CIMA Business Ethics and Corporate Governance 1 — Questions and Answers
Question 1: Which CIMA ethical principle requires a professional accountant to be straightforward and honest in all professional and business relationships?
- Integrity (Correct answer)
- Objectivity
- Confidentiality
- Professional competence
Correct answer: Integrity
Integrity is the CIMA fundamental principle requiring straightforwardness and honesty in all professional relationships.
Question 2: Under CIMA's Code of Ethics, which of the following best describes a 'self-interest threat'?
- A financial or other interest that inappropriately influences a member's judgment (Correct answer)
- A threat from a third party attempting to override professional judgment
- A lack of knowledge causing poor professional decisions
- Pressure from management to act against ethical principles
Correct answer: A financial or other interest that inappropriately influences a member's judgment
A self-interest threat arises when a financial or other interest could inappropriately influence a member's professional judgment or behavior.
Question 3: According to CIMA's corporate governance principles, what is the primary role of the audit committee?
- Overseeing financial reporting and internal controls (Correct answer)
- Setting executive remuneration packages
- Approving the annual budget
- Managing day-to-day financial operations
Correct answer: Overseeing financial reporting and internal controls
The audit committee's primary role is to oversee financial reporting integrity and the effectiveness of internal controls.
Question 4: Which governance concept separates the role of CEO from Chairman to reduce concentration of power?
- Segregation of duties
- Independence of leadership (Correct answer)
- Dual control principle
- Agency theory application
Correct answer: Independence of leadership
Independence of leadership is the governance principle recommending separation of CEO and Chairman roles to prevent undue concentration of power.
Question 5: CIMA's ethical framework uses a 'threats and safeguards' approach. Which safeguard is created by the profession, legislation, or regulation?
- Education and training requirements for entry (Correct answer)
- Engagement quality control reviews
- Rotation of senior personnel
- Consultation with a senior colleague
Correct answer: Education and training requirements for entry
Education and training requirements for entry into the profession are safeguards created by the profession and regulation, not individual firms.
Question 6: Which of the following actions best demonstrates 'professional behavior' under CIMA's fundamental principles?
- Disclosing client information to third parties when commercially beneficial
- Complying with relevant laws and avoiding actions that discredit the profession (Correct answer)
- Maximizing personal earnings regardless of ethical implications
- Accepting gifts from clients to maintain good business relationships
Correct answer: Complying with relevant laws and avoiding actions that discredit the profession
Professional behavior requires compliance with relevant laws and regulations and avoiding actions that discredit the profession.
CIMA Business Ethics and Corporate Governance 1
Which CIMA ethical principle requires a professional accountant to be straightforward and honest in all professional and business relationships?