Mixed Deck — All ACCA Topics Flashcards

An auditor identifies a significant deficiency in internal control over financial reporting. To whom must this be communicated?

Answer: Those charged with governance

Significant deficiencies in internal control must be communicated in writing to those charged with governance under ISA 265.

Which legal theory allows plaintiffs to hold a parent corporation liable for the debts of its subsidiary?

Answer: Piercing the corporate veil

Courts may pierce the corporate veil and impose liability on a parent or shareholders when the subsidiary is used as a mere alter ego or to perpetrate fraud.

Which of the following is a PRIMARY role of the nomination committee?

Answer: Identifying and recommending candidates for board appointments

The nomination committee leads the process for board appointments, ensuring the board has the right balance of skills, experience, and diversity.

According to the Ashridge Mission Model, which four elements define an organization's mission?

Answer: Purpose, Strategy, Values, and Standards of behavior

The Ashridge model defines mission through Purpose (why the company exists), Strategy (competitive position), Values (beliefs and moral principles), and Standards of behavior (policies guiding employees).

In US bankruptcy law, what is the key difference between Chapter 7 and Chapter 11 proceedings?

Answer: Chapter 7 involves liquidation; Chapter 11 allows reorganization while continuing operations

Chapter 7 involves liquidating assets to pay creditors, while Chapter 11 allows the debtor to reorganize and continue operating under a court-approved plan.

In the context of the Greiner Growth Model, what is the 'crisis of leadership' associated with?

Answer: Phase 1: Growth through creativity

The crisis of leadership ends Phase 1 (creativity) when founders lack the management skills to guide the growing organization, necessitating professional management.

Which of the following is NOT typically a characteristic of a responsibility centre classified as a profit centre?

Answer: The manager controls long-term capital investment decisions

Capital investment decisions are the distinguishing feature of an investment centre, not a profit centre.

Under IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, a change in accounting policy is applied:

Answer: Retrospectively, restating comparative periods as if the new policy had always applied

IAS 8 requires retrospective application of a change in accounting policy so that all periods presented reflect the new policy, ensuring comparability.

A division has controllable profit of $200,000 and controllable investment of $1,000,000. Its controllable Return on Investment (ROI) is:

Answer: 20%

ROI = Controllable profit ÷ Controllable investment = $200,000 ÷ $1,000,000 = 20%.

Which leadership style in Hersey and Blanchard's Situational Leadership model is most appropriate for a follower with high competence but low commitment?

Answer: Participating (S3)

Participating (S3) is appropriate for high-competence, low-commitment followers because the leader focuses on two-way communication and motivation rather than task direction.

Which costing method treats fixed production overheads as period costs rather than product costs?

Answer: Marginal costing

Marginal costing charges fixed production overheads entirely to the period in which they are incurred, not to products.

In a leveraged buyout (LBO), the acquisition of the target company is primarily funded by:

Answer: High levels of debt, typically secured against the assets and future cash flows of the target

LBOs use substantial debt — often 60–90% of the purchase price — secured on the target's assets, with debt repaid from the target's operating cash flows post-acquisition.

Which of the following best describes 'working capital'?

Answer: Current assets minus current liabilities

Working capital measures short-term liquidity as the difference between current assets and current liabilities.

An accountant discovers a new product has a minor defect that is not dangerous but will be very costly to recall. The accountant's manager argues against the recall, stating, 'The cost of the recall will harm our profits, potentially leading to job losses and a drop in shareholder value. The negative impact on these large groups far outweighs the minor inconvenience to a few customers.' The manager's argument is most closely aligned with which ethical perspective?

Answer: Utilitarianism

Utilitarianism is a consequentialist theory that judges an action's morality based on its ability to produce the greatest good for the greatest number of people. The manager is weighing the consequences for different groups (employees, shareholders vs. customers) and concluding that the action causing the least overall harm is the most ethical choice.

A company issues 1,000 shares at $5 nominal value for $8 each. Which journal entry correctly records the share premium?

Answer: Dr Bank $8,000; Cr Share Capital $5,000; Cr Share Premium $3,000

The nominal value ($5 × 1,000 = $5,000) goes to share capital and the excess ($3 × 1,000 = $3,000) is credited to the share premium account.

If a business fails to accrue for electricity used but not yet billed at year end, what is the effect on the financial statements?

Answer: Profit overstated; liabilities understated

Omitting the accrual means the expense is not recorded, so profit is overstated and the corresponding accrued liability is missing, understating liabilities.

Which of the following best describes a 'blue ocean strategy' as proposed by Kim and Mauborgne?

Answer: Creating uncontested market space and making competition irrelevant

Blue ocean strategy involves creating new market space where no competitors currently operate, rendering traditional competitive dynamics irrelevant.

When a company's treasury function operates as a 'profit center,' this means that:

Answer: The treasury is authorised to take speculative positions in financial markets to generate returns beyond hedging costs

A profit center treasury actively trades and takes market views to generate profits, accepting higher risk compared to a cost center treasury that simply hedges group exposures.

In the Mendelow Stakeholder Matrix, how should an organization manage stakeholders with HIGH power but LOW interest?

Answer: Keep satisfied

High-power, low-interest stakeholders should be kept satisfied to prevent them from becoming actively opposed to the organization's strategy.

A company receives a government grant of $50,000 related to the purchase of equipment costing $200,000. Under the deferred income approach in IAS 20, how should the grant be recognized?

Answer: Released to income over the useful life of the asset

Under the deferred income approach, the grant is initially recorded as deferred income and released to profit or loss over the asset's useful life.