E1: Knowledge Check: The roles of the finance function in organisations

An objective assurance and consulting activity designed to add value and improve an organisation’s operations is known as:

Which ONE statement below is the best description of the role of the Company Secretary?

Kim has discovered that the capital required to open her bakery was a lot more than initially expected, and she has approached her sister, Klara, about investing in the bakery.

If both Kim and Klara jointly own the bakery, which one of the following will the organisation be classified as?

Kim recently quit her job as a teacher in Beverly High, a state owned school, to start her own bakery. She aims to specialise in customised birthday cakes and cupcakes.

Which of the following would Beverly High be categorised in?

Yagata is a company based in Sparkleland that manufactures household cleaning utensils. At the end of its most recent financial year, the board tries to figure out why profits have declined. It appears as if overall demand for household cleaning products in Sparkleland is stronger than ever. There are no new competitors in the market, and its existing rivals appear not to have done much differently compared to the previous year. Looking inward, the board sees that Yagata’s management has been very closely measuring and monitoring output, with more metrics than ever in place at the company. However, when they dig deeper, they realise that they have been spending a huge amount of time and energy measuring activities/outputs which are largely irrelevant to generating value for the end customer!

Which of the following is most likely the source of Yagata’s problems?

PQ plc is a furniture retailing firm. At a recent presentation to investment analysts and financial journalists, PQ’s Finance Director (FD) gave a very optimistic forecast for PQ’s future, suggesting that revenue would treble over the next three years and profits and dividends would increase by 80%. The FD prepared his forecast in a hurry and had not had it confirmed by anybody else within PQ. The FD also did not mention in his presentation that PQ’s home government was considering taking legal action against PQ for underpayment of excise duties and had made a claim for large damages. If this claim were to be successful, it would materially affect PQ’s profit.

The situation above contains a possible conflict with which fundamental principle?

TRUE or FALSE: The responsibility that directors and managers have to look after the company’s assets on behalf of the shareholders is called stewardship.

The board of directors at Norne Corporation have been holding secret meetings after hours at Norne’s head offices. The directors are concerned that they are going to lose their performance-related bonuses, because Norne is projected to make a loss this financial year. The directors will only receive their significant bonuses if Norne registers a profit. The finance director suggests that, through some creative accounting and the use of special purpose vehicles (SPVs), Norne’s losses can be effectively concealed from shareholders. The board unanimously agrees to the finance director’s suggestion.

The above is an example of:

An employee explains that the logical next step to creating a mission statement is to set up the objectives of an organisation. He further elaborates the SMART framework to help his colleague understand the criteria of setting up an objective.

According to the SMART framework, which one of the following is a required feature of an objective?

When undertaking audit work for a company, the external auditors report to:

Choose the statements below that are TRUE with respect to good corporate governance practice, according to the UK Corporate Governance Code:

Which three of the following may be advantages claimed for adopting a CSR strategy?

Highlife ltd, are a housing developer who are hoping to build a new housing estate within a small village. The local residents are very unhappy with the proposal as they believe the village lacks the infrastructure to cope with so many new houses.

According to Medelow’s matrix, how would the local residents be classified?

True or false, the primary reason for behaving ethically is because unethical behaviour will at some point be discovered resulting in damage to reputation?

Guy arrives at work to an urgent request from his line manager. He has been asked to complete a client’s tax return as soon as possible since the deadline is looming. Guy is yet to complete his tax exams and feels uneasy agreeing to his line manager’s request.

If Guy complies, which ethical principle will he be compromising?

In which three of the following activities would the finance function enable an organisation to create and preserve value?