BPP House 142-144 Uxbridge Road London W12 8AA United Kingdom T 0845 075 1100 (UK) T +44 (0)20 8740 2211 (Overseas) E Learningmedia@bpp.com bpp.com/learningmedia • Banks of questions on every syllabus area • Answers with detailed guidance on approaching questions • Three mock exams with full answers and guidance For exams up to June 2015 Contact us One of a suite of products supporting Paper P1 Governance, Risk and Ethics, for use independently or as part of a package, this Kit is targeted at ACCA’s exams up to June 2015 and contains: Practice & Revision Kit Paper P1 Governance, Risk and Ethics This Kit provides material specifically for the practice and revision stage of your studies for Paper P1 Governance, Risk and Ethics that has been comprehensively reviewed by the ACCA examining team This unique review ensures that the questions, solutions and guidance provide the best and most effective resource for practising and revising for the exam Governance, Risk and Ethics BPP Learning Media is dedicated to supporting aspiring business professionals with top-quality learning material as they study for demanding professional exams, often whilst working full time BPP Learning Media’s commitment to student success is shown by our record of quality, innovation and market leadership in paper-based and e-learning materials BPP Learning Media’s study materials are written by professionally qualified specialists who know from personal experience the importance of top-quality materials for exam success ACCA P1 ACCA approved content provider ACCA APPROVED CONTENT PROVIDER ACCA Approved Practice & Revision Kit Paper P1 Governance, Risk and Ethics Practice & Revision Kit for exams up to June 2015 Free access to our Exam Success site Look inside June 2014 £18.00 ACP1RK14.indd 1-3 30/05/2014 16:15 PAPER P1 GOVERNANCE, RISK AND ETHICS BPP Learning Media is an ACCA Approved Learning Partner – content for the ACCA qualification This means we work closely with ACCA to ensure our products fully prepare you for your ACCA exams In this Practice and Revision Kit, which has been reviewed by the ACCA examination team, we: Discuss the best strategies for revising and taking your ACCA exams Ensure you are well prepared for your exam Provide you with lots of great guidance on tackling questions Provide you with three mock exams Provide the ACCA exam answers as well as our own for selected questions Our Passcard and i-pass products also support this paper FOR EXAMS UP TO JUNE 2015 P R A C T I C E & R E V I S I O N K I T First edition 2007 Eighth edition June 2014 ISBN 9781 4727 1107 (previous ISBN 9781 4453 8000 1) e-ISBN 9781 4727 1171 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Published by BPP Learning Media Ltd BPP House, Aldine Place London W12 8AA www.bpp.com/learningmedia All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of BPP Learning Media Ltd We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions The suggested solutions in the practice answer bank have been prepared by BPP Learning Media Ltd, except where otherwise stated Printed in the United Kingdom by Ricoh UK Limited Unit Wells Place Merstham RH1 3LG Your learning materials, published by BPP Learning Media Ltd, are printed on paper obtained from traceable, sustainable sources ii © BPP Learning Media Ltd 2014 Contents Page Finding questions Question index v Topic index vii Helping you with your revision x Revising P1 Topics to revise xi Reading articles xi Question practice xi Passing the P1 exam xii Exam information xix Useful websites xxviii Questions and answers Questions Answers 71 Exam practice Mock exam Questions 307 Plan of attack .313 Answers .315 Mock exam Questions 333 Plan of attack .339 Answers .341 Mock exam (December 2013) Questions 357 Plan of attack .365 Answers .367 ACCA's exam answers June 2013 383 December 2013 393 Review form iii A note about copyright Dear Customer What does the little © mean and why does it matter? 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Please note the e-products are sold on a single user licence basis: we not supply 'unlock' codes to people who have bought them second-hand And what about outside the UK? BPP Learning Media strives to make our materials available at prices students can afford by local printing arrangements, pricing policies and partnerships which are clearly listed on our website A tiny minority ignore this and indulge in criminal activity by illegally photocopying our material or supporting organisations that If they act illegally and unethically in one area, can you really trust them? iv Question index The headings in this checklist/index indicate the main topics of questions, but questions are expected to cover several different topics Time Page number Ins Marks allocation Question Answer Mins Part A: Governance and responsibility Taraton Area Council 25 45 71 MegaMart 25 45 73 PKG High School 25 45 76 LL 25 45 79 Sentosa House (Examiner question) 25 45 81 Frank Finn (Pilot paper) 25 45 84 Seamus O'Brien (12/07) 25 45 87 West vs Leroi (6/08) 25 45 91 TQ (6/09) 25 45 93 10 Sam Mesentery (12/09) 25 45 97 11 Tomato Bank (6/10) 25 45 10 100 12 KK (12/10) 25 45 11 103 13 HHO (6/11) 25 45 12 106 14 Geeland (12/11) 25 45 13 109 15 Dale Gas (12/11) 25 45 13 112 16 Lum (6/12) 25 45 14 115 17 Oland (12/12) 25 45 15 118 18 Boom (6/13) 25 45 16 121 19 Gogone 25 45 17 124 20 Doctors' practice 25 45 17 126 21 Ceedee 25 45 18 129 22 Cerberus 25 45 19 131 23 B Bank 25 45 19 133 24 Southern Continents (12/07 amended) 25 45 20 136 25 H & Z (6/09) 25 45 21 139 26 YGT (6/11) 25 45 21 143 27 Zogs (6/12) 25 45 22 146 28 Dubland (6/13) 25 45 23 149 29 PNY 25 45 23 152 30 Franks & Fisher (Examiner question) 25 45 24 155 31 Gluck and Goodman (12/08) 25 45 25 158 32 Saltoc (12/09) 25 45 26 161 33 COSO (6/10) 25 45 26 164 34 Yaya (12/12) 25 45 27 166 35 Blup (6/13) 25 45 28 169 Part B: Internal control and risk v Time Ins Page number Marks allocation Mins Question Answer 36 Crawley Gossop 25 45 29 172 37 Environmental and social issues 25 45 29 174 38 Edted 25 45 30 177 39 CDC 25 45 30 179 40 Practice question: David Hunter 25 45 31 182 41 Penrice 25 45 32 184 42 JH Graphics (Examiner question) 25 45 32 186 43 Football club (12/07) 25 45 33 189 44 Anne Hayes (6/08) 25 45 34 192 45 Hogg Products (12/08) 25 45 35 195 46 Policy speech (6/09) 25 45 35 199 47 John Wang (12/09) 25 45 36 201 48 Happy and healthy (6/10) 25 45 37 204 49 JGP (12/10) 25 45 37 207 50 Ann Koo (6/11) 25 45 38 209 51 Biggo (12/11) 25 45 39 212 52 Jojo (6/12) 25 45 40 215 53 RDC (12/12) 25 45 40 218 54 Wilberforce Humphries 50 90 42 221 55 Integrated Broadcasting Organisation 50 90 44 225 56 Chemco (Pilot paper) 50 90 45 230 57 Worldwide Minerals (12/07) 50 90 46 236 58 Rowlands and Medeleev (6/08) 50 90 48 242 59 Swan Hill (12/08) 50 90 49 247 60 Global-bank (6/09) 50 90 50 253 61 Mary Jane (12/09) 50 90 52 258 62 Hesket Nuclear (6/10) 50 90 54 263 63 ZPT (12/10) 50 90 56 268 64 Bobo (6/11) 50 90 58 274 65 Coastal Oil (12/11) 50 90 60 279 66 Hayho (6/12) 50 90 62 286 67 P & J (12/12) 50 90 64 291 68 Hoppo (6/13) 50 90 66 296 Part C: Professional values and ethics Section A questions Mock exam Mock exam Mock exam (December 2013) vi Topic index Listed below are the key Paper P1 syllabus topics and the numbers of the questions in this Kit covering those topics If you need to concentrate your practice and revision on certain topics or if you want to attempt all available questions that refer to a particular subject, you will find this index useful Syllabus topic Question numbers Absolutist approach 44(c), 63(b) Accountability 1(c), 7(b), 17(c), 59(d), 66(d) Accountancy as a profession Mock Q2(c) Agency 2, 3(d), 5(a), 60(c), 62(c), 66(d), Mock Q2(a), Mock Q2(b) ALARP 19(b), 21(b), 65(c) American Accounting Association model 40(a), 61(a), 66(b) Audit committee 1(a), 13(c), 31(c), 35(b), Mock Q4(b) Board of directors 2, 3, 4(c), 7, 10(b), 16, 17(c), 22, 55(b), 56, 61, 67(d), Mock Q4, Mock Q4(b) Bribery and corruption 39 Chairman 7, 9, 10(c), 14(b) Charities 13 Chief executive 7, 9(a), 14(b), 15(a), 60(e), 64(d) Conflicts of interest 6, 12(a), 54(a) Confidentiality 58(d), 59, 61(a) Continuing professional development 16(b) Control environment Mock Q1(a) Corporate citizen 38(a), 54(c) Corporate ethical codes 42, 45, 55(d), 65(a) Corporate governance 1-18, 22, 48(a), 55-57, 63, Mock Q1, Mock Q4, Mock Q1, Mock Q2 Corporate governance codes 5(d), 7(c), 18(a) Corporate governance concepts 17(c), 54(b) Deontological approach 45(c), 55(c), 68(d), Mock Q3(c) Directors' remuneration 2, 6, 9(c), 11, 15(a), 18(b), 23(a), 24(c), Mock Q1(d), Mock Q1(c) Directors' vacation of office 9(a), Mock Q4(a) Diversity 54(e), Mock Q3(b) Employee responsibilities 44, Mock Q2(c) Entrepreneurial risk 25(c) Environmental auditing 41(b), 49(b) Environmental issues 36-39, 41, 49, 56(e), 58(d), 62(d), 65, Mock Q1, Mock Q1 Environmental management systems 36(a), 38(b) vii viii Syllabus topic Question numbers Environmental reporting 36, 37, 39(c), 41(a), 56(e), 65(b), 68(b), Mock Q1(c) Ethics 11(c), 36-53, 55-57, 59-61, 63-66, 68(d), Mock Q1, Mock Q2, Mock Q1(d), Mock Q3, Mock Q4(c) Ethical theories 38, 42, 44(c), 45(c), 54(d), 55(c), Mock Q3 External auditors 32(c), 41(b) Fiduciary duty 28(b), 43(c) Financial risks 23(b), 28(c), 63(c),Mock Q4(a) Full cost accounting 41(a) General meetings 64(c) Gray, Owen, Adams approaches on social responsibility 43(b), 46(c), 51, 59(c), 64(d), Mock Q1(b) Independence 27(a), 30, 44 Induction programme 10(a), 16(b) Information provision 3(b), 22(b), 34(c), 37(c), 61(d) Insider dealing 50(c) Insider-dominated businesses 48(a) Institutional investors 5(b), 63(a) Integrated reporting 36(c), 37(d) Integrity 47(a), 68(d), Mock Q3(b) Internal audit 20(c), 29-31, 33(c), 35, 54(b), Mock Q1(d) Internal control 3(c),8, 22, 29, 31, 33-35, 39(b), 57(d), 58(e), 60(b), 61, 63-68, Mock Q2, Mock Q4, Mock Q1(d), Mock Q2(b) Kohlberg's theories 42(b), 55(c), 57(b), 60(a), 64(b) Market risk 15(b), 31(c) Nomination committee Mock Q2(b), Mock Q3(a) Non-executive directors 2, 6, 12, 16(b), 18(c), 27(a), 56(d), 57(c), 61(c), Mock Q3(c) Objectivity 30(d) Operational risks 49(c), 54(a), 59(b), 67(d), Mock Q1(c) Principles-based approach 5(d), 8(a), 14, 17(b), 33(a), Mock Q1(b), Mock Q2(a) Professional ethics codes Mock Q3 Professional responsibilities 44, 47, 48, 50, 67(c), Mock Q2(c) Proxy voting 15(c) Public interest 36(b), 46, 50(b), Mock Q4(c) Public sector 1,3 Relativist approach 44(c), 63(b) Remuneration committee 6(a), 11(a) Reporting 4, 8, 12(c), 14(c), 36, 37, 39(c), 41(a), 59(d), 63(c), 65(b), Mock Q4(c) Syllabus topic Question numbers Reputation risk 19(a), Mock Q2(b) Retirement by rotation Mock Q2(c) Risk appetite 20(b), 23(c), 66(a) Risk assessment 19-28, 55, 56(b), 58, 62(d), 65(c), 67(d), Mock Q2(b), Mock Q3, Mock Q1(b) Risk audit 32(c) Risk committee 5(c), 27, Mock Q3 Risk correlation 26(c), 68(a) Risk culture 24(b), 26(d), 32, Mock Q4 Risk management 15(b),19-29, 54(a), 65(c), 67(b), Mock Q3, Mock Q4, Mock Q1(b) Risk manager 25(a) Risk monitoring Mock Q4 Risk perception 21(c), 65(c) Rules-based approaches 8(a), 14(a), 17(b), 33(a), Mock Q2 Sarbanes-Oxley 4(a), 8(a), Mock Q2 Social issues 37, 62(d), 67(a) Social responsibility 37, 51, 54(c), 59(c), Mock Q1, Mock Q4(d), Mock Q3(c) Stakeholders 1(a), 37(c), 42, 43, 53, 58-60, 62(a), 66(d), Mock Q1(a) Strategic risks 49(c), 54(a), 55(a), 59(b), 67(d), Mock Q1(c) Sustainability 49(a), 58(d), Mock Q1(c), Mock Q1(a) Technological risk Mock Q4(b) Teleological approach 45(c), 68(d), Mock Q3(c) Trade unions 62(b) Transaction cost theory 41(c) Transparency 13(b), 57(a), 59(c), 68(d) Tucker's question model 40(b), 53(a), 59(a) Utilitarianism 54(d), 55(c) ix Notes Notes Notes Notes Notes Notes Notes Notes Notes Notes Notes Notes Notes Review Form – Paper P1 Governance, Risk and Ethics (06/14) Name: Address: How have you used this Kit? (Tick one box only) During the past six months you recall seeing/receiving any of the following? (Tick as many boxes as are relevant) Home study (book only) On a course: college Our advertisement in Student Accountant With 'correspondence' package Our advertisement in Pass Other Our advertisement in PQ Our brochure with a letter through the post Why did you decide to purchase this Kit? (Tick one box only) Our website www.bpp.com Which (if any) aspects of our advertising you find useful? (Tick as many boxes as are relevant) Have used the complementary Study text Have used other BPP products in the past Recommendation by friend/colleague Prices and publication dates of new editions Recommendation by a lecturer at college Information on product content Saw advertising Facility to order books off-the-page Other None of the above Which BPP products have you used? Text Passcards Kit i-Pass Home Study Package Your ratings, comments and suggestions would be appreciated on the following areas Very useful Useful Not useful Good Adequate Poor Yes No Passing P1 Questions Top Tips etc in answers Content and structure of answers Mock exam answers Overall opinion of this Kit Excellent Do you intend to continue using BPP products? The BPP author of this edition can be emailed at: helenajones@bpp.com Please return this form to: Pippa Riley, ACCA Range Manager, BPP Learning Media Ltd, FREEPOST, London, W12 8AA Review Form (continued) TELL US WHAT YOU THINK Please note any further comments and suggestions/errors below [...]... Text chapter J D13 J D 12 13 J D1 1 J 12 1 1 D10 10 D09 3a,b 1a,c 1b, 3a J09 D08 J 08 1c 1a GOVERNANCE AND RESPONSIBILITY 1 Scope of governance 1d 2a,c 4b,c 1d, 2a 1 Agency 2b 3b 1d 3 Board of directors 3b, 4c 3c, 4b, c 4a 3,5,8 Board committees 3a 2b 4a 1c 2b 1d, 3b 4c 2b 1c 1c, 1e, 2a,b, c 3a,d 3c 3a 2c 3c 2c, 3b 3c 3 Directors’ remuneration 2 Different approaches to governance 2, 11 Corporate social... Revising P1 Risk identification, measurement and assessment 1a 3c 4b 1a, 3a 1d 2a 1c,3b 1c 2c 2c, 1b, 4a 3c 1d 4b 1c 1b Covered in Text chapter J D13 J D 12 13 J D1 1 12 1 1 J D10 10 D09 J09 D08 4c 4a 2a J 08 CONTROLLING AND MANAGING RISK 5,8 Risk targeting and monitoring 5,7,8 Risk reduction and control 1b Risk, avoidance, retention and modelling 1b 5,7 2b,c 3c 1b 2c 2d 4b,c 4a,b 2b 2b 4c 2b 1a 1a,... responsibility 3 Reporting and disclosure 1 Public sector governance 1c 4b,c 2a,c 4a 3a 2b 4a 2a,b 3c 2a 4a 3c 1a 1b,2c 3c 1c 3c 1d 4a 3b 1d INTERNAL CONTROL AND REVIEW 4,5,7,8 Management control systems 4,7,8,10 Internal control, audit and compliance Internal control and reporting 7,8 8 1c 1d 1d 2a 3a,b 2b 2c 1c 3a,b 1c 1a 3c 3a 1b 1b 3a,b 1e, 2a 1c 4b,c 3c Management information 1d IDENTIFYING AND ASSESSING... 10 Professional practice and codes of ethics 10 Conflicts of interest and consequences of unethical behaviour 9,10 11 4a,b, c 2c 4b 4c 3b 1c Ethical characteristics of professionalism 4c Social and environmental issues 1a 3a 2a 1a 2b 4a,b 4a 3a 4c 3b,c 2c, 3b 2b 2a 2c 4b 1b 1a 2a,b 1d 1d IMPORTANT! The table above gives a broad idea of how frequently major topics in the syllabus are examined It should... examiners to show you where students struggled or performed well in the actual exam We refer to the 20 14 BPP Study Text (for exams up to June 20 15) for detailed coverage of the topics covered in questions In a bank at the end of this Kit we include the official ACCA answers to the June and December 20 13 papers Used in conjunction with our answers they provide an indication of all possible points that... overall performance in December 20 12 was similar to previous diets There were some excellent scripts and many candidates had obviously worked hard and prepared thoroughly for the exam The parts of questions done well by many candidates were 1(a), 1(c), 2( a), 2( b), 3(a), 3(b) and 4(a) The parts that were often done poorly were 1(b), both parts of 1(d) and also 4(b) June 20 12 Question in this Kit Section... you with your revision BPP Learning Media – Approved Learning Partner – content As ACCA' s Approved Learning Partner – content, BPP Learning Media gives you the opportunity to use exam team reviewed revision materials By incorporating the examination team's comments and suggestions regarding syllabus coverage, the BPP Learning Media Practice and Revision Kit provides excellent, ACCA- approved support... exams There are several technical articles on the ACCA website written by either myself, or other informed authors, and I strongly advise P1 candidates to study these as a part of their preparations for P1 exams June 20 11 Question in this Kit Section A 1 Internal controls; Kohlberg; general meetings; chief executive; Gray, Owen and Adams 64 Section B 2 Risk assessment; risk management; related risks;... December 20 13 Section A 1 Sustainability; risk management; executive remuneration; internal controls and audit Section B 2 Rules and principles-based approaches; agency; small companies 3 Nomination committee; diversity; corporate social responsibility 4 Director departure from board; technological risk; ethics and public interest The December 20 13 exam is Mock exam 3 in this kit Revising P1 xix June 20 13... technical articles on P1 These are published in Student Accountant magazine and are also posted on the ACCA website Revising P1 xxi December 20 10 Question in this Kit Section A 1 Institutional investors; approaches to ethics; good corporate governance; reporting on controls and risks 63 Section B 2 Sustainability; environmental auditing; environmental risk 3 Conflicts of interest; non-executive directors; ... 37 20 4 49 JGP ( 12/ 10) 25 45 37 20 7 50 Ann Koo (6/11) 25 45 38 20 9 51 Biggo ( 12/ 11) 25 45 39 21 2 52 Jojo (6/ 12) 25 45 40 21 5 53 RDC ( 12/ 12) 25 45 40 21 8 54 Wilberforce Humphries 50 90 42 221 55... 25 45 19 131 23 B Bank 25 45 19 133 24 Southern Continents ( 12/ 07 amended) 25 45 20 136 25 H & Z (6/09) 25 45 21 139 26 YGT (6/11) 25 45 21 143 27 Zogs (6/ 12) 25 45 22 146 28 Dubland (6/13) 25 ... Gas ( 12/ 11) 25 45 13 1 12 16 Lum (6/ 12) 25 45 14 115 17 Oland ( 12/ 12) 25 45 15 118 18 Boom (6/13) 25 45 16 121 19 Gogone 25 45 17 124 20 Doctors' practice 25 45 17 126 21 Ceedee 25 45 18 129 22 Cerberus