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 Due to several factors, the company began performing poorly, leading to an unpublished financial report indicating a huge loss.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

BMF – May 2021 – L1 – SB – Q6c – The Role of Professional Accountants in Business and Society

Explain the role of professional accountancy bodies in promoting ethical behaviour in the business environment.

Question

What are the roles expected of the professional accountancy bodies in promoting ethical behaviour in the business environment?

Answer

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Tags: Business Conduct, Ethical Standards, Ethics, Professional Accountancy Bodies
Level: Level 1

Topic: The Role of Professional Accountants in Business and Society
Series: MAY 2021

BMF – May 2021 – L1 – SB – Q6b – The Role of Professional Accountants in Business and Society

State the expectations of the public regarding accountants and their professional bodies.

Question

State the expectations of the public in respect of the accountants and the professional bodies they affiliate with.

Answer

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Tags: Accountants, Ethics, Professional Bodies, Public Trust
Level: Level 1

Topic: The Role of Professional Accountants in Business and Society
Series: MAY 2021

BMF – May 2021 – L1 – SB – Q6a – The Role of Professional Accountants in Business and Society

State two problems that may arise causing employees to use a different reporting channel for unethical conduct.

Question

In a normal situation or circumstance, employees are expected to report unethical or illegal conduct to the supervisor or manager. State TWO problems that may arise that would make an employee use a different reporting channel.

Answer

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Tags: Ethics, Reporting Channels, Whistleblowing
Level: Level 1

Topic: The Role of Professional Accountants in Business and Society
Series: MAY 2021

BMF – May 2021 – L1 – SB – Q5 – Basic Management Functions

Describe Adair's leadership concept, key skills in the three leadership groups, and explain the 50/50 rule.

Question

Leadership means giving a lead to others. A leader gives guidance and direction, and the others (‘followers’) follow the lead that they are given.

You are required to:

a. Describe the main elements of Adair’s concept of action-centred leadership. (6 Marks)

b. State the main skills required within each of Adair’s THREE leadership groups. (11 Marks)

c. Explain Adair’s 50/50 rule. (3 Marks)

Answer

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Tags: Adair’s Leadership Model, Leadership, Leadership Skills, Team Management
Level: Level 1

Topic: Basic Management Functions
Series: MAY 2021

BMF – May 2021 – L1 – SB – Q4 – Investment Decisions

Evaluate two equipment options using NPV and Discounted Payback Period to maximize shareholder value.

Question

Felfred Limited is contemplating buying a new item of equipment to facilitate the improvement of the quality of services provided to customers of the company. Two models of the needed equipment are currently available in the market. The two machines, Xetoy and Whytox would cost N750,000 and N1,500,000 respectively. Additional information in relation to the two equipment is as stated below:

Equipment	Xetoy	Whytox
Estimated Lifespan	5 years	5 years
Expected Cash inflows / Year
2021	N500,000	N500,000
2022	N500,000	N500,000
2023	N300,000	N600,000
2024	N200,000	N600,000
2025	N100,000	N600,000
Disposal value	N50,000	N100,000

Based on Net Present Value (NPV) and Discounted Payback Period methods of investment appraisal, you are required to select the equipment in which the value of shareholders will be maximised. Costs of installation for Xetoy and Whytox are N50,000 and N100,000 respectively. The company’s minimum required rate of return is currently at 12%.

Answer

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Tags: Capital Budgeting, Discounted Payback, Investment Appraisal, Net Present Value, Shareholder Value
Level: Level 1

Topic: Investment Decisions
Series: MAY 2021

BMF – May 2021 – L1 – SB – Q3 – Investment Decisions

Calculate payback periods for two investment projects and decide based on company policy.

Question

CASHIO Limited must choose between two investments, Project ABUWA and Project BRIWA. It cannot undertake both investments. The expected cash flows for each project are:

Year	Project ABUWA (₦)	Project BRIWA (₦)
0	(800,000)	(800,000)
1	200,000	600,000
2	360,000	240,000
3	360,000	20,000
4	170,000	–

The company has a policy that the maximum permissible payback period for an investment is three years and if a choice has to be made between the two projects, the project with the earlier payback will be chosen.

a. Calculate the payback period for each project:
i. Assuming that cash flows occur at year-end
ii. Assuming that cash flows after Year 0 occur at a constant rate throughout each year (16 Marks)

b. Which project should be selected according to the company’s payback rule? (2 Marks)

c. State the reasons for your decision in (b) above. (2 Marks)

Answer

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Tags: Capital Budgeting, Cash Flows, Investment Appraisal, Payback Period
Level: Level 1

Topic: Investment Decisions
Series: MAY 2021

BMF – May 2021 – L1 – SB – Q2 – Management, Individual, and Organisational Behaviour

State and describe Belbin's team role categories and their sub-roles and identify factors contributing to successful teamwork.

Question

An important contribution to ideas about the management of teams was made by Belbin. He studied the behaviour of individuals in teams and the ‘team role’ that each individual plays. He defined a team role as ‘our tendency to behave, contribute and interrelate with others in a particular way’.

You are required to:
a. State and describe briefly the THREE main groups of Belbin team roles. (6 Marks)

b. For each of the THREE Belbin groups, state and describe the THREE team roles it includes. (9 Marks)

c. According to Belbin, what are the factors that contribute to the most successful team work? (5 Marks)

Answer

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Tags: Belbin Theory, Leadership, Management Theory, Organizational Behaviour, Team Dynamics, Team Roles
Level: Level 1

Topic: Management, Individual, and Organizational Behavior
Series: MAY 2021

BMF – May 2021 – L1 – SB – Q1c – The Business Environment

State ten possible economic impacts of the removal of fuel subsidy in Nigeria.

Question

Governments of nations sometimes use economic policies to achieve political, social, or economic objectives. As an integral part of the Nigerian government’s medium-term fiscal framework, there is a proposal to remove fuel subsidy in 2021. According to economic theory, state TEN possible economic impacts of the removal of fuel subsidy in Nigeria.

Answer

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Tags: Economic Impact, Fuel Subsidy, Government Policy, Inflation
Level: Level 1

Topic: The Business Environment
Series: MAY 2021

BMF – May 2021 – L1 – SB – Q1b – The Business Environment

Discuss the implications of rectifying international payment disequilibrium through currency depreciation.

Question

Theoretically, disequilibrium in international payments could be rectified by a fall in the exchange value of the currency of countries that have a deficit in their balance of payments in goods and services. What are the implications of taking this measure?

Answer

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Tags: Currency Exchange, Economic Policy, International trade
Level: Level 1

Topic: The Business Environment
Series: MAY 2021

BMF – May 2021 – L1 – SB – Q1a – The Business Environment

Discuss two measures countries adopt to protect industries against foreign competition.

Question

Protectionism takes the form of government measures to discourage or prohibit imports of foreign goods. State TWO measures countries adopt to protect industries against foreign competition.

Answer

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Tags: Currency Exchange, Economic Policy, International Payments, Protectionism
Level: Level 1

Topic: The Business Environment
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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BMF – May 2021 – L1 – SB – Q6c – The Role of Professional Accountants in Business and Society

Explain the role of professional accountancy bodies in promoting ethical behaviour in the business environment.

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BMF – May 2021 – L1 – SB – Q6b – The Role of Professional Accountants in Business and Society

State the expectations of the public regarding accountants and their professional bodies.

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BMF – May 2021 – L1 – SB – Q6a – The Role of Professional Accountants in Business and Society

State two problems that may arise causing employees to use a different reporting channel for unethical conduct.

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BMF – May 2021 – L1 – SB – Q5 – Basic Management Functions

Describe Adair's leadership concept, key skills in the three leadership groups, and explain the 50/50 rule.

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BMF – May 2021 – L1 – SB – Q4 – Investment Decisions

Evaluate two equipment options using NPV and Discounted Payback Period to maximize shareholder value.

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BMF – May 2021 – L1 – SB – Q3 – Investment Decisions

Calculate payback periods for two investment projects and decide based on company policy.

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BMF – May 2021 – L1 – SB – Q2 – Management, Individual, and Organisational Behaviour

State and describe Belbin's team role categories and their sub-roles and identify factors contributing to successful teamwork.

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BMF – May 2021 – L1 – SB – Q1c – The Business Environment

State ten possible economic impacts of the removal of fuel subsidy in Nigeria.

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BMF – May 2021 – L1 – SB – Q1b – The Business Environment

Discuss the implications of rectifying international payment disequilibrium through currency depreciation.

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BMF – May 2021 – L1 – SB – Q1a – The Business Environment

Discuss two measures countries adopt to protect industries against foreign competition.

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