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Accountant in Business Notes ACCA Paper F1 Complete Notes

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Default Accountant in Business Notes ACCA Paper F1 Complete Notes


Accountant in Business

Paper F1

Course Notes



Contants


1 Business organisation and structure

2 Information technology and systems
3 Influences on organisational culture
4 Ethical considerations
5 Corporate governance and social responsibility
6 Home study chapter – The macro economic environment


7 The business environment
8 Home study chapter – The role of accounting
9 Control security and audit
10 Identifying and preventing fraud
11 Leadership and managing people
12 Individuals, groups, teams
13 Motivating individuals and groups
14 Personal effectiveness and communication
15 Recruitment and selection

16 Diversity and equal opportunities
17 Training and development
18 Performance appraisal
19 Answers to Lecture Examples
20 Appendix: Pilot Paper questions


Don’t forget to plan your revision phase!
• Revision of syllabus
• Testing of knowledge
• Question practice
• Exam technique practice


INTRODUCTION

Introduction to Paper F1 Accountant in Business

Overall aim of the syllabus

To introduce knowledge and understanding of the business and its environment and the influence this has on
how organisations are structured, on the role of the accounting and other key business functions in contributing
to the efficient, effective and ethical management and development of an organisation and its people and
systems.

The syllabus

The broad syllabus headings are:

A Business organisation structure, governance and management
B Key environmental influences and constraints on business and accounting
C History and role of accounting in business
D Specific functions of accounting and internal financial control
E Leading and managing individuals and teams
F Recruiting and developing effective employees

Main capabilities

On successful completion of this paper, candidates should be able to:

• Explain how the organisation is structured, governed and managed
• Identify and describe the key environmental influences and constraints
• Describe the history, purpose and position of accounting
• Identify and explain the functions of accounting systems
• Recognise the principles of leadership and authority
• Recruit and develop effective employees
Links with other papers

BA (P3)
MA (F2) and FA (F3)
PA (P1)
AB (F1)


This diagram shows where direct (solid line arrows) and indirect (dashed line arrows) links exist between this
paper and other papers that may follow it.

The Accountant in Business is the first paper that students should study, as it acts as an introduction to business
structure and purpose and to accountancy as a core business function.


Assessment methods and format of the exam

The examination is a two hour paper-based or computer-based examination. Questions will assess all parts of
the syllabus and will test knowledge and some comprehension of application of this knowledge. The examination
will consist of 40 two mark and 10 one mark multiple choice questions. The pass mark is 50% (ie. 45 out of 90).


Course Aims
Achieving ACCA's Study Guide Outcomes

A Business organisations structure, governance and management
A1 The business organisation and its structure Chapter 1
A2 The formal and informal business organisation Chapter 3
A3 Organisational culture in business Chapter 3
A4 Stakeholders of business organisations Chapter 3
A5 Information technology and information systems in business Chapter 2
A6 Committees in the business organisation Chapter 1
A7 Business ethics and ethical behaviour Chapter 4
A8 Governance and social responsibility Chapter 5

B Key environmental influences and constraints on business and accounting

B1 Political and legal factors Chapter 7
B2 Macro-economic factors Chapter 6
B3 Social and demographic factors Chapter 7
B4 Technological factors Chapter 7
B5 Competitive factors Chapter 7

C History and role of accounting in business

C1 The history and functions of accounting in business Chapter 8
C2 Law and regulations governing accounting Chapter 8
C3 Financial systems, procedures and IT applications Chapter 8
C4 The relationship between accounting and other business functions Chapter 1

D Specific functions of accounting and internal financial control

D1 Accounting and financial functions within business Chapter 1
D2 Internal and external auditing and their functions Chapter 9
D3 Internal financial control and security within business organisations Chapter 9
D4 Fraud and fraudulent behaviour and their prevention in business Chapter 10


E Leading and managing individuals and teams

E1 Leadership, management and supervision Chapter 11
E2 Individual and group behaviour in business organisations Chapter 12
E3 Team formation, development and management Chapter 12
E4 Motivating individuals and groups Chapter 13

F Recruiting and developing effective employees

F1 Recruitment and selection, managing diversity and equal opportunities Chapter 15, 16
F2 Techniques for improving personal effectiveness at work and their benefits Chapter 14
F3 Features of effective communication Chapter 14
F4 Training, development and learning in the maintenance and improvement of business
performance Chapter 17
F5 Review and appraisal of individual performance Chapter 18



1 - Business organisation and structure


Business organisational structure

Why does the organisation exist?
Departments and functions
Structural forms Business hierarchy

1 Organisations

1.1 Definition – 'An organisation is a social arrangement which pursues collective goals, which
controls its own performance and which has a boundary separating it from its environment'.
Boundaries can be physical or social.

1.2 Key categories:
• Commercial
• Not for profit
• Public sector
• Charities
• Trade unions
• Local authorities
• Mutual associates

Lecture example 1
Class exercise

Required

Identify a 'real-world' example of the above categories of organisation.


1.3 Organisations owned or run by the government (local or national) or government agencies
are described as being in the public sector. All other organisations are classified as the private sector.

Limited liability



1.4 Limited companies (denoted by X Ltd or X plc) are set up so as to have a separate legal
entity from their owners (shareholders). Liability of these owners is thus limited to the
amount invested.

Private v public

1.5 Private companies are usually owned by a small number of people (family members), and
these shares are not easily transferable. Shares of public companies will be traded on the
Stock Exchange.


2 Organisational structure

2.1 Henry Mintzberg believes that all organisations can be analysed into five components,
according to how they relate to the work of the organisation and how they prefer to coordinate.
Strategic
Apex
Support
Staff
Technostructure
Middle
Line
Operating Core

(a) Strategic apex
Drives the direction of the business through control over decision-making.
(b) Technostructure
Drives efficiency through rules and procedures.
(c) Operating core

Performs the routine activities of the organisation in a proficient and standardised manner.

(d) Middle line
Performs the management functions of control over resources, processes and business areas.

(e) Support staff
Provide expertise and service to the organisation.

Lecture example 2 - Exam standard question

Required

Match the following staff/rules to Mintzberg's technostructure:

(a) Manager of a retail outlet supervising 40 staff.
(b) A salesman responsible for twenty corporate accounts.
(c) The owner of a start-up internet company employing two staff.
(d) The HR department which provides support to business managers.
(e) The IT department seeking to standardise internal systems.

3 Structural forms for organisations

Scalar chain and span of control



3.1 As organisations grow in size and scope, different organisational structures may be suitable.
3.2 The Scalar chain and Span of control determine the basic shape. The scalar chain relates
to levels in the organisation, and the span of control the number of employees managed.
3.3 Tall organisations have a:
(a) Long scalar chain (via layers of management)
(b) Hierarchy
(c) Narrow span of control.
3.4 Flat organisations have a:
(a) Short scalar chain (less layers)
(b) Wide span of control.


3.5

1- Tall

MD
Divisional directors
Department managers
Section managers

Supervisors

Charge hands

Workers

2- Flat

MD
Department managers
Supervisors
Workers

Lecture example 3
Pilot paper

Required

Identify factors which may contribute to the length of the chain and the span of control.


3.6 Entrepreneurial
A fluid structure with little or no formality. Suitable for small start-up companies, the activities
and decisions are dominated by a key central figure (the owner/entrepreneur).

3.7 Functional
This structure is created via separate departments or 'functions'. Employees are grouped by
specialism, and departmental targets will be set. Formal communication systems will be set
up to ensure information is shared.


3.8 Matrix
A matrix organisation crosses a functional with a product/customer/project structure.

Production Dept - Sales Dept - Finance Dept - Distribution Dept - R & D Dept - Marketing Dept
Area Manager A • • • • • •
Area Manager B • • • • • •
Area Manager C • • • • • •

This structure was created to bring flexibility to organisations geared towards project work or
customer-specific jobs. Staff may be employed within a hierarchy or within specific functions
but will be slotted into different teams or tasks where their skill is most needed. The matrix
structure is built upon the principles of flexibility and dual authority.

Lecture example 4
Required

Identify two advantages and two disadvantages of each structure.
Advantages Disadvantages

Entrepreneurial


Functional


Matrix

3.9 Organisations are rarely composed of only one type of structure, especially if the
organisation has been in existence for some time and as a consequence a 'hybrid' structure
may be established. 'Hybrid' structures involve a mixture of functional divisionalisation and
at least one other form of divisionalisation.

Lecture example 5
Ideas generation

Required

Which structure would suit these companies?

(a) A family run restaurant with 10 staff.
(b) A small manufacturing company with 250 staff.
(c) Johnson and Johnson who have 197 strategic business units.

4 Divisional structures

4.1 When organisations reach a certain size it may be appropriate to structure it into divisions or
'semi-autonomous' blocks. These divisions may focus on a particular geographic area or a
particular product.

Role of head office in divisions

4.2 Divisions will normally report to head office on a range of performance-related matters. The
level of autonomy given to divisional heads is dependant on the level of centralisation
required.

4.3 Centralised organisations retain much of the power and decision-making at head office.
Decentralised organisations delegate more business decisions to divisional heads.


Lecture example 6 - Pilot paper question

Required

Suggest two benefits and two drawbacks of both centralisation and decentralisation.



5 Flexibility in modern organisations

5.1 Modern management writers such as Charles Handy and Tom Peters rate flexibility as a key
critical success factor for competitive organisations today.

5.2 Flexibility can be achieved by:
(a) Flat structures
(b) Out-put focused structures
(c) Delayering
(d) Outsourcing
(e) Flexible working conditions/patterns
(f) Information technology

5.3 The 'Shamrock' organisation to encourage flexibility:
Support
staff
Core
workers
Peripheral/
Contingent
workforce

5.4 A fourth element of organisations today is the consumer who may do part of the work themselves(eg self-checkout).

6 Anthony's hierarchy

6.1
Strategic
Tactical
Operational

6.2 Each level of the organisation differs in terms of:
(a) The role/tasks performed
(b) The decisions taken
(c) The nature of the working environment
(d) The nature of the information required (see chapter 2).

The rest of this chapter is for Home Study

7 Organisational departments and functions

7.1 Research and development
(a) Organisations undertake research and development in order to improve their products
and processes; thus enabling them to remain competitive in the market place.
(b) Research types:
Pure

No commercial advantage

Applied

Specific application

(c) An 'R & D' department will be involved in the development of brand new products as
well as enhancements to existing ones. It will also be involved with improving the manufacturing processes.

7.2 Purchasing
(a) The purchasing department is responsible for the acquisition of material resources
and business services used by the organisation.

(b) Purchasing managers have to obtain the best purchasing mix from suppliers bearing
in mind four factors in order to obtain the best value for money:
• Price
• Quality
• Quantity
• Delivery
(c) Key issues:
• Sources of supply – number and mix
• Cost of supplies
• Whether to outsource or make it in house
• Building supplier relationships

7.3 Production

Inputs Production Outputs Decisions

• Long-term
– Assets
– Job design
– Layout
– Selection of employees
• Shorter-term
– Scheduling
– Maintenance
– Quality
– Management

7.4 Service operations
(a) Many products have a service element (eg after sales warranty and service), whilst
some businesses are purely service orientated (eg health-care, education).
(b) Service issues:
Simultaneous
Homogenous
Intangible
Perishable


7.5 Marketing
(a) Marketing is 'the management process which identifies, anticipates, and satisfies
customer needs profitably' (Chartered Institute of Marketing).

(b) Marketing activities comprise:
• Sales support (reactive to the needs of its sales force)
• Marketing communications (a pro-active approach)
• Strategic marketing (creation of competitive strategy)
• Operational marketing (supports all aspects of the organisation)

(c) Marketing strategy has a very important input into the organisation's corporate
strategy as it will help influence the overall direction of the organisation. Marketing
planning ensures that the marketing strategy is actioned in the day-to-day operational process.

(d) There are four types of marketing orientation:
(i) Production – Customers will buy whatever is produced (demand exceeds supply)
(ii) Product – If more features are added to the product, more units will be sold. No research into customer requirements is carried out.
(iii) Sales – Customers must be persuaded to buy the product or service.
(iv) Marketing – The organisation determines the needs, wants and values of the target market and the organisation then
aims to satisfy these customer requirements.

(e) The marketing 'mix' comprises four 'Ps':
(i) Product
The actual physical products or services that are being sold. The marketing
function endeavours to ensure that the products are what the customers
require and/or communicates the benefits of the products to the consumers.

(ii) Place
Marketing help decide where the consumer can obtain the product and how the
product is distributed.

(iii) Promotion
This includes all marketing communications which inform potential customers
about the products on offer. Promotion should create:

• Awareness of the product
• Interest in the product
• Desire to purchase the product
• Action in purchasing the product

(iv) Price
The price of a product has to deliver a profit to the organisation, but at the
same time must be set at the right level for the consumer.

Sometimes prices are pitched at a low level to persuade purchasers to buy.
This is known as 'penetrating pricing' and often occurs in the early stages of the
product life cycle.

'Price skimming' is where prices are set very highly to maximise profits, even
though this will restrict demand.

Price is often used as a competitive weapon.

7.6 Administration
This is covered in Chapter 8.


7.7 Finance
(a) The finance function has four primary roles:
• Raising money
• Recording and controlling what happens to the money
• Providing information to mangers
• Reporting to shareholders and others

(b) Money is raised from a variety of equity and debt sources as required by the
organisation's strategic plan.

(c) The finance function produces financial accounts for its shareholders and ensures
that all transactions are properly recorded in accordance with the law.

(d) A key feature of the finance function is treasury management to ensure that the
organisation deploys its financial resources in the most effective manner. This role
includes the management of working capital (ie debtors, creditors, stock).

(e) The finance function produces management accounts, which are used by the
organisation to control its activities and to help make general management decisions.

8 Committees

8.1 Many organisations set up permanent or limited duration committees to assist in the management of the organisation.

8.2 Committees can assist in:
• Creating new ideas
• Communications
• Problem solving
• Combining abilities
• Co-ordination (between departments)

8.3 Types of committee include:
• Executive – the power to govern/administer
• Standing – deal with routine business issues
• Ad hoc – complete a specific task
• Sub committees – relieve a main committee of tasks
• Joint committees – co-ordinate activities
• Management committees – make key organisational decisions

8.4 Advantages of committees:
(a) Consolidation of power
(b) Delegation
(c) Blurring responsibility
(d) Creating new ideas
(e) Communication
(f) Encourage participation
(g) Advisory capacity

8.5 Disadvantages of committees:
(a) Too large for constructive action
(b) Time consuming and expensive
(c) Delays
(d) Incorrect or ineffective decisions
(e) Apathetic members
(f) Compromise

9 Chapter summary

• This chapter has outlined the various types of structure that organisations effect in
order to achieve their objectives.
• It has also looked at the different departments to be found within organisations.

Chapter 1: Questions Chapter 1: Questions


1: QUESTIONS

1.1 Which of the following is not a type of marketing orientation?
A Product
B People
C Sales
D Production (2 marks)

1.2 A limited company has a separate legal identity from its owners. True or false.
A True
B False (1 mark)

1.3 Strategy can be made at several levels in an organisation; which of the following is not one such level:
A Supervisory
B Functional
C Corporate
D Business (2 marks)

1.4 Who devised a method of analysing organisations into five components, including the operating core?
A Charles Handy
B Abraham Maslow
C Henry Mintzberg
D Tom Peters (2 marks)

1.5 What is not an advantage of a matrix structure?
A Slower decision making
B Bureaucratic obstacles removed
C Greater feasibility
D Closeness to customers (2 marks)

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Default Re: Accountant in Business Notes ACCA Paper F1 Complete Notes

Chapter 1: Answers

1.1 B Products or services are marketed to people but this is not a type of marketing orientation as all
marketing is to people.

1.2 A In law a limited company has its own identity even if it is owned by only one shareholder (ie. owner).

1.3 A Supervisors manage groups of employees. Supervisors are usually below middle management
levels in an organisation, but they are not included in strategy setting.

1.4 C Mintzberg's organigrams.

1.5 A A matrix structure should lead to better decision making, but at a cost of the speed of making the decision.
END OF CHAPTER



2- Information technology and systems


Syllabus Guide Detailed Outcomes

Having studied this chapter you will be able to:

• Understand the differences between types of information systems.
• Evaluate sources and uses of data.
• Appreciate levels of security for information systems.

Exam Context

The choice of suitable systems to meet specific business information requirements could be the topic of a question.

Qualification Context

An understanding of information technology is important with regard to higher level papers.

Business Context

Virtually all organisations now rely on information technology and systems for their operational requirements.

Overview

Information technology and systems

Information
What is it? What are the key sources? Key information technology systems


System security
Why do organisations need it?


1 What is information?


1.1 DATA System/process INFORMATION
1.2 Information is data which has been processed to make it meaningful to the user.
1.3 Sales day book Analysis Aged debtors analysis

1.4 Meaningful information provides a basis for decision-making.

Lecture example 1 Brainstorming

Suggest some uses of information in organisations.


1.5 Information can be obtained from both internal and external sources.
1.6 Qualities of Good information
A – accurate
C – complete
C – cost – beneficial
U – user – targeted
R – relevant
A – authoritative
T – timely
E – easy to use


Lecture example 2 Brainstorming

Suggest ways in which the organisation can improve its information to make it ACCURATE.


1.7 The features of information will differ at each level in the organisation and therefore different
systems will be used to support those information needs

1.8 (i) Strategic information: Ad hoc

Range of sources required
Overview/big picture

(ii) Tactical information : Routine
Formally reported
Largely internal

(iii) Operational information: Real-time
Highly detailed
Internal

1.9 Sources of information

Internal Informal

Formal

External Informal

Formal


2 Information systems

2.1 Data capture
Data can be captured by organisations in the following ways.
(a) Manual input
(b) Automated systems
(c) Self-administration.

2.2 The method of data capture will depend on the nature of the organisation, the speed of the
data capture and the volume.

Lecture example 3 - Exam standard question

Suggest business uses of the following data capture systems:

(a) Optical character recognition (OCR)
(b) Optical mark recognition (OMR)
(c) Scanners/bar code readers
(d) Voice recognition
(e) Touch screens
(f) Electronic funds transfer at point of sale (EFTPOS)


2.3 Systems at different organisational levels.
Management
information
systems (MIS) Strategic


Used at

Expert

all levels

systems

Technical/management

Database Transactions
systems Processing
Systems (TPS)

Office

Operational
Executive support systems (ESS)
Decision support systems (DSS)
automation
systems (OAS)

Lecture example 4
Class exercise

Complete the following table:

Purpose TPS DSS ESS Expert MIS
Volume processing , Manipulation of information ,Presentation of key information, Adds value to decisions, Integrates

internal information

Example




3 Database systems

3.1 A database is a collection of records and files designed in such a way that it is possible for
the whole of the user community to search and obtain a wide range of data and process it
into standard and ad hoc reports.
3.2 Data will be stored in tables, and will be accessed by users via a piece of software called the
database management system (DBMS).
3.3 A database has three major characteristics:
(a) It is shared
(b) It provides for needs of different users
(c) It can evolve to meet future needs

3.4 Advantages of a database Disadvantages of a database
Reduced duplication of data or data redundancy High set-up costs
Reduced storage costs Risk of failure
Consistent data Data not meeting all users' needs
Security and privacy Costs of security and contingency planning

3.5 A database administrator (DBA) controls and sets standards for:
(a) Data input
(b) Physical storage structures
(c) System performance
(d) Back-up and recovery strategies
(e) Security of data

3.6 A database structure is developed for each database. This structure specifics which files will
be held in the database and what 'records' and 'fields' they contain. It will specify how many
characters can be entered in each field.

4 Internet technology

4.1 Internet technology can be used in organisations in different ways, eg
(a) Source of information
(b) Sales channel
(c) Communication channel
(d) Supply chain management

Lecture example 5 - Brainstorming

Identify the key features of a well-designed website.

4.2 An intranet is an internal' mini' internet using the company's own networked computers and
internet technology. Each employee has a browser and a server which distributes corporate
information.
The type of information which an intranet may be used to distribute could be company-wide
information such as the company newsletter, staff hand-book, job vacancies and key operational information.

4.3 An extranet is a secure private extension of a company's intranet, it can be accessed by
authorised outsiders.

5 Systems security

5.1 Organisations must set up suitable controls to reduce significant risks to IT systems and data.
Lecture example 6 - Class exercise

Give an example of the risks below, and suggest a suitable control.

Risk Example Control

• Human error
• Malfunctioning hardware or software
• Natural disasters
• Deliberate actions
• Commercial espionage
• Malicious damage
• Industrial action

5.2 Categories of systems controls
Security controls - Integrity controls - Contingency controls

5.3 These types of controls are covered in more details in chapter 9.


6 Chapter summary

• This chapter has outlined the importance and significance of Information technology
and systems to all organisations.
• It has also looked at the relevance of databases to organisations, and the significant
risks affecting IT systems.


Chapter 2: Questions Chapter 2

2.1 What is not an example of an internally generated source of information?
A Personnel records
B Production department information
C Customer listing
D Industry wide analysis of market shares (2 marks)

2.2 Good information has specific qualities. Which of the following is not such a quality?
A Complete
B Authoritative
C Non-targeted
D Timely (2 marks)

2.3 It is essential that information systems have contingency controls. True or false?
A True
B False (1 mark)

2.4 Which of the following is not an advantage of a database?
A Reduced storage costs
B Data meets all users needs
C Security
D Reduced duplication of data (2 marks)

2.5 Which of the following types of information systems does not operate on the managerial level?
A Expert systems
B Management information systems
C Executive support systems
D Decision support systems (2 marks)

Chapter 2: Answers Chapter 22.13

2.1 D An industry wide analysis of market shares includes information obtained from outside the
company and so is classified as being external (even if it is produced by the company itself).

2.2 C Good information should always be targeted to the user's requirements.

2.3 A Contingency controls allied with security controls and integrity controls ensure that information is
as protected as possible.

2.4 B A database ensures consistent data and so it may not be in a format which meets the needs of all
users.

2.5 C Executive support systems operate at the strategic level.

3- Influences on organisational culture


3: INFLUENCES ON ORGANISATIONAL CULTURE

What is culture?

1.1 Schein defines organisational culture as 'the set of shared, taken for granted implied
assumptions that a group holds and that determines how it perceives, thinks about and
reacts to its environment'.
Handy describes culture as 'the way we do things around here'.

1.2 According to Schein there are three determinants of culture which build on each other:
(a) Observable beliefs

(b) Values and beliefs
(c) Assumptions or 'unspoken rules'

1.3 The 'Iceberg' of culture
BEHAVIOUR AND ATTITUDES
PROFESSED CULTURE
ASSUMPTIONS

(inbuilt and shared beliefs and values)
Behaviour and attitudes are observable to outsiders, but professed culture and assumptions
are not, despite often being the more important aspect of culture.

1.4 Organisations have differing cultures. These are sets of values, norms (standards of
behaviour) and beliefs, which are reflected in different organisation structures and systems.

1.5 There are five observable aspects of culture that can be identified (and memorised as CRABS).
Customs
Rituals
Artefacts
Beliefs and values
Symbols


Lecture example 1
Ideas generation

Give an example of each of the aspects in 1.5, using your organisation.


2 Culture and structure

2.1 Roger Harrison (1972) classified organisation culture into four types that relate structure to
culture. Charles Handy in his book ‘Gods of Management’ (1996) gave each type the name
of a Greek God.

Power culture – (Web) Zeus

2.2 Key features
(a) Central power source
(b) Control through trust
(c) Flexible and reactive

Role culture – (Temple) Apollo

2.3 Features based around functional "pillars" (ie Finance, Production etc)
(a) The pillars are co-ordinated at the top by a narrow band of senior management.
(b) Likely to be regulated and hierarchical.

Task culture – (Net) – Athena


2.4 Features
(a) Job or project orientated.
(b) Team based.
(c) Very adaptable.
(d) Horizontally structured.

Person culture – (Cluster) – Dionysus


2.5 Features
(a) A culture based on self-interest.
(b) Management through facilitation and administration.

2.6 It is possible for different cultures to occur in different parts of the same organisation,
especially large ones with many departments and sites. This is an example of the
"contingency approach" where "it all depends".

3 National cultures

3.1 National Cultural dimensions influence the way in which people work and the way in which
they expect to be managed.

3.2 Global organisations need to be sensitive to these particular issues.

3.3 The Hofstede model (developed by Gert Hofstede in 1980) explains key cultural differences
and values, rating different countries on a scale.
In particular, Hofstede pointed out that countries differ on the following dimensions:

(a) Power distance. This dimension measures how far superiors are expected to
exercise power.
(b) Uncertainty avoidance. Some cultures prefer clarity and order, whereas others are
prepared to accept change.
(c) Individualism-collectivism. In some countries individual achievement is what
matters. In a collectivist culture, people put the interests of the group first.
(d) 'Masculinity'. In 'masculine' cultures assertiveness and acquisitiveness are valued.
'Masculine' cultures place greater emphasis on possessions, status, and display as
opposed to quality of life and caring for others.
Hofstede grouped countries into eight clusters using these dimensions. Here are some examples:

HIGH LOW
Power distance - Latin, Near East , less developed Asian - Anglo, Nordic, Germanic
Uncertainty Avoidance - Latin, Near East, Germanic, Japan - Anglo, Nordic
Individualism - Anglo, Nordic - Near East, less developed Asian
Masculinity - Anglo, Germanic, Japan - Nordic

4 The informal organisation

4.1 An informal organisation exists side by side with the formal one. Informal organisations are
loosely structured, flexible and spontaneous. Features of informal organisations include:
• Social networks
• Informal channels of communication
• Informal ways of doing things

4.2 Benefits/uses of the informal organisation
• Satisfying for staff
• Can over-ride 'red tape'
• Can encourage staff to share knowledge

4.3 Drawbacks/risks
• Can distract energy/attention
• Can encourage the cutting of corners
• Can undermine management

4.4 The Hawthorne experiments performed by Elton Mayo identified the importance workers
place on belonging to a group, and the influence a group can have on an individual.

4.5 Mayo's work forms the basis of the 'Human Relations' School of Management which will be
covered in chapter 11.
5 Stakeholder goals and objectives

5.1 Stakeholders are those people or groups that have an interest in what the organisation
does. Johnson and Scholes identified three types of stakeholder:
(a) Internal:
Corporate management
Employees


(b) Connected:
PrimaryShareholders
Debt holders (eg bank)
Intermediate (business) and final (consumer) customers
Suppliers

(c) External:
Immediate community
Competitors


5.2 Stakeholders potential influence can be mapped according to Mendelow:
(a) The matrix can be used to:
(i) Track the changing influences between different stakeholder groups over time.

This can act as a trigger to change strategy as necessary; and
(ii) Assess the likely impact that a strategy will have on different stakeholder groups.

Level of interest

A MINIMAL EFFORT eg Casual labour - Low
B KEEP INFORMED eg Core employees - High
C KEEP SATISFIED eg Institutional shareholder - Low
D KEY PLAYERS eg Main suppliers - High

(b) Its aim is to assess:
(i) Whether stakeholders' resistance is likely to inhibit the success of the strategy;
and
(ii) What policies or actions may ease the acceptance of the strategy.


5.3 An organisation can make strategic gains from effectively managing its stakeholder
relationships and it needs to measure levels of satisfaction amongst its stakeholders.
Measurement will not be easy but ideally a combination of qualitative and quantitative
measures needs to be established.

6 Chapter summary

• This chapter has looked at what culture is and how it impacts on organisations.
• The objectives and importance of different stakeholder groups have also been reviewed.

Chapter 3: Questions Chapter 3: 3: QUESTIONS

3.1 Which of the following is not a connected stakeholder?
A Customer
B Employee
C Landlord (Lessor)
D Shareholder (2 marks)

3.2 A role culture emphasises the completion of a job or project. True or false?
A True
B False (1 mark)

3.3 What is the name of the management theorist that broke national culture into four key dimensions?
A Mayo
B Handy
C Scholes
D Hofstede (2 marks)

3.4 If a stakeholder has a high level of interest in the company and has high power under Mendelow's
stakeholder mapping grid, the stakeholder is classified as:
A Minimal effort
B Keep informed
C Key players
D Keep satisfied (2 marks)


3.5 Which of the following is not an observable aspect of culture?
A Style
B Beliefs and values
C Customs
D Rituals (2 marks)

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Chapter 3: Answers Chapter 3: Answers


3.1 B Employee is an internal stakeholder.


3.2 B Role culture emphasises the importance of the functions/departments. Task culture emphasises
the importance of the job or project.

3.3 D Hofstede developed the four key dimensions of national culture; power distance, uncertainty
avoidance, individualism – collectivism, masculinity.

3.4 C High interest and high power stakeholder means the company has to work with the stakeholder to
keep them satisfied.

3.5 A The observable aspects of culture are identified (and memorised) as CRABS; customs, rituals,
artefacts, beliefs and values, symbols.

END OF CHAPTER




4- Ethical considerations

What are ethics?

1.1 Ethics are a set of moral principles that guide behaviour. They can be distinguished in
principle from the legal obligations, and other rules and regulations which must be adhered
to. They apply to organisations as well as individuals.

Lecture example 1 - Ideas generation

Required

Complete the following table, in a business context:

Examples of obligations - Consequences of noncompliance
Law
Regulations
Ethics

1.2 Two approaches to ethics that are found in Western cultures are 'consequences' and 'duty':
(a) A 'consequences' approach judges actions by reference to their outcomes. For
example, utilitarianism suggests that actions should be undertaken 'for the greater
good of the greater number'. However, this can overlook the need to protect
minorities and lead to a view that 'the end justifies the means'.
(b) A 'duty' approach is not concerned with consequences but with acting according to
ethical principles such as 'treat others as you would like to be treated yourself'.
These approaches can conflict at times, for example if job reductions are required to secure
an organisation’s future.

Lecture example 2 - Ideas generation

Required

What ethical issues might the following types of organisation face?
How might they address these issues?

(a) A multinational manufacturing company
(b) A mining company
(c) A cosmetics manufacturer
(d) An arms manufacturer

2 Organisational ethics

2.1 There are many influences on the ethics practiced within organisations. These may include:
(a) Personal ethics of staff
(b) Organisation culture
(c) The example set by senior management – 'tone from the top'
(d) Organisational statements of ethics or values
(e) Professional ethics from relevant bodies such as ACCA

2.2 It has been suggested that organisations can adopt an approach to ethics based entirely on
compliance, i.e. ethics consists of ensuring that the letter of the law and any relevant
regulations are observed. This approach tends to be driven and codified by lawyers.

2.3 An alternative approach is that of ethics based on integrity. The law and regulations are
treated as a starting point, but ethics are also seen as part of organisational culture. The
approach will be driven by management as well as lawyers.

2.4 Whistle-blowing is the disclosure to the authorities/public by an employee of an illegal or
unethical practice carried out by the organisation. Such disclosure can lead to financial loss
for the whistle-blower as he/she may lose his/her job. In the UK some protection is now
provided under legislation to whistle-blowers.

3 Professional ethics

3.1 A profession is an occupation that requires extensive training and the study and mastery of
specialised knowledge, and usually has a professional association, ethical code and
process of certification or licensing.

3.2 Professional bodies will issue 'Codes of Conduct' or 'Codes of Ethics', which members
are expected to adhere to. The may be developed using:
(a) A rules based approach, creating specific rules for members to follow in as many
situations as possible.
(b) A framework based approach, describing fundamental values and qualities that
members should aspire to, but not laying out prescriptive rules.

Lecture example 3 - Exam standard question

Required

What are the respective advantages of the rules-based and framework-based approaches to
professional ethical codes?

4 A code of ethics for accountants

4.1 Accountancy is a high-profile profession and accountants are frequently in positions of trust
and responsibility. A code of ethics for accountants has been issued by the International
Federation of Accountants (IFAC), which represents all the major accountancy bodies
around the world. This has been incorporated by ACCA into its own code of ethics.
Principles of the code include:
(a) Integrity
(b) Objectivity
(c) Professional competence and due care
(d) Confidentiality
(e) Professional behaviour

4.2 To meet these principles, students and members of ACCA need to develop a mix of
personal and professional qualities.

4.3 Personal qualities include:
(a) Reliability – all work must meet professional standards
(b) Responsibility – taking ownership for your work
(c) Timeliness – delays can be costly and disruptive
(d) Courtesy – to colleagues and clients
(e) Respect – to develop constructive relationships

4.4 Professional qualities include:
(a) Independence – not only being independent, but appearing to be independent
(b) Scepticism – questioning information and data
(c) Accountability – for judgements and decisions
(d) Social responsibility – to your employer and the public

5 Chapter summary

• This chapter has reviewed ethics as an issue for organisations today.
• Specifically, it has looked at how ethics impact on accountants, and the standards
they are expected to adhere to as professionals.


Chapter 4: Questions Chapter 4:


4.1 IFAC stands for
A International Financial Accounting Committee
B International Financial Accounting Commission
C International Federation of Accountants
D International Federation of Accounting Concepts (2 marks)

4.2 Which of the following is an advantage of the rules based approach to developing a code of ethics?
A Ideal for complex or fast changing situations
B Consistency of application
C Encourage proactive members
D Hinders members trying to circumvent rules (2 marks)

4.3 Which of the following is not a source of rules that regulate behaviour of individuals and businesses?
A The law
B Ethics
C Customs and rituals
D Non-legal rules and regulations (2 marks)

4.4 Ethical behaviour is the same the world over. True or false
A True
B False (1 mark)

4.5 Which of the following is not a principle of the code of ethics issued by the International Federation of
Accountants?
A Objectivity
B Professional behaviour
C Integrity
D Courtesy (2 marks)


4: ANSWERS
4.1 C IFAC is an international body representing all major bodies across the world.

4.2 B The other three possible answers are all advantages of the framework based approach rather
than the rules based approach.

4.3 C Customs and rituals are not a source of rules, although they will influence the way individuals and
organisations behave.

4.4 B Ethical behaviour can vary from country to country as a result of different cultures.

4.5 D Courtesy is a personal quality that all members of the ACCA should demonstrate.

END OF CHAPTER




5- Corporate governance and social responsibility


1 Introduction to corporate governance

1.1 Corporate governance is the system by which organisations are directed and controlled by
their senior officers. It is an issue not just for public companies but also not-for-profit and
public sector bodies.

1.2 Corporate governance issues generally arise from the separation between ownership and
control in organisations (for many smaller organisations, ownership and control may not be
separated and these issues are less relevant). For example, public companies are owned by
their shareholders but controlled by senior management. There is scope for senior
management to abuse the power they have.

Lecture example 1 Class exercise

Required

Why might managers act in a way that is not in the best interests of shareholders?


1.3 Corporate governance has become increasingly high profile in recent years due to a number
of factors including:
(a) High-profile corporate scandals (e.g. Maxwell, Enron, WorldCom)
(b) Increasingly active and international shareholders
(c) Increasing media scrutiny
(d) Globalisation highlighting cultural differences
(e) Developments in financial reporting

Lecture example 2 - Ideas generation

Required

What might the features of poor corporate governance be?

1.4 Poor corporate governance can lead to reputational damage and sometimes bankruptcy.

1.5 Corporate governance in the UK has developed through a series of committees and reports:

2 The role of the board

2.1 A director is someone who works for a company and is charged with the conduct and
management of its affairs. The directors collectively are referred to as the Board of
Directors, who are elected by the shareholders.

2.2 Stewardship theory links to Corporate Governance as it views the directors as stewards of
the company assets on behalf of the owners.

2.3 The role that should be taken by the Board has been much debated. The Cadbury report
suggests that the Board should have a formal schedule of matters on which it decides,
which should include:
(a) Mergers and acquisitions
(b) Acquisitions and disposals of major assets
(c) Investments
(d) Capital projects
(e) Bank and other borrowings

2.4 Corporate governance codes have made a number of recommendations in relation to the
Board, including the following:
(a) Individual directors should have relevant expertise, which complements each other.
(b) The Board should receive appropriate information of sufficient quality in a timely
manner, including non-financial information.
(c) The performance of the Board and its members should be assessed annually
(d) The roles of chairman and chief executive should be separated. Companies are
discouraged from appointing an outgoing chief executive as chairman.

3 Non-executive directors

3.1 Non-executive directors have no management responsibilities. It is intended that they act as
a balance to executive management and advise the board on issues such as strategy,
performance, risk and remuneration of the executive directors.

3.2 Non-executive directors can broaden the experience and perspective available to the Board,
and can offer reassurance to shareholders and other outside parties.

3.3 Non-executive directors must be independent of the company, for example, they are not
expected to have business or financial connections with the company, and have time-limited
appointments.

Lecture example 3 - Ideas generation

Required

What do you think are some of the problems around the recruitment and role of non-executive
directors?

3.4 In certain countries, the concept of non-executive directors is taken further. For example, in
Germany all public companies must have a two-tier board. The management board
comprises executive directors and the supervisory board comprises non-executive directors,
partly elected by shareholders and partly by employees.

4 Remuneration and audit committees

4.1 Key features of the Remuneration and Audit Committees may be set out as follows:
Remuneration Committee - Audit Committee
Membership - At least 2-3 non-executive directors
At least 2-3 non-executive directors, at least one of whom must have recent, relevant financial experience
Remit - Remuneration policy and specific packages for executive directors and senior management
Internal controls with the organisation, liaison with external auditors, oversight of internal auditors

Key concerns

(a) Procedures for determining remuneration are formal and transparent
(b) Bonuses should arise from achievement of measurable performance
(c) All Board remuneration and benefits are transparent in the statutory accounts
(d) Remuneration packages align the interests of management and shareholders

(a) An independent channel is available to report any control issues
(b) Resolving any auditor recommendations and auditor/management disputes
(c) Financial and control systems in place are adequate, including an effective internal audit function
(d) Adequate risk monitoring is in place

5 Reporting on corporate governance

5.1 Companies listed on the London Stock Exchange are required to provide:
(a) A narrative statement of how the principles of the Combined Code have been applied
(b) A statement of compliance with the Code throughout the accounting period, or reasons for non-compliance
(c) Information about the Board of Directors
(d) Reports of the Remuneration and Audit Committees
(e) A statement of effectiveness of internal controls

6 Corporate social responsibility

6.1 Corporate Social Responsibility is the idea that organisations, especially (but not only)
companies, have an obligation to consider the interests of customers, employees,
shareholders, communities, and ecological considerations in all aspects of their operations.

6.2 Some arguments for and against companies embracing corporate social responsibility are
as follows:

For Against
Large companies can be very powerful and,
as they are not democratically accountable,
may infringe on others’ rights if they do not
exercise self-restraint
Companies can benefit societies most by
operating efficiently and maximising wealth
for shareholders
Companies depend on society’s
infrastructure to function
Companies already fund society’s
infrastructure via taxes
A company’s operations may have social
consequences that need to be addressed,
e.g. pollution, environmental damage
It should be up to shareholders to donate to
charities if they wish to, not for companies
to undertake charitable activities
Adopting corporate social responsibility can
result in a better image and greater
customer and employee loyalty
Companies should already be focused on
anything that will enhance shareholder
value without labelling it corporate social
responsibility



6.3 The range of ethical stances, as described by Johnson and Scholes includes:
(a) Short-term shareholder interest

The organisation is responsible for its ethical stance in the short term interests of
shareholders, but the government has a wider longer term remit.

(b) Long-term shareholder interest
The organisation takes a wider view of its ethical responsibilities by:
(i) Corporate image enhancement
(ii) Presentation of pressure for legal regulation
(c) Multiple stakeholder obligations.
The organisation accepts the legitimacy of the expectations of stakeholders other
than shareholders.

(d) Shaper of society
This is a more demanding role that 'multiple stakeholder obligations' and is largely the
preserve of public sector organisations.

6.4 Many companies develop a social responsibility programme by identifying key stakeholders
and analysing their needs and interests (refer back to chapter 1 for information on
Stakeholders).

Chapter summary

• This chapter has reviewed the importance and implications of corporate governance.
• It has also reviewed the impact of increasing pressure for companies to adopt
corporate social responsibility.

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Chapter 5: Questions Chapter 5


5.1 Johnson and Scholes described a range of ethical stances. Which of the following is not part of the
range?
A Social audit
B Shaper of society
C Long term shareholder interest
D Multiple stakeholder obligations (2 marks)

5.2 Which of the following produced a report into the principles and guidelines of UK corporate governance?
A Sarbanes
B Mintzberg
C Hampel
D Friedman (2 marks)

5.3 The Combined Code is a set of principles that is followed by companies quoted on the London Stock
Exchange. True or false?
A True
B False (1 mark)


5.4 Which of the following would prevent a non executive director from being seen as independent?
A Not being financially independent of the company
B Having share options
C Other directorships
D Not being a previous employee of the company (2 marks)

5.5 Which of the following is not a theory on governance associated with the ownership and management of
UK organisations?
A Agency theory
B Stakeholder theory
C Two-tiered boards theory
D Stewardship theory (2 marks)

Chapter 5: Answers Chapter 5


5.1 A A social audit is used by an organisation to see if it has achieved its social responsibility targets.

5.2 C Sarbanes with his colleague Oxley developed the USA's approach to corporate governance
through detailed rules and laws.

5.3 A True.


5.4 A In the UK it is not acceptable for independent non executive directors to be awarded share
options.

5.5 C Two-tiered boards are a common feature of German companies.

END OF CHAPTER




6: THE MACRO-ECONOMIC ENVIRONMENT

THIS CHAPTER IS FOR HOME STUDY

1
Government policies and obligations

1.1 Governments seek to manage national economy, and this may include the following aims:
(a) To achieve economic growth
(b) To control price inflation
(c) To achieve full employment
(d) To achieve a balance between exports and imports

1.2 Governments spend money raised by taxation and borrowing on a variety of items.
Decisions by governments on taxing and spending affect companies in many ways:
(a) Suppliers to government
(b) Knock on effect of government spending throughout the economy
(c) Taxation affects consumers' purchasing power
(d) Taxes on profits affect investment returns
(e) Public sector investment benefits some companies
(f) Public sector investment has a longer time scale and less quantifiable benefits

1.3 Government influences

2- Fiscal policy

2.1 The formal planning of fiscal policy is set out in the 'Budget' which has three components:
(a) Expenditure planning
(b) Revenue raising
(c) Borrowing

If expenditure exceeds revenues the government will need to borrow. This is known
as the 'Public Sector Net Cash Requirement' (PSNCR).

2.2 Governments can use fiscal policy to change the level of demand in the economy:
(a) If government reduces taxation, but does not change its spending then economic
demand is stimulated.
(b) Demand can be increased by the government spending more, but not altering
taxation.
(c) Demand can be reduced by increasing taxation or reducing spending.

2.3 When the government's income exceeds its expenditure and, therefore it is repaying earlier
borrowings, it is known as having a 'budget surplus'. The opposite position is known as
running a 'budget deficit'.

2.4 Taxation is a key source of revenue raising. It also serves to discourage activities and to
redistribute income and wealth.

2.5 A good tax system should be:
(a) Flexible
(b) Efficient
(c) Able to attain its purpose

2.6 Taxes can be either:
(a) Direct Paid directly to the Revenue authority (eg income tax, capital gains tax, inheritance tax).

(b) Indirect This is collected by the Revenue authority via a third party (a 'supplier') who passes
the tax on to consumers Indirect taxes can be:

(i) A specific tax charged as a fiscal sum per unit sold (eg petrol tax)
(ii) 'Ad valorem tax' charged as a fixed percentage of the price of the item (eg VAT).

3 Monetary policy

3.1 Monetary policy uses money supply, interest rates, exchange rates and credit control to
influence aggregate demand.

3.2 Instruments of monetary policy include:
• Changing interest rates through open market operations
• Changing reserve requirements
• Intervention to influence the exchange rate

3.3 Monetary control can reduce inflation which helps:
• Prevent economic uncertainty through high inflation
• Ensure business confidence and so stimulate investment
• Controlled money supply growth should provide higher incomes

4 National income and economic growth – key terminology

4.1 Equilibrium national income
• Demand for goods and services is in balance with available supply and the level of
output is produced fully utilising resources.

4.2 Inflationary gap
• Occurs when resources are already employed so that an increase in demand will
serve to increase prices.

4.3 A 'deflationary gap' occurs where there is unemployment of resources. Prices are fairly
constant and real output changes as aggregate demand changes.

4.4 'Stagflation' occurs where there is a combination of high unemployment and high inflation
caused by a price shock (eg crude oil price rises in the early 1970's).

5 Phases in the business cycle

5.1 The business cycle is the continual sequence of rapid growth in national income followed by
a slowdown.

5.2 After slowdown or recession comes growth again and so on.

5.3 The four main phases of the business cycle are:
(a) Recession (point A on the graph below)
(b) Depression (point B on the graph below)
(c) Recovery (point C on the graph below)
(d) Boom (point D on the graph below)

5.4 In the 'Recession' phase consumer demand falls and previous investment projects begin to
look unprofitable. This phase can begin quite quickly.

5.5 If during the recession phase there is a lack of stimulus to aggregate demand a period of
'depression' will set in.

5.6 'Recovery' is usually slow to begin due to a general lack of confidence in the economy, but it
will quicken up. Incomes and employment will rise as output does.

5.7 Once the actual output has risen above the trend line the 'Boom' phase of the cycle is
entered. Capacity and labour become fully utilised in this phase.

6 Inflation and its consequences

6.1 Inflation is the name given to an increase in prices.

6.2 High inflation is a problem because it leads to:
(a) Redistribution of income and wealth
(b) Balance of payments effects
(c) Uncertainty of the value of money and prices
(d) Resource costs of changing prices
(e) Lack of economic growth and investment

6.3 The rate of inflation is measured by price indices. A 'basket' of items which represent
average purchases around the country is priced regularly and this forms the basis of a price
index.

6.4 In the UK there are now two key price indices:
(a) Retail Prices Index (RPI)
This index includes prices for all goods and services (including housing costs) purchased by UK consumers.

(b) Consumer Prices Index (CPI)
This index, which excludes housing costs, is calculated on the same basis as the rest of Europe.

(c) RPIX
This is the underlying rate of inflation excluding mortgage interest payments.

(d) RPIY
This is RPIX as adjusted for the effects of any VAT changes.

7 Unemployment

7.1 The rate of unemployment can be calculated as: Number of unemployed Χ100% / Total workforce

7.2 Consequences of unemployment include:
(a) Loss of output
(b) Loss of human capital
(c) Increases inequalities in income distribution
(a) Social costs
(e) Increased welfare payments


7.3 Unemployment can be classified into categories:
(a) Real wage unemployment (labour supply exceeds demand but wage rates do not fall)
(b) Frictional (delays in transferring from one job to another)
(c) Seasonal (eg tourism)
(d) Structural (eg coal mining)
(e) Technological (eg robots in car plant)
(f) Cyclical or demand deficient (reflects the economic cycle)

8 Objective of economic growth

8.1 Economic growth is measured by increases in real gross national product (GNP) per head of population.

8.2 Factors which contribute to growth include:
(a) New investment
(b) Natural resources
(c) Labour sources
(d) Capital availability
(e) Technological progress

9 The balance of payments

9.1 The balance of payments account relates to foreign exchange movements in a country. It
consists of a current account for trading activities and a capital account.

9.2 The current account is sub-divided into:
(a) Trade in goods
(b) Trade in services
(c) Income from:
– Employment by overseas companies of UK residents
– Returns on overseas capital investment
(d) Transfers from:
– Interest payments to/from overseas bodies, eg EU
– Non government payments to/from overseas bodies, eg EU

9.3 The capital account comprises public sector flows of capital (eg government loans to other
countries).

9.4 The balance on the financial account comprises flows of capital to/from non government
sector (eg investment overseas).

9.5 The sum of the balance of payments accounts must always be zero, excluding statistical
errors in collecting the data known as the 'balancing item'. When commentators speak of a
balance of payments surplus or deficit they are only referring to the current account, which
is also known as the balance of trade.

9.6 Deficit Surplus
Importing more Exporting more
than exporting than importing

10 Chapter summary

• This chapter has explained the impact of government policy on the macro economy
and the potential impact of policy decisions on organisations.

6.10 Chapter 6: Questions Chapter 6

6.1 Adam Smith lists four features of a good tax system, which of the following is not one of these features?
A Regressive
B Economy
C Certainty
D Convenience (2 marks)

6.2 The Consumer Prices Index (CPI) is the European equivalent of the Retail Prices Index (RPI). True or
false?
A True
B False (1 mark)


6.3 Which of the following is not a category of unemployment?
A Technological
B Cyclical
C Demographic
D Seasonal (2 marks)

6.4 Which of the following is not a disadvantage of economic growth?
A Increased pollution
B Structural unemployment
C Faster use of natural resources
D Higher standard of living (2 marks)

6.5 In the business cycle if A represents Recession, B Depression, C Recovery and D Boom, which is the
correct sequence?
A BADC
B DABC
C CBAD
D ACDB (2 marks)



6.12 Chapter 6: Answers Chapter 6

6.1 A A regressive tax is one which takes a higher proportion of a low income than a high income (eg
vehicle excise duty).

6.2 B The Consumer Prices Index excludes housing costs (which are included in the Retail Prices
Index), but is calculated on the same basis as the rest of Europe.

6.3 C Demographic is a term used to analyse a population into segments based on factors such as age
and income.

6.4 D Higher standard of living is an advantage of economic growth.

6.5 B The cycle operates in the following sequence; Boom, Recession, Depression, Recovery.

END OF CHAPTER




7- The business environment


1 Analysing the environment

1.1 The environment can be described as everything which is beyond the organisational
boundary.

1.2 Management cannot control the environment, however it influences all aspects of
organisational activity and so must be viewed strategically.

1.3 The environment comprises a number of different elements, illustrated by the rings as below:
ORGANISATION
COMPETITIVE ENVIRONMENT
POLITICS TECHNOLOGY
ECONOMY SOCIETY (& CULTURE)
MACRO ENVIRONMENT
PHYSICAL ENVIRONMENT
MATERIALS SUPPLIERS
LABOUR CAPITAL
GOODS TO CUSTOMERS
WAGE TO LABOUR
PROFIT TO INVESTORS
POLLUTION
GENERAL ENVIRONMENT

Lecture example 1 - Ideas generation

Required

Suggest some reasons why companies should analyse their environment?

1.4 The general environment covers all the political/legal, economic, social/cultural and
technological influences in the countries in which an organisation operates.

1.5 PEST analysis is used as a framework for generating ideas for the factors that are
influencing the environment:
P Political/Legal/Regulation
E Economic
S Social/Cultural/Fashion
T Technology


2 Political and legal environment

2.1 The political factors impacting on the environment include:
(a) Degree of government intervention
(b) Policy direction
(c) Political risk

2.2 The legal framework in which organisations operate derives from:
(a) Parliamentary legislation
(b) Government regulations
(c) Treaty obligations
(d) Official regulations
(e) International bodies

2.3 Key legislation for organisations includes:
• Company law

• Health and Safety
• Criminal law • Data Protection
• Employment law

3 Legal framework for employees

3.1 Employees are protected by a range of laws including the following areas:
• Termination of employment
• Health and safety in the workplace

. Termination of employment

Lecture example 2 - Ideas generation

Required

Identify ways in which people leave organisations.


Health and safety

3.2 Both employers and employees have a duty to maintain health and safety standards at work
for the following reasons:
• To meet legal obligations
• To minimise the risk of accidents
• To minimise the risk of litigation

Lecture example 3 - Ideas generation

Required

Suggest areas which would fall under the responsibility of the employer.


3.3 Employees' duties over health and safety include:
(a) Take care of themselves and others
(b) Do not interfere with machinery
(c) Use all equipment properly
(d) Inform employer of any potentially dangerous situation

Lecture example 4

A scene from everyday office life is shown below
Required

Ideas generation

Note down anything that strikes you as being dangerous and allocate responsibilities between employer and employee.


Stress

3.4 Stress in employees can arise for a variety of reasons, connected with the job or the
employee's private life. Symptoms of stress in the work environment include:
(a) Nervous tension
(b) Withdrawal
(c) Low morale
(d) Repressing the problem

3.5 Causes or aggravators of stress in the work place:
(a) Personality of employee
(b) Ambiguity/conflict in employee's roles
(c) Change, insecurity, risk
(d) Management style
(e) Job related factors (eg environment, work load)
(f) Social factors

3.6 Many employers have a health and safety policy which details:
(a) Statement of principles
(b) Detail of safety procedures
(c) Compliance with the law
(d) Instruction on equipment use
(e) Training requirements

4 Data protection and security

4.1 In recent years, there has been a growing popular fear that information about individuals
which was stored on computer files and processed by computer could be misused.

4.2 In particular, it was felt that an individual could easily be harmed by the existence of
computerised data about him or her which was inaccurate or misleading and which could be
transferred to unauthorised third parties at high speed and little cost.

4.3 In the UK the current legislation is the Data Protection Act 1998. This Act replaced the
earlier Data Protection Act 1984.

4.4 In order to understand the Act it is necessary to know some of the technical terms used in it:
(a) Personal data is information about a living individual, including expressions of opinion about him or her. Data about other organisations (eg supplier or customer companies) is not personal data, unless it contains data about individuals who belong to those other organisations.
(b) Data users are organisations or individuals who control the contents of files of personal data and the use of personal data which is processed (or intended to be processed) automatically – ie who use personal data which is covered by the terms of the Act.
(c) A data subject is an individual who is the subject of personal data.

4.5 The Act contains the Data Protection Principles which data users must comply with:
(a) Personal data shall be processed fairly and lawfully.
(b) Personal data shall be obtained only for one or more specified and lawful purposes.
(c) Personal data shall be adequate, relevant and not excessive.
(d) Personal data shall be accurate and, where necessary, kept up to date.
(e) Personal data processed for any purpose or purposes shall not be kept for longer than is necessary for that purpose or those purposes.
(f) Personal data shall be processed in accordance with the rights of data subjects under this Act.
(g) Appropriate technical and organisational measures shall be taken against unauthorised or unlawful processing of personal data and against accidental loss or destruction of, or damage to, personal data.
(h) Personal data shall not be transferred to a country or territory outside the European Economic Area unless that country or territory ensures an adequate level of protection for the rights and freedoms of data subjects in relation to the processing of personal data.

4.6 Key points of the Act can be summarised as follows.
(a) With certain exceptions, all data users and all computer bureaux have had to register under the Act with the Data Protection Registrar.
(b) Individuals (data subjects) are awarded certain legal rights.
(c) Data holders must adhere to the data protection principles.

4.7 The key risks affecting data are:
(a) Human error
(b) Technical malfunction
(c) Deliberate/malicious action
(d) Hacking

4.8 Using the Internet brings numerous security dangers:
(a) Viruses
(b) Deliberate damage caused by disaffected employees
(c) Damage caused by outside people (hackers)
(d) Downloading of inaccurate information and/or virus ridden software
(e) Internal information may be intercepted, but this can be avoided by encryption (see later)
(f) Communications link may distort data or break down

4.9 Data stored electronically is at risk of a security breach. At particular risk is:
(a) Information regarding the business's standing and competitive advantage
(b) Personal and private information
(c) Information regarding the business's security
(d) Information integral to the outcome of deadlines (eg tenders)

4.10 When data is transmitted over a network or telecommunications link (especially the
Internet) there are numerous security dangers:
(a) Corruptions such as viruses on a single computer can spread through the network to
all of the organisation's computers. (Viruses are described at greater length later in this chapter.)
(b) Disaffected employees have much greater potential to do deliberate damage to
valuable corporate data or systems because the network could give them access to
parts of the system that they are not really authorised to use.

5 Social and demographic trends

5.1 Organisations are impacted by social and demographic factors in two ways:
(a) Managing HR
(b) Successfully marketing products.

5.2 Managing HR Organisations must take account of a range of factors when managing its labour force:
(a) What skills do we need:
(b) What skills are available
– internally?
– externally?
(c) How does the education system contribute to our labour supply?

6 Cultural trends

6.1 There have been significant changes in UK attitudes to diet and health in areas such as:
(a) Smoking
(b) Diet (eg organic food)
(c) Obesity

6.2 The impact on business of these trends in health and diet include:
(a) Growing market (for sports-related goods)
(b) Employee health (and its impact on employers' productivity)
(c) New foods (with added vitamins)
(d) New convenience foods
(e) Organic foods

7 Impact of technology on organisations

7.1 Information technology has played a significant role in the development of the modern
business environment.

Lecture example 5 - Ideas generation

Required

Suggests ways in which IT has changed your working environment.


7.2 Structure and IT

New structures through…
Downsizing - Delayering - Outsourcing

Lecture example 6 - Pilot Paper question

Required

Identify the benefits and risks of outsourcing an organisations IT department.


7.3 When finalising arrangements for outsourcing IT the following factors need to be considered:
(a) Is the system of strategic importance?
(b) Can the system be relatively isolated?
(c) Do we understand the systems enough to manage the service agreement?
(d) Are our requirements likely to change?

8 Competitive forces

8.1 Michael Porter argues that the pressures of five competitive forces, specific to the industry
or organisation, will determine long-term shareholder returns (1980).

8.2 This model may be used in two ways:
(a) To understand the inherent attractiveness of an industry.
(b) By understanding the impact of each individual force on an organisation, actions may be taken to mitigate that force.

8.3 Porter's 5 forces model
Potential Entrants


Threat of New Entrants


Bargaining Power

Industry

Bargaining Power of Suppliers

Competitors of Buyers

Suppliers


Buyers

Rivalry Among
Existing Firms


Threat of Substitute Products or Services
Substitute Industries

(a) Substitutes. The threat that alternative products (or services) will equally satisfy
customer needs.
(b) Potential entrants. The threat posed by an outside organisation that may try to
penetrate the market place. Examples of barriers include economies of scale, product
differentiation, capital costs, switching costs, distribution channels.
(c) Buyer power. The threat posed by the relative market forces that can be imposed by
customers (eg relative size and number of buyers).
(d) Supplier power. The threat posed by the relative market forces that can be imposed
by suppliers (eg monopoly suppliers, switching costs, possible alternative products).
(e) Competition and rivalry. The inherent level of rivalry and competition in the industry
between existing firms.

8.4 IT can be used to support an organisation's competitive strategy and can be used in a collaborative venture.

9 Converting resources: the value chain

9.1 Michael Porter says that competitive advantage is achieved by the way a firm organises and performs activities.

9.2
Example – A restaurant
BUYING - COOKING - SERVING
A restaurant's activities can be divided into buying food, cooking it, and serving it. The
ultimate value a firm creates is measured by the amount customers are willing to pay for its
products or services above the cost of carrying out value activities.

A firm is profitable if the realised value to customers exceeds the collective cost of
performing the activities.

Growing- Packing- Distribution- Buying- Cooking- Serving

9.4 Activities that add value do not stop at the organisation's boundaries. For example, when a
restaurant serves a meal, the quality of the ingredients – although they are chosen by the
cook – is determined by the grower.

9.5 Porter analysed the various activities of an organisation into a value chain. This is a model
of value activities and the relationships between them.

9.6 Primary activities are those directly related to production, sales, marketing, delivery and
services:
(a) Inbound logistics eg warehousing, transport, stock control.
(b) Operations are those activities that convert resource inputs into a final product.
(c) Outbound logistics are those activities relating to storing the product and its distribution to customers.
(d) Marketing and sales are those activities that relate to informing customers about the
product, persuading them to buy it, and enabling them to do so. This includes
advertising, promotion etc.
(e) After sales service. For many companies, there are activities such as installing
products, repairing them, upgrading them, providing spare parts etc.

9.7 Support activities are those which provide purchased inputs to support the primary
activities, eg human resources, technology and infrastructural functions:
(a) Procurement refers to those activities which acquire the resource inputs to the
primary activities (eg purchase of materials, subcomponents and equipment).
(b) Technology development (in the sense of apparatus, techniques and work
organisation). These activities are related to both product design and to improving
processes and/or resource utilisation.
(c) Human resource management is the activities of recruiting, training, developing and
rewarding people.
(d) Firm infrastructure. The systems of planning, finance and quality control are activities
which Porter believes are crucially important to an organisation's strategic capability
in all primary activities.

9.8 Value Chain is used to identify the following:
(a) Internal strengths and weaknesses
(b) Benefits from internal linkages
(b) Benefits from external linkages
(c) How the value chain supports the generic strategy

10. Chapter summary

• This chapter has demonstrated a variety of techniques that organisations use to
understand the impact of the changing business environment on their organisations.

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Default Re: Accountant in Business Notes ACCA Paper F1 Complete Notes

Chapter 7: Questions Chapter 7

7.1 Which of the following headings is not part of a normal PEST analysis?
A Political
B Ecological
C Social
D Technological (2 marks)

7.2 Which of the following is not a competitive force in Porter's 5 forces model?
A Potential entrants
B Supplier power
C Substitute industries
D Infrastructure (2 marks)

7.3 What does a Value Chain not identify?
A Internal strengths and weaknesses
B Positions in the market
C Benefits from internal linkages
D How the generic strategy is supported (2 marks)

7.4 The Data Protection Act enables organisations to indiscriminately utilise information held on all
databases. True or false?
A True
B False (1 mark)


7.5 Which of the following is not likely to effect an organisation's span of control?
A Nature of the task
B Age of the organisation
C Ability of the managers
D Availability of good quality information (2 marks)

Chapter 7: Answers Chapter 7
7.1 B Ecological factors may be an important part of an environmental analysis for some organisations,
but the "E" in PEST stands for Economic.

7.2 D Firm infrastructure is a secondary activity in Porter's Value Chain.

7.3 B The value chain reviews the organisation and not its position within the business environment and
so its position in the market (eg market share) is not obvious from the value chain.

7.4 B The Data Protection Act is designed to protect data about individuals from being misused by any
organisation.

7.5 B Whether the organisation is young or old does not necessarily impact on its span of control.

END OF CHAPTER

8-The role of accounting

1 The purpose of accounting information

1.1 Accounting is a way of recording, analysing and summarising the transactions of a business
and the accounting system must be adequate to fulfil this task.

1.2 An appropriate accounting system will depend upon:
• Size of the organisation
• Type of organisation
• Structure of organisation
• Legal jurisdiction of the organisation

1.3 The accounting system will provide the basis for financial information used internally and
externally.

1.4 Financial statements have to be produced as a result of requirements of:
(a) Law (Companies Acts)
(b) HM Revenue and Customs
(c) Banks (if providing finance to the company)
(d) Employee reports

1.5 Professional accountancy bodies around the world have produced accounting standards
with which all published accounts are expected to comply.

1.6 Good accounting information will have the following qualities:
(a) Relevance
(b) Comprehensibility
(c) Reliability
(d) Completeness
(e) Objectivity
(f) Timeliness
(g) Comparability

1.7 Key users of accounts include:
(a) Managers
(b) Shareholders
(c) Trade contacts
(d) Providers of finance
(e) Analysts

1.8 Typically large organisations structure their accounting functions on the lines of:

1.9 Many organisations also have an internal audit department, which is designed to alleviate
the risks of error and fraud. Internal auditors are employees of the company.

2 Nature, principles and scope of accounting

2.1 Financial accounting
• Records historic results
• Provides information for external users

Management accounting

• Produces information for decision-making
• Provides information for internal users

2.2 The statutory annual accounts of a company, subject to a minimum size requirement, need
to be audited by an independent qualified person. The auditors prepare an audit report
which is either unqualified or if there are issues arising from the accounts it will be qualified.

2.3 The accounts department interacts with other departments in the organisation and so there
is a need for close co-ordination.

3 The regulatory system

3.1 The following factors have influenced the current shape and style of financial statements:
(a) Company law
(b) Accounting concepts and individual judgement
(c) Accounting standards
(d) European Union
(e) Other international influences
(f) Generally accepted accounting principles (GAAP)

3.2 The Companies Act 1985 dictates the form and content of accounts, which must also
comply with accounting standards.

3.3 In 1990 this system was replaced by the Financial Reporting Council and its subsidiary the
Accounting Standards Board (ASB) which issued statements that focused on principles
rather than fine details. The Urgent Issues Task Force is an offshoot of the ASB and deals
with urgent matters not covered by existing standards.

3.4 The International Accounting Standards Board's objectives include:
(a) Development of global accounting standards
(b) Rigorous application of those standards
(c) Convergence of national accounting standards

3.5 Company law requires that a published balance sheet must give a 'true and fair view of the
state of affairs' of the company at the year end, whilst the profit and loss account must give
a 'true and fair view of the profit or loss' for the financial period.

4 Control over business transactions

4.1 There are a number of functions to be managed within a business:
(a) Purchasing
(b) Human resources
(c) Finance
(d) Sales and marketing
(e) General administration

4.2 To minimise these risks, an organisation must ensure that it has adequate controls over
transactions

4.3 Financial control procedures exist to ensure that:
(a) Transactions are correctly recorded
(b) Business assets are safeguarded
(c) Production of accurate and timely information

4.4 Examples of good financial control procedures include:
(a) Cheque/bank transfers over a certain amount needing two signatures
(b) Authorisation limits on purchase orders
(c) Authorisation of expense claims
(d) Effective credit control
(e) Effective computer security and access levels


5 Manual and computerised accounting systems

5.1 The principles behind computerised accounting are the same as those of manual
accounting. Computerised accounting tends to rely on accounting packages which comprise
several modules (eg sales ledger, purchase ledger).

5.2 Manual systems are usually inferior to computerised systems. Disadvantages of manual
systems include:
(a) Lower productivity
(b) Slower processing speeds
(c) Greater risk of errors
(d) Information less accessible
(e) More difficult to make alterations/corrections
(f) Not suitable for large amounts of data
(g) Inconsistent quality of output

5.3 Integrated accounting software has automatic links between separate accounting modules
thus meaning data needs only to be processed once and all files are updated.

5.5
Integrated accounting systems have the following advantages and disadvantages:
Advantages Disadvantages
1 entry updates others Greater computer memory needed
Users specify reports Fewer facilities than specialist modules
Users workload is simplified

6 Databases and spreadsheets

6.1 A database is a 'pool' of data that can be used by a variety of people for a variety of applications:
Input date - user - queries
Database
management
system
Database

Application
programs
Branch and Staff

Sales

Other

personnel payroll

application

applications*

statistics etc analysis etc

statistics etc

*
The range of applications which make use of a database will vary widely, depending on what data is held in the database files.
6.2 Spreadsheets are often used in both financial and cost accounting and are essentially computerised calculation formats.

7 Chapter summary

• This chapter has looked at why and how accounting is used in organisations.

Chapter 8: Questions Chapter 8

8.1 Which of the following is not an advantage of an organisational database?
A Only one secure access point
B No need to duplicate files or data
C Common data is shared by all users
D There is no inconsistent data (2 marks)

8.2 Which of the following has not influenced the current shape an style of financial statements?
A Accounting standards
B HM Revenue and Customs
C Company law
D GAAP (2 marks)

8.3 Which of the following is a requirement of an effective procurement system?
A Quality of goods received checked upon receipt
B Reconciliation of suppliers' statements
C Bank reconciliation
D All orders properly authorised (2 marks)

8.4 Which of the following is not a disadvantage of a manual accounting system as compared to a
computerised one?
A Slower processing speeds
B Greater risk of error
C Cost of system
D Not suitable for large volumes of data (2 marks)


8.5 Double entry bookkeeping ensure every transaction is entered twice thus ensuring that the accounts
balance. True or false?
A True
B False (1 mark)

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Default Re: Accountant in Business Notes ACCA Paper F1 Complete Notes

8.10 Chapter 8: Answers Chapter 8

8.1 A The concept of an organisational database is that a range of employees can have access to it at any time.

8.2 B HM Revenue and Customs use published accounts as an initial basis for tax collection, but they
do not influence the shape and style of financial statements.

8.3 D The quality of goods received is a task for the Goods in/Inventory department. Reconciliation of
suppliers' statements and bank reconciliations are the responsibility of the accounts department.

8.4 C Computerised systems are more expensive to set up than manual systems.

8.5 A True.


END OF CHAPTER


9- Control security and audit


1.1 To succeed internal controls need to be well directed and staff need to understand them.


1.2 A suitable framework for controls would consist of:
(a) Control environment
(b) Control procedures
(c) Information and communication processes
(d) Processes monitoring their continuing effectiveness


1.3 There are inherent limitations of an internal control system:
(a) Cost v benefits
(b) Potential for fraud or human error
(c) Employee collusion
(d) Bypassing/overriding of controls by management

2 Internal control environment and procedures

2.1 Controls can be split into…..
Control environment Control procedures
• Philosophy
• Rules
• Management style
• Regulations
• Strategy
• Procedures
• Culture
• Processes
• Ethical principles

2.2 A useful framework for control procedures is
Segregation of duties
Physical
Accounting
Management
Supervision
Organisational structure
Audit
Personnel

3 Internal audit and internal control

3.1 Internal audit is one part of an internal control system which assesses the effectiveness of other controls.


3.2 The work of the internal audit department may cover the following broad areas:
(a) Review of accounting and internal control systems
(b) Examination of financial and operating information
(c) Review of the economy, efficiency and effectiveness of operations
(d) Review of compliance
(e) Review of safeguarding of assets
(f) Review of implementation of corporate objectives
(g) Identification of significant business risks, monitoring overall risk management policy and monitoring risk management strategies
(h) Special investigations

3.3 Internal auditors' work depends on the scope and priority of the identified risks. They may
have to conduct a risk assessment from which they will recommend an appropriate
framework.

3.4 The key features of good internal audit:
(a) Independence
(b) Appraisal

3.5 There are five different types of audit to be aware of:
(a) Operational
(b) Systems
(c) Transactions
(d) Social
(e) Management investigations

3.6 Operational audits monitor management's performance and are sometimes known as
'management', 'efficiency' or 'value for money' audits.

3.7 Systems audits test and evaluate internal controls. Typically there are two types of test:
• Compliance (controls are applied as laid down)
• Substantive (seeking errors and omissions)
If compliance tests reveal that internal controls are working satisfactorily then the amount of
substantive testing can be reduced.

3.8 A transactions audit aims to detect fraud and uses only substantive tests.

3.9 Ideally the internal audit department should report to the audit committee of the board of
directors as it is then free to report on all levels of management and can ensure that any of
its recommendations are implemented.

3.10 The internal audit department plays a significant part in an organisation's risk management process.

4 External audit

4.1 External audit is the regular examination of the organisation's records by an outside party to
ensure that they have been properly maintained and give a true and fair view of the entity's
financial state.

4.2 The key differences between internal and external audit are:
Internal External
Reason Add value and improve
organisation's operations
Express an opinion on the financial
statements
Reporting to Board of Directors Shareholders
Work relating to Operations of the organisation Financial statements
Relationship with
company
Employees of the company Independent of the company and its
management

The table above shows that whilst some of the work may be similar the whole basis and
reasoning for their work is fundamentally different. This is emphasised by the difference in
objectives with internal audit having a much wider scope.

4.3
There should be co-ordination between the external and internal auditors to ensure that
duplication of work is minimised and controls enhanced.

4.4 If external auditors rely to an extent on the work of the internal audit department they will
consider:
(a) Organisational status
(b) Scope of internal audit functions
(c) Technical competence
(d) Due professional care

5 IT systems security and safety

5.1 It is important that IT systems are secure and protect the data and information which they
process and store. Security can be categorised as follows:
(a) Prevention
(b) Detection
(c) Deterrence
(d) Recovery procedures
(e) Correction procedures
(f) Threat avoidance

Lecture example 2 - Ideas generation

Required


Suggest some physical environmental threats to IT systems and data.

5.2 Physical access controls seek to prevent intruders access to the IT system and include:
• Personnel
• Door locks
• Keypad or card entry systems
• Intruder alarms

5.3 Computer theft is an increasing problem as equipment becomes smaller and more portable.
Whilst the loss of the physical asset is a concern, the loss of the data stored on the
computer may cause a bigger problem.

6 Building controls into an information system

6.1 Controls can be built into an IT system and they can be classified as follows:


Security - Integrity - Contingency


exist to prevent risk - exist to ensure conformity of systems operation to the design specification - exist to provide back-up and recovery
such as:

• Human error
• Technical error
• Natural disaster
• Deliberate actions (eg fraud)
• Commercial espionage
• Malicious damage
• Industrial action

6.2 Input controls ensure the accuracy, completeness and validity of input data by:
(a) Data verification
(b) Data validation

6.3 Back-up controls aim to maintain system and data integrity by ensuring that the most recent
copy of the data can be recorded and restored in the event of loss or corruption to the
primary storage media.

6.4 A well planned back up and archive strategy should include:
(a) Off site storage and back up
(b) Regular back up of critical data
(c) Archive plans
(d) Disaster recovery plan
(e) Regular testing to verify back up data can be successfully restored

6.5 Administrative controls include:
(a) Careful personnel selection for senior IT roles
(b) Segregation of duties for other IT roles

6.6 Contingency controls include the creation of a 'disaster recovery plan' to ensure that the
system recovers as fully and as soon as possible in the event of a disaster.

6.7 Disaster recovery plans provide for:
(a) Standby procedures
(b) Recovery procedures
(c) Personnel management

Chapter summary

• This chapter has explained internal control and compared the role of internal and external auditors.


Chapter 9: Questions Chapter 9

9.1 Internal auditors are employees of the company's external auditors who work full time auditing the
company's accounts. True or false?
A True
B False (1 mark)


9.2 Which of the following is not an inherent limitation of an internal control system?
A Procedures manual
B Non routine transactions
C Management by passing controls
D Employee collusion (2 marks)

9.3 Which of the following is an incorrect statement regarding the external auditors?
A They report to the Board of Directors
B There work relates to financial statements
C They express an opinion on the financial statements
D They are independent of the company and its management (2 marks)

9.4 Which of the following is not a method of data validation?
A Audit trails
B Range checks
C Control totals
D Limit checks (2 marks)

9.5 Which of the following is not suggested by Turnbull to help ensure a strong control environment?
A Clear definition of authority
B Clear strategies
C Good internal communications
D Reconciliations (2 marks)

Chapter 9: Answers Chapter 9

9.1 B Internal auditors are employees of the company itself and are not controlled or employed by the
external auditors.

9.2 A Procedures manuals will aid the effectiveness of an internal control system.

9.3 A External auditors report to shareholders whilst internal auditors report to the Board of Directors.

9.4 A Audit trails show who has accessed a system and what operations were performed. They do not
validate data.

9.5 D Reconciliations are a specific control procedure listed by the UK Auditing Practices Board.

END OF CHAPTER

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