Tony is concerned that his
company may not be able to meet the strict standard imposed by the Japanese
manufacturer. The deal, if it is sealed, would establish Davidson Ltd as an
important auto component supplier in South East Asia, thus, opening up the
potential for exports. Tony realises that the export potential is great and that any
initiative towards exports would get full backing from the government. While,
this is happening, the spare parts division is also showing signs of growth.
Recent reforms in part of North Africa has made companies in that region to be
very keen to modernise and innovate their old manufacturing processes and
Davidson had received business enquiries from the region.
Tony faces a dilemma. He knows that the opportunities that have presented
themselves would give the company a global presence. At the same time, he
knows that the company is solely under his management as chief executive.
Tony holds eighty percent of the shares. The other two directors hold ten percent
each. Although the other divisions have managing directors, they rely on him for
decision making. The current managing directors are family members. One is a brother in-law and the other a cousin. Their knowledge of the industry and its
workings is generally poor. He made these appointments to please his father so
that he could be left to run the company as he deems fit. Tony knows that to
satisfy the Japanese auto manufacturer, he needs to reorganise the automobile
design division and consider issues of Total Quality Management (TQM). This will
take time and requires that he delegates responsibilities to other divisions.
However, he feels uncomfortable doing this.
The company is at crossroads. The three divisions are doing well, but could do
even better, if their old, bureaucratic and hierarchical systems are reviewed.
Indeed, some of the younger managers and engineers would prefer a more open,
flexible management structure. Some of them have studied both engineering and
management in Holland and the United States, and are keen to see key
innovations in place. While Tony knows that these opportunities highlighted
above should not be missed, he has to ensure that they are handled successfully
so that the future is secured for Davidson Ltd. This requires that he takes some
tough decisions in restructuring the company within a few months.

Required:

Write a report to the Chief Executive of Davidson Ltd addressing the following issues:

a.
i. The key resources and implementation issues facing Davidson Ltd in the scenario above. (15 Marks)
ii. How the key resources will affect strategic choices. (7 Marks)
iii. How implementation issues will affect strategic choices. (8 Marks)

b. How should Tony restructure the company? (10 Marks)

Answer

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Tags: Delegation, Implementation, Restructuring, Strategic Resources, TQM
Level: Level 2

Topic: Strategic Implementation
Series: MAY 2021

PSAF – May 2021 – L2 – Q6b – The Budgeting Process in the Public Sector

Explanation of budget uses and steps for National Chart of Accounts application in public budgeting.

Question

The importance of classification code as a system driven for budget cannot
be over emphasised as it forms the basis for budgeting and budgetary
control mechanism. Thus, for a country, state or local government to
achieve a reasonable level of success in accountability, transparency,
performance evaluation and adherence to Appropriation Act, the
application of unified chart of accounts is paramount.

Required:

Discuss FOUR uses of budget and FOUR steps to be followed to ensure completeness of using the National Chart of Accounts for budgeting.

Answer

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Tags: Accountability, Budget Classification, Budget Completeness, Chart of Accounts, Transparency
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: MAY 2021

BL – May 2021 – L1 – SB – Q4a – Law of Contract

Distinguishing between an offer and an invitation to treat in contract law.

Question

Preliminaries of a contract may involve an offer or invitation to treat.

Required:
Distinguish an offer from an invitation to treat.

Answer

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Tags: Contract Law, Invitation to Treat, Offer
Level: Level 1

Topic: Law of Contract
Series: MAY 2021

BL – May 2021 – L1 – SB – Q3c – Company Law

Explanation of GSM phone evidence and its admissibility in court for financial transactions.

Question

Evidence generated by a Global System for Mobile communication (GSM) phone is admissible by the courts.

Required:
Explain the nature of GSM phone evidence and the duty of a person that seeks to tender it in court in proof of a financial transaction.

Answer

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Tags: Evidence, Financial Transactions, GSM Phone
Level: Level 1

Topic: Company Law
Series: MAY 2021

BL – May 2021 – L1 – SB – Q3b – Company Law

Legal implications of fraudulent use of a housing loan by an employee to contest in an election.

Question

Okonto, an employee of a Federal Government Agency, had a parcel of land allocated to him in the proposed estate of the Agency in Abuja. To facilitate the building of a bungalow on the land pursuant to the Agency’s staff home ownership scheme, the Agency gave Okonto a housing loan. Okonto purchased an application form with the housing loan from one of the major political parties so as to contest for a senatorial seat in his home state on the platform of that party. Okonto planned to build the bungalow later from his income as a Senator.

Required:
Explain to the Director-General of Okonto’s Agency the legal implication of Okonto’s action in criminal law.

Answer

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Tags: Criminal Law, Employee loans, Fraudulent conversion
Level: Level 1

Topic: Company Law
Series: MAY 2021

BL – May 2021 – L1 – SB – Q3a – Company Law

Characteristics of private and public companies in Nigeria.

Question

The Companies and Allied Matters Act classifies companies broadly into ‘private company’ and ‘public company.’

Required:
State FOUR characteristics each of a private company and a public company respectively.

Answer

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Tags: Corporate Characteristics, Private Company, Public Company
Level: Level 1

Topic: Company Law
Series: MAY 2021

BL – May 2021 – L1 – SB – Q2c – Company Law

Explanation of receivership as an alternative to company liquidation.

Question

Receivership is an alternative to company liquidation.

Required:
Explain receivership.

Answer

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Tags: Insolvency, Liquidation, Receivership
Level: Level 1

Topic: Company Law
Series: MAY 2021

BL – May 2021 – L1 – SB – Q2b – Company Law

Explanation of creditor claims against a majority shareholder when a company is insolvent.

Question

Adigwe and his two sons caused Adigwe and Sons Limited to be incorporated and became the first directors of the company. The company traded profitably for five years after it was incorporated, but it is about to be wound up because it owes trade creditors a huge amount of money. Adigwe holds 95% of the issued shares of the company while each of his two sons holds 2½%. The creditors of Adigwe and Sons Limited have discovered that the assets of the company are insufficient to satisfy their claims and have filed an action to recover the money from Adigwe who holds most of the shares of the company.
Required:
Explain to the creditors of Adigwe and Sons Limited their chance of succeeding in their claim against Adigwe.

Answer

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Tags: Company Law, Corporate Personality, Creditor Claims, Insolvency
Level: Level 1

Topic: Company Law
Series: MAY 2021

BL – May 2021 – L1 – SB – Q2a – Company Law

Stating four key functions of the Corporate Affairs Commission in Nigeria.

Question

The lead regulatory agency for companies in Nigeria is the Corporate Affairs Commission, which is established by the Companies and Allied Matters Act.

Required:
State FOUR functions of the Corporate Affairs Commission.

Answer

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Tags: Company Law, Corporate Affairs Commission, Functions of Regulatory Agencies
Level: Level 1

Topic: Company Law
Series: MAY 2021

BL – May 2021 – L1 – SB – Q1c – Partnership Law

Dispute between partners over profit-sharing entitlement and registered partnership implications.

Question

Oguche and Agoro have been friends for twenty-five years. They agreed to trade together by contributing money to buy textile materials from Aswani market in Lagos, Aba market in Abia State, and Sabongari market in Kano. The two friends have been buying the materials and sharing them for sale in towns and villages in Oyo State, Nigeria. Recently, Agoro bought textile materials from Kano when he visited his political associates in that city. Agoro resold the materials at a huge profit, and when Oguche became aware of that fact, he approached Agoro, demanding a share in the profit of the resale, basing his entitlement on the argument that they are partners. Agoro has refused to share the profit with Oguche, and the latter has approached you for advice.

Required:
i. Advise Oguche on whether or not he is entitled to a share in the profit that Agoro made. (6 Marks)

ii. Would you have advised Oguche differently if the two friends had a registered partnership under the name and style “Oguche and Agoro Ventures”? (6 Marks)

Answer

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Tags: Dispute Resolution, Partnership, Profit Sharing
Level: Level 1

Topic: Partnership Law
Series: MAY 2021

BL – May 2021 – L1 – SB – Q1b – Sources of Nigerian Law

Characteristics of civil law in contract dispute resolution.

Question

Kokori and Jendor have a dispute arising from non-execution of a contract that Kokori awarded to Jendor about four years ago. Kokori intends to go to court on the matter, and he has been advised that the matter falls under one of the two broad divisions of law.

Required:
State FOUR characteristics of the broad division of law that applies to the dispute between Kokori and Jendor.

Answer

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Tags: Civil Law, Contract disputes, Legal Proceedings
Level: Level 1

Topic: Sources of Nigerian Law
Series: MAY 2021

BL – May 2021 – L1 – SB – Q1a – Sources of Nigerian Law

Characteristics of the Constitution of the Federal Republic of Nigeria.

Question

The Constitution of the Federal Republic of Nigeria has a number of key features.

Required:
State FOUR characteristics of the Constitution of the Federal Republic of Nigeria.

Answer

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Tags: Constitution, Legal Characteristics, Nigerian Law
Level: Level 1

Topic: Sources of Nigerian Law
Series: MAY 2021

Series: MAY 2021

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CSME – May 2021 – L2 – Q6 – Ethics in Business

Analysis of Mr. John’s actions regarding insider trading based on various ethical perspectives.

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CSME – May 2021 – L2 – Q5c – Risk Management and Corporate Strategy

Relating 'Impact and Likelihood' to 'Objective and Subjective' risk perception using a table.

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CSME – May 2021 – L2 – Q5b – Risk Management and Corporate Strategy

Explanation of the ALARP principle with the aid of a diagram.

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CSME – May 2021 – L2 – Q5a – Corporate Governance

Discussing four different ways in which agency conflict can arise between stakeholders.

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CSME – May 2021 – L2 – Q4 – Corporate Social Responsibility (CSR)

Explanation of social responsibility levels by Gray, Owen, and Adams, and ethical stances by Johnson and Scholes.

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CSME – May 2021 – L2 – Q3b – Corporate Governance

Explanation of board responsibilities per ICSA guidelines that cannot be delegated.

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CSME – May 2021 – L2 – Q3a – Corporate Governance

Advising on voting rights to protect a shareholder's investment in a struggling company.

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CSME – May 2021 – L2 – Q2 – Risk Management and Corporate Strategy

Examination of a risk manager’s role, specific risks managed, and purposes of risk monitoring.

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CSME – May 2021 – L2 – Q1 – Strategic Implementation

Assessing Davidson Ltd's key resources, strategic choices, and restructuring to address international opportunities.

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PSAF – May 2021 – L2 – Q6b – The Budgeting Process in the Public Sector

Explanation of budget uses and steps for National Chart of Accounts application in public budgeting.

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BL – May 2021 – L1 – SB – Q4a – Law of Contract

Distinguishing between an offer and an invitation to treat in contract law.

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BL – May 2021 – L1 – SB – Q3c – Company Law

Explanation of GSM phone evidence and its admissibility in court for financial transactions.

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BL – May 2021 – L1 – SB – Q3b – Company Law

Legal implications of fraudulent use of a housing loan by an employee to contest in an election.

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BL – May 2021 – L1 – SB – Q3a – Company Law

Characteristics of private and public companies in Nigeria.

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BL – May 2021 – L1 – SB – Q2c – Company Law

Explanation of receivership as an alternative to company liquidation.

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BL – May 2021 – L1 – SB – Q2b – Company Law

Explanation of creditor claims against a majority shareholder when a company is insolvent.

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BL – May 2021 – L1 – SB – Q2a – Company Law

Stating four key functions of the Corporate Affairs Commission in Nigeria.

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BL – May 2021 – L1 – SB – Q1c – Partnership Law

Dispute between partners over profit-sharing entitlement and registered partnership implications.

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BL – May 2021 – L1 – SB – Q1b – Sources of Nigerian Law

Characteristics of civil law in contract dispute resolution.

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BL – May 2021 – L1 – SB – Q1a – Sources of Nigerian Law

Characteristics of the Constitution of the Federal Republic of Nigeria.

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