ICAEW BTF QB 2023st

The Institute of Chartered Accountants in England and Wales
Business, Technology
and Finance
Question Bank
For exams in 2023
icaew.com
Business, Technology and Finance
The Institute of Chartered Accountants in England and Wales
ISBN: 978-1-0355-0172-4
Previous ISBN: 978-1-5097-3898-4
e-ISBN: 978-1-0355-0551-7
First edition 2007
Sixteenth edition 2022
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© ICAEW 2022
Contents
The following questions are exam-standard. Unless told otherwise, these questions are the style,
content and format that you can expect in your exam.
Title Page
Question Answer
1 Introduction to business 1 105
2 Managing a business 7 109
3 Organisational and business structures 13 113
4 Introduction to business strategy 19 119
5 Introduction to risk management 25 123
6 The finance function and financial information 35 129
7 Business finance 43 135
8 The accountancy profession 51 141
9 Governance and ethics 55 145
10 Corporate governance 61 149
11 The economic environment of business and finance 67 153
12 External regulation of business 75 159
13 Data analysis 79 163
14 Developments in technology 85 167
15 Practice exam 91 171
Appendix: Mock Exam guidance notes 181
ICAEW 2023 Contents iii

Exam
This exam will consist of 50 questions with equal marks, adding up to 100 marks.
The questions are of the following types:
• Multiple-choice – select 1 from 4 options A, B, C or D (see Chapter 1 Q2)
• Multiple-response – select 2 or more responses from 4 or more options (see Chapter 1 Q7)
In this Question Bank you will select only one option per question unless told otherwise.
Our website has the latest information, guidance and exclusive resources to help you prepare for this
exam. Find everything you need, from exam webinars, sample exams, errata sheets and the syllabus
to examiner- and tutor-written articles at icaew.com/examresources if you are studying the ACA and
icaew.com/cfabstudents if you are studying ICAEW CFAB.
iv Business, Technology and Finance ICAEW 2023

Professional skills
Professional skills are essential to accountancy and your development of them is embedded
throughout the ACA qualification. The level of competency in each of the professional skills areas
required to pass each module exam increases as ACA trainees progress upwards through each Level
of the ACA qualification.
The professional skills embedded throughout this Question Bank provide the opportunity to develop
the knowledge and professional skills required to successfully pass the exam for this module.
During your question practice, remain mindful that you should be demonstrating each of the four
professional skills within your answers. You are advised to familiarise yourself with the full ACA
professional skills development grids which can be found at icaew.com/examresources.
The following advice will help you demonstrate each of the professional skills when completing your
answers to questions in this Question Bank.
Questions in the Business, Technology and Finance module are rapid fire, plus they can be complex
and test the syllabus in a non-sequential order, so each one requires a good skillset to answer
correctly. Below are the key skills required in the Business, Technology and Finance exam that you
will need to master.
Professional skills focus: Assimilating and using information
The Business, Technology and Finance exam requires you to attempt 50 questions in 90 minutes,
meaning you have 108 seconds for each question. Being disciplined, reading both the scenario and
the requirement carefully and keeping track of time will mean that you work effectively within time
constraints which should offer you the best chance of passing.
Some questions will ask you which models should be used for a particular purpose. Others may
require you to apply the models you have learned to a mini scenario – for example, stating which of
the quadrants in the Boston Consulting Group matrix a product belongs to, or what type of authority
a manager is displaying. It is important therefore to know the models in your study text well.
Professional skills focus: Applying judgement
You may need to use judgement in some questions - for example, deciding on how great the impact
of a particular risk is, so practising questions is the key to passing these types of questions. Questions
may also test your awareness of ethical, public interest and regulatory issues, so it is important to
know the parts of the syllabus that deal with these, particularly those relating to the professional
accountant and ethics.
Professional skills focus: Concluding, recommending and communicating
Some questions may require you to determine the best option, or course of action in a particular
case. Such questions will test your technical knowledge, so it is important to ensure that this is sound.
ICAEW 2023 Introduction v

vi Business, Technology and Finance ICAEW 2023
Question Bank
viii Business, Technology and Finance ICAEW 2023
Chapter 1: Introduction to business
1 What are the primary objectives of profit-oriented and non-profit oriented organisations?
Option Profit-oriented organisation Non-profit oriented organisation
1 Output of goods/services Minimise costs
2 Output of goods/services Provision of goods/services
3 Maximisation of wealth Minimise costs
4 Maximisation of wealth Provision of goods/services
A Option 1
B Option 2
C Option 3
D Option 4
LO 1a
2 At the Annual General Meeting (AGM) of Vortex plc, a major shareholder claimed that the company
was suffering from the symptoms of ‘satisficing’. In the context of corporate objectives, ‘satisficing’
means that:
A managers seek to make satisfactory profits rather than maximise wealth
B managers seek to keep all stakeholders satisfied
C owners seek to meet a satisfactory level of corporate responsibility obligations
D owners seek to make satisfactory profits
LO 1a
3 Joe, the Managing Director of Gargoyle Ltd, has set a primary objective of growth in profits for the
company. He aims to concentrate on product development to support this objective. Identify
whether the following will be suitable secondary objectives to achieve the growth in profits via
product development.
(1) Bringing in new products
(2) Reducing labour turnover
(3) Investing in research and development
A 1 and 2 only
B 2 and 3 only
C 1 and 3 only
D 1, 2 and 3
LO 1a
4 Maximising the wealth of its shareholders is the stated goal of Avernanche plc. The company’s
objectives have been expressed as a hierarchy of primary and secondary objectives. Identify which of
the following is most likely to be Avernanche plc’s primary business objective.
A To increase the annual profit after tax by 125% in the next 10 years
B To introduce an average of two new products each year for the next six years
C To double the share price within the next 10 years
D To become the market leader in four market segments within the next 10 years
LO 1a
ICAEW 2023 1: Introduction to business 1

5 A major shareholder has stated that for three years the directors of Barrington plc have run the
company in a manner designed solely to increase their prestige in the business community.
According to William Baumol, this is most likely to be shown in the directors’ aim to:
A maximise wealth
B maximise sales revenue
C minimise costs
D minimise social impact
LO 1a
6 To establish whether a particular organisation should be classified as a business or not, it is necessary

to enquire about the nature of its:
A primary objective
B mission
C vision
D secondary objective
LO 1a, 1b
7 The primary objective of ABC Car Rental Ltd is as follows: “We aim to be the fastest growing
company with the highest profit margin in the global vehicle rental and leasing business.”
One of its secondary objectives is: “To increase our market share for global family car rentals to 20%
within a reasonable time.”
Requirement
Which three components of the SMART acronym are present in the company’s secondary objective?
A S
B M
C A
D R
E T
LO 1a
8 For a business, which two of the following would be classified as secondary objectives?
A The business’s market share target for next year
B The business’s productivity improvement target for next year
C The business’s mission statement
D The business’s financial objective of shareholder wealth maximisation
E The business’s vision
LO 1a, 1b
9 A major airline, FlotAir plc, has been drawing up a mission statement.

Requirement
Which three of the following items could be expected in it?
A We will double profits in three years
B We will encourage diversity in the workplace
2 Business, Technology and Finance ICAEW 2023

C We intend to be the best airline in the world
D We aim to give excellent customer service
E We intend to take over XYZ airlines
F We intend to have a 30% market share on the London to New York route
LO 1a, 1b
10 Two of Sunshine Tours plc’s stakeholder groups are putting the company under pressure to improve
its return on investment.
Requirement
These are most likely to comprise which two of the following groups?
A Shareholders
B Customers
C Bankers
D Suppliers
E Employees
LO 1a, 4d
11 Mandrake plc processes waste for local authorities. It has stated that it seeks to provide “our
shareholders with increased value, our customers with value for money, our employees with secure
and interesting jobs and the public with safe and sustainable waste disposal.”
Requirement
This is analysed below into four statements. Identify which is Mandrake plc’s primary business
objective.
A To provide our shareholders with increased value
B To provide our customers with value for money
C To provide our employees with secure and interesting jobs
D To provide the public with safe and environmentally sustainable waste disposal
LO 1a
12 Daycare is a charity that funds nursery places for children whose parents are both unemployed. On
its website, the organisation states that it continually needs to raise funds that can be reinvested to
produce an on-going income to fund its activities. It also seeks to provide daycare for all families who
need its support and that it will never turn a family in need away.
A business adviser has made two statements:
Statement (1): The primary objective of Daycare is to maximise profit.
Statement (2): The secondary objective of Daycare is the funding of nursery places.
Requirement
Identify whether each statement is accurate.
A Statement (1) accurate; Statement (2) inaccurate
B Statement (1) inaccurate; Statement (2) inaccurate
C Statement (1) accurate; Statement (2) accurate
D Statement (1) inaccurate; Statement (2) accurate
LO 1a, 1b

13 At its recent AGM, the shareholders of Boron plc voted by a small majority to accept a small
dividend. At the meeting many shareholders said that they accepted the dividend because the
company’s profits were low, but were very unhappy with the return because the company’s financial
statements showed a large increase in revenue.
Requirement
Which of the following describes what is most likely to be happening at Boron plc?
A Revenue maximising
B Profit satisficing
C Profit maximising
D Revenue satisficing
LO 1a, 1b
14 Which of the following statements relating to Environmental, Social and Governance (ESG) objectives
is true:
A If businesses are only interested in maximising the wealth of shareholders, they should ignore
ESG objectives
B Businesses should only adopt ESG objectives if the costs are less than the fines of poor ESG
behaviour
C Even where shareholders are only interested in maximising their wealth, the value of a business
over the longer term is enhanced by good ESG practices
D ESG is likely to reduce the wealth of shareholders due to higher costs, but the owners have a
moral obligation to embrace good ESG performance
LO 1a, 1b
15 To what does the term ‘triple bottom line’ refer?

A Operating profit, Profit before tax, Profit after tax
B Profits, Planet, People
C Profit after tax, Net cash flows for the year, Changes in equity
D Corporate profits, Business Unit profits, Departmental profits
LO 1a, 4h
16 Sportylook is a global retailer of fashionable sportswear clothes. The company reports on its
environmental, social and economic sustainability in a sustainability report. The company outsources
the manufacture of many of its products to suppliers in certain countries where labour costs are
lower. There is concern that some of Sportylook’s suppliers in these countries use child labour and
pay very low wages to all workers.
Requirement
What social responsibility does Sportylook have for the behaviour of its suppliers?
A Sportylook has no responsibility for the behaviour of its suppliers
B Sportylook has a responsibility for the behaviour of its suppliers, and should require suppliers to
comply with its own social standards
C Sportylook should attempt to persuade its supplier of the need to treat employees fairly, but
then leave it up to the supplier to decide if it wishes to comply with this request
D Sportylook should recognise that different countries have different cultures, and while the use of
child labour might be frowned on at home, it is acceptable in some countries
Lo 1a, 1b, 4h

17 The following statements have been made about the relevance of climate change to organisations:
(1) Climate change leads to extreme weather conditions, such as floods and droughts, and these
can damage businesses assets and threaten the safety of its employees
(2) Laws and regulations that aim to limit climate change can cause additional costs to organisations
(3) Organisations that emit large quantities of greenhouse gasses, and therefore contribute to
climate change, are increasingly suffering from reputational damage
Requirement
Which of the above statements are true?
A 1 and 2 only
B 2 and 3 only
C 1 and 3 only
D 1, 2 and 3
LO1b, 4h
18 Quench, a manufacturer of soft drinks has decided to stop using plastic bottles and instead use glass
bottles for all of its products. Each used bottle returned by customers to a retailer gives customers
10p off their next bottle of Quench. The bottles are returned by the retailer to Quench, who washes
and sterilises them before using them again.
Requirement
In the 4Rs model, which R is this an example of?
A Reduce
B Reuse
C Recycle
D Replace
LO1a, 4h

Chapter 2: Managing a business
1 Hu Song works for Premidian plc. Because of his personal stature and credibility, he has strong
support from owners, employees and customers for his application to be a senior manager. He
generates strong feelings of loyalty and commitment among the people that currently work for him.
They know that he has great capabilities and should progress in the company.
Requirement
Hu Song appears to exhibit which kind of power?
A Legitimate power
B Referent power
C Coercive power
D Expert power
LO 1d
2 Amanda is a Regional Lending Manager with a major international bank. She has the authority to
lend up to £1 million on an unsecured basis to any single corporate customer without reference to
the bank’s head office. What sort of power does Amanda have?
A Referent power
B Expert power
C Legitimate power
D Reward power
LO 1d
3 Cerise can authorise her own travel expenses up to £1,000. Cerise will soon travel abroad on
business, and she has a choice between flying economy class for £350 or flying business class for
£1,050. Cerise is an old friend of the company’s travel administrator, Malcolm, who arranges
bookings. She persuades him to book the business class seat. This is an example of Cerise
exercising:
A authority without power
B power without authority
C delegation of authority
D power with authority
LO 1d
4 Michael is a Senior Manager working for Chirac plc. He decides to delegate completion of an
internal report to one of his subordinates. In doing this, Michael is transferring to the subordinate:
A authority, responsibility and power
B authority, accountability and power
C responsibility and authority
D power, responsibility and accountability
LO 1d
5 Pamela is a Line Manager in the accounting function of Holland plc. This means that Pamela has line
authority:
A over a subordinate down the chain of command
B to give specialist advice, but not the right to insist the advice is followed
ICAEW 2023 2: Managing a business 7

C over a project team’s function
D in certain areas over another department
LO 1d
6 Which of the following managers is operating as a functional manager?

A A human resources manager suggesting aptitude tests for managers to use when recruiting
B An IT manager setting out rules for internet and email use
C A manager setting targets for the workforce
D A product manager asking IT and marketing staff to help with a big product launch
LO 1d
7 Andrew is a Manager in Fortwarren plc. He has to re-arrange a staff rota after a staff member fell ill.
According to Henry Mintzberg, this forms part of Andrew’s:
A decisional role
B interpersonal role
C disseminator role
D informational role
LO 1d
8 Charlize is a Manager at Tordos Ltd. She complains to a friend that all she does is attend meetings
along with other managers in the company, and represent her team at conferences. In terms of Henry
Mintzberg’s managerial roles, Charlize is describing her:
A decisional role
B interpersonal role
C disseminator role
D informational role
LO 1d
9 Tristam plc has recently established a new project team. The team agreed clear objectives and
performance measures for the project in hand at a meeting last week. At today’s weekly progress
meeting there were many arguments about which roles would be undertaken by which members of
staff. From this, it is clear that the project team is at which stage of group development?
A Forming
B Storming
C Norming
D Performing
LO 1d
10 A management consultant has identified that Samp plc’s organisational culture is outward-looking
but controlling. Samp plc is, therefore:
A an internal process culture
B a rational goal culture
C an open systems culture
D a human relations culture
LO 1d

11 Malcolm is a Marketing Manager with Stone plc. The Marketing Director has primary responsibility
for the company’s overall marketing strategies, but Malcolm has day-to-day responsibility for all
aspects of the company’s marketing mix. This means that Malcolm will be responsible for:
A a set of variables that he manages in order to achieve a desired response from the company’s
various target markets
B budgets setting out the volumes to be sold to the company’s various target markets
C the sets of different features and benefits that are present in the company’s range of products
D the types of advertising used by a firm to reach and influence its various target markets
LO 1c
12 In terms of authority, which of the following is the best description of a staff function?
A A situation where a person is entitled to command another
B A function that is carried out only at head office
C A situation where a person can give advice and guidance to another
D A function that is carried out locally only
LO 1d
13 In terms of the organisational iceberg, which three of the following are classified as covert variables
affecting organisational behaviour in a company?
A Formal goals
B Attitudes
C Underlying competencies and skills
D Organisation design
E Communication patterns
LO 1d
14 Hamid is the managing director of Welldean Ltd, a small company selling aromatherapy products. He
has read about the benefits of market segmentation with regard to both competitive strategy and
resource allocation. Adoption of market segmentation by Welldean Ltd would mean that:
A the company would sell to only one section of the market
B the market is broken down into several different sections
C the company sees the aromatherapy market as homogeneous
D the competitive scope of the company would be narrow
LO 1c
15 Manton plc has decided to support the launch of its latest product by means of a major television
advertising campaign. This is an example of:
A pull promotion
B push promotion
C a combination of pull and push promotion
D personal selling
LO 1c
16 The process of dividing a market into homogeneous groups of potential customers who may be
treated similarly for marketing purposes is called:
A market research

B mass marketing
C marketing mix
D market segmentation
LO 1d
17 The main influences on a business’s pricing are:

A place, price, promotion and product
B volume, variety, variation in demand and visibility
C costs, competitors, customers and corporate objectives
D people, processes and physical evidence
LO 1d
18 Harris plc has capital-intensive operations, with specialisation of work and well-established systems.
Each month its operations manager is required to produce more items than in previous periods.
Using the four Vs model, Harris plc’s operations manager is expected to manage:
A high volume and high unit costs
B high volume and low unit costs
C low volume and low unit costs
D low volume and high unit costs
LO 1d
19 Research into products which have obvious commercial or practical use is called:
A market research
B pure research
C applied research
D process research
LO 1d
20 What are the four elements of the procurement mix?

A Price, product, place, promotion
B Quantity, quality, price, lead time
C Volume, variety, variation in demand and visibility
D Costs, competitors, customers and corporate objectives
LO 1d
21 Wesley is a General Manager with Chain Ltd. The company is restructuring and Wesley will have a
larger team of staff reporting to him. Wesley is trying to persuade the Managing Director that he
does not want to delegate more of his work but the Managing Director has responded by telling
Wesley about the advantages of delegating.
Requirement
Which of the following is an advantage for Wesley of delegating?
A Wesley can give more focus to those tasks that require his management experience
B Wesley can ask other people to do the tasks that he finds boring
C Wesley can spend less time supervising
D Wesley’s team will enjoy having more work to do
LO 1d

22 The HD5000 is a state of the art TV and audio system. The makers of the HD5000 have decided
against advertising the system and instead the marketing team has focussed its efforts on negotiating
with shops and online retailers to stock the product, by persuading them that consumers would be
attracted to their store if they sold it.
Requirement
Which of the following techniques is the marketing team using?
A Pull marketing technique
B Digital marketing technique
C Push marketing technique
D Direct marketing technique
LO 1c, 1d
23 Trews Ltd manufactures clothes, which it then sells to a number of major retailers as well as directly to
consumers (through its own website).
Requirement
Which of the following is part of Trews Ltd’s upstream supply chain?
A Orders received from retailers
B Deliveries of raw materials used to make the clothes
C Trews Ltd’s online advertising and marketing campaigns
D Distribution of clothes from Trews Ltd’s warehouse to the retailers
LO 1c
24 The Managing Director of Birdot is concerned about the company’s procurement function, because
production of Birdot’s product recently had to be halted because it had run out of a key component
used in the production process.
Requirement
Birdot’s problems are most likely to be the result of it failing to achieve which two of the following
‘rights’ of procurement?
(1) Right quality
(2) Right time
(3) Right quantity
(4) Right price
A 1 and 2
B 1 and 3
C 2 and 3
D 2 and 4
LO 1c

Chapter 3: Organisational and business
structures
1 Identify which of the following statements about an organisation chart for Ginger plc are true.
(1) The chart will show the degree of decentralisation in Ginger plc
(2) The chart will show the span of control in Ginger plc
(3) The chart will show the scalar chain in Ginger plc
A 1 and 2 only
B 2 and 3 only
C 1 and 3 only
D 1, 2 and 3
LO 2b
2 Lan plc trains bankers. It has been established for over 30 years. Lan plc has a large operating core
which consists of all the well-qualified lecturing staff. They need to keep their teaching material
constantly updated to reflect current issues in the complex banking industry, and to ensure that the
company’s courses remain competitive. The lecturers are supported by a large administrative team
which follows procedures to ensure the smooth delivery of courses.
Requirement
Which of the following organisational structures does Lan plc have?
A Entrepreneurial
B Machine bureaucracy
C Professional bureaucracy
D Divisionalised
LO 2b
3 Identify which three of the following are Henry Mintzberg’s building blocks of an organisation.
A Support staff
B Middle line
C Functional division
D Scalar chain
E Ideology
F Matrix structure
LO 2b
4 Jane’s job description at Glue Pot plc states that her role is part of the company’s technostructure.
According to Henry Mintzberg, a technostructure:
A ensures that an organisation follows its mission
B provides ancillary services
C standardises work processes
D controls the work of the operating core
LO 2b
ICAEW 2023 3: Organisational and business structures 13

5 Benton plc is a machine bureaucracy. Which of the following characteristics is the company most
likely to exhibit?
A The technostructure exerts a pull towards standardised processes
B The operating core exerts a pull towards standardised skills
C The middle line exerts a pull towards fragmentation
D The support staff exert a pull towards collaboration
LO 2b
6 Justin works for Edwinstone plc. He is part of a project team developing a large construction site. The
team has a matrix structure with employees from many different departments working on this project.
Requirement
Which of the following basic principles of organisational structure is necessarily contravened by this
type of structure?
A Authority and responsibility
B Subordination of individual interests
C Unity of command
D Division of work
LO 1d, 2b
7 The Chief Executive of Acton plc has identified problems caused by the centralised nature of the
company’s decision-making processes. These have led to accusations from staff and some customers
that the company is increasingly slow and unresponsive. The Chief Executive wants to increase the
amount of decentralised decision-making over the next year.
Requirement
Which three of the following characteristics of Acton plc are likely to increase the amount of
decentralisation that is possible?
A The authoritarian style of its management
B Its well-skilled workforce
C Its large size
D The slow pace of technological change in its markets
E The effectiveness of communication across the company
LO 1d, 2b
8 In terms of structure, Platlet plc is a wide, flat organisation.

Which three of the following characteristics is the company most likely to exhibit?
A A greater need to delegate
B Higher administration and overhead costs
C Many opportunities for promotion
D Better communication between the strategic apex and operating core
E Large spans of control
F Slow decision making
LO 1d, 2b
9 Logical Computing Ltd adopts a wide, flat organisational structure. Which of the following is likely to
present problems for the company?
A Ensuring enough face-to-face contact takes place between superiors and staff members

B High management overhead costs
C Internal communication
D Superiors not delegating enough work to staff
LO 1d, 2b
10 Which three of the following are characteristics of limited companies?

A Perpetual succession
B Separate legal personality
C Financial statements can remain private
D Simple withdrawal of capital
E The company’s liability is limited
F Regulation under the Companies Act 2006
LO 2a
11 Tom Burns and G M Stalker classified organisations as ‘mechanistic’ or ‘organic’. Which of the
following is an appropriate description of a mechanistic organisation?
A Commitment to organisation’s mission
B Network structure of control
C Relatively flexible job descriptions
D Suitable for slow moving environments
LO 1d, 2b
12 Protin plc has a modern manufacturing operation. It uses components manufactured by suppliers
and sub-contractors all over the world to assemble finished goods to customer specifications in its
assembly plant. Operations managers are technically competent and their competence within the
area of their expertise is rarely questioned. There is a high degree of specialisation of labour.
Procedures ensure that, whoever carries out tasks, they are executed in the same way each time.
Requirement
From this description of Protin plc, identify which of the following statements about the company are
likely to be true.
(1) Innovation is suppressed.
(2) Employees are concerned with completing the task efficiently, rather than with how the task can
be improved upon for the benefit of the organisation.
(3) Everyone in the organisation finds it easy to learn from their mistakes.
A Statements 1 and 2
B Statements 2 and 3
C Statements 1 and 3
D Statements 1, 2 and 3
LO 1c, 2b
13 Imperiax Ltd wishes to expand abroad. It has agreed with a foreign manufacturer of a
complementary product to market both products jointly in both countries. What method of
expansion has Imperiax Ltd adopted?
A A group structure
B A joint venture
C A strategic alliance

D A licensing agreement
LO 2a
14 Angela is a Sole Trader who currently employs one person. Her business, Markstat, performs
statistical analysis for market research companies. Workloads are increasing rapidly and Angela has
realised that she now needs to employ three more people. This will require new office premises plus
new furniture and equipment. Markstat operates in a highly competitive sector.
Requirement
Identify which two of the following factors are disadvantages of Markstat’s current business structure
in this context.
A A floating charge cannot be used to secure borrowing
B Angela’s liability is unlimited
C The business’s liability is unlimited
D Financial statements do not have to be filed with the Registrar of Companies
E The stringent legal rules that apply to the business’s constitution
LO 2a
15 Rumbert plc is a large group listed in the UK. It has a head office in London and strategic business
units (SBUs) spread throughout the world. Only overall strategic direction, research and
development, and consolidated financial reporting are provided by London. All SBUs manage their
own marketing and operations, and report directly to regional centres which provide all other forms
of functional support. Rumbert Insurance is an SBU operating in South Africa and reporting to the
Rumbert Southern Africa regional centre. It provides home and car insurance direct to consumers.
Requirement
Which of the following areas of functional support would be provided to Rumbert Insurance by the
Rumbert Southern Africa regional centre?
A Sales management
B Financial reporting for the London Stock Exchange
C Periodic management accounts
D Research and development
LO 2b
16 Which of the following business structures necessarily have a legal identity separate from that of its
owner(s)?
(1) A strategic alliance between a limited company and a limited liability partnership
(2) A limited liability partnership
(3) A registered company
A 1 and 2 only
B 2 and 3 only
C 1 and 3 only
D 1, 2 and 3
LO 2b
17 Mr Dafinone is a Sole Trader who works alone, maintaining and repairing IT systems. He works 60
hours per week. He wants to take on a major new maintenance and repair contract for a local
hospital’s operating theatre. This will require at least 60 working hours each week. It will be extremely
profitable if he can acquire the necessary equipment.

Requirement
Which of the following statements about his sole trader status is true?
A It prevents him from employing staff to help with the contract.
B It gives him personal liability for any failure of his in relation to the hospital IT system.
C It prevents him from obtaining a loan to obtain the equipment.
D It allows him to issue shares in his business to friends and family.
LO 2a
18 Pliar Ltd is considering a number of business structures to market a new product with Secateur Ltd’s
help. Which of the following business structures is a joint venture?
A Buy Secateur Ltd and market the product through that company
B Form a project team with employees of both Secateur Ltd and Pliar Ltd and market the product
through that team
C With Secateur Ltd as equal partner, form Plicateur Ltd and market the product through that
company
D Sell Secateur Ltd the right to market the product in return for a percentage of the revenues
LO 2a
19 Jacinta works in the Human Resources department of Huff plc. She is preparing a job description for
a new vacancy for an accounts payable assistant in the finance function.
Requirement
Which three of the following items would be included in the job description that Jacinta is
preparing?
A Duties and responsibilities of the role
B Job title
C Organisation chart showing all positions within Huff plc
D Huff plc’s health and safety policy
E Pay grade
LO 1d
20 The organisational structure for Grenestede Ltd is flat compared to many businesses. There are only
three levels in its hierarchy, directors, managers and workers.
Requirement
Which of the following is an advantage of this type of organisational structure to Grenestede Ltd?
A Greater opportunity to delegate
B Narrower spans of control
C More participation in decision making
D Improved management training
LO 2b
21 Which of the following business structures necessarily has a legal identity separate from that of its
owner(s)?
A a joint venture between two limited liability companies
B a general partnership
C a limited liability partnership

D a strategic alliance
LO 2a

Chapter 4: Introduction to business strategy
1 In the home computer market, laptop computers are an example of a:
A product form
B brand
C product class
D generic product
LO 1c, 1e
2 Nevin works for Dorchester plc. Nevin’s manager has asked him to undertake an internal analysis of
the company as part of a strategic planning review.
Requirement
Which three of the following analytical techniques will be useful in this context?
A Value chain analysis
B Porter’s five forces analysis
C The BCG Matrix
D PESTEL analysis
E Analysis of distinctive competencies
F Ansoff’s Matrix
LO 1e
3 Sharma is carrying out a PESTEL analysis for her employer, Decron plc. During her research Sharma
has realised the ageing of the UK’s population is a potentially important strategic issue for the
company. In which section of her analysis should Sharma record this matter?
A P
B S
C T
D L
LO 1e
4 The Marketing Director of Birstall plc is formulating whether one of the company’s products, which is
aimed at a small niche market, should be differentiated from its close competitors. At this stage she is
unsure how such differentiation would be achieved in practice. The decision on whether to
differentiate or not is a decision concerning the company’s:
A functional strategy
B business strategy
C competitive strategy
D product/market strategy
LO 1e
5 Cassion plc has entered a market and achieved a reasonably dominant position in just under a year.
Cassion plc is pleased that the threat of new entrants into the market seems to be relatively low.
Requirement
Which of the following factors is most likely to have contributed towards this situation?
A Low initial capital costs
ICAEW 2023 4: Introduction to business strategy 19

B A customer base consisting of a few large customers
C A highly competitive supplier market
D The market is for services rather than manufacturing
LO 1e
Option Encourages new entrants Erects a barrier to new entrants
1 High competition Low capital costs
2 A monopoly supplier of a vital High competition

component
3 One large customer A monopoly supplier of a vital

component
4 Low competition High capital costs
With regard to Porter’s Five Forces Analysis and new entrants into a market, which of the following
pairs of statements is correct?
A 1
B 2
C 3
D 4
LO 1e
7 In the past a major stakeholder in Justin plc has exerted considerable influence over the
environmental impact of the company’s manufacturing operations. Specifically, a production facility
was temporarily closed down for three weeks as a result of one recent campaign orchestrated by this
stakeholder. The stakeholder writes regularly to the company’s chairman about a range of
environmental issues involving the company.
Requirement
In terms of Mendelow’s matrix which of the following strategies should Justin plc pursue for this
stakeholder?
A Keep this stakeholder informed at all times about the company
B Keep this stakeholder satisfied with regard to the company and its strategies
C Take minimum effort with regard to this stakeholder as he always complains
D Treat this stakeholder as a key player when formulating future strategies
LO 1e, 5e
8 Seago plc provides exclusive scuba-diving holidays for people over 60 years of age. In terms of
Michael Porter’s generic competitive strategies, this represents a strategy of:
A differentiation
B cost leadership
C cost focus
D differentiation focus
LO 1e

9 Martin is a Product Manager with Mangrove plc. He is preparing an assessment for the company’s
directors of each of the company’s product lines. In preparing his assessment, Martin is making use
of the BCG matrix. He has classified one particular product, the Pluton, as having a low market share
in a high growth market. Martin should recommend to the directors that, with regard to the Pluton,
the company should pursue:
A either a hold or a divest strategy
B either a hold or a harvest strategy
C either a build or a harvest strategy
D a build strategy
LO 1b, 1e
10 Nextron plc manufactures washing machines. It has a 20% share of the UK market. The company
wants to increase its revenues so has decided to add tumble dryers to its range of products. In terms
of Ansoff’s matrix, this represents a growth strategy of:
A market penetration
B market development
C product development
D diversification
LO 1e
11 The board of directors of Swinson plc is evaluating whether to pursue a new strategic option for a
major strategic business unit. The final decision should be judged against which three of the
following criteria?
A A cost of entry test
B An acceptability test
C A suitability test
D A feasibility test
E An attractiveness test
F A payoffs test
LO 1e
12 Arto plc manufactures the Zulon. The Zulon’s dominant market share has continued for over five
years, but market growth has now almost ceased. Zulon’s product manager does not believe that the
product merits further significant financial support. In terms of the BCG matrix, which of the following
strategies should the product manager recommend?
A Hold
B Harvest
C Divest
D Build
LO 1e
13 Which of the following statements about a product life cycle diagram is true?
A The life cycle diagram predicts when the decline phase will start
B Sales growth always follows the introduction of a product
C Profits are normally highest during the maturity phase
D The mature phase usually lasts about 10 years
LO 1c, 1e

14 Millward Ltd sells garden sheds. It has a number of local competitors who regularly use price cuts
and other sales promotions to win business. Its competitors have noticed that Millward Ltd responds
to price cuts by matching prices and then launching a leafleting campaign to houses in the local
area. In terms of Philip Kotler’s competitor reaction profiles, Millward Ltd is:
A laid back
B a tiger
C selective
D stochastic
LO 1e
15 Manson Ltd aims to pursue a differentiation strategy for its Portex sliding-door product.
Requirement
Which three of the following will form part of this strategy?
A Action to minimise labour and overhead costs
B Action to improve productivity
C Improved product features and benefits
D Promotion of the Portex brand
E Use of higher quality materials in the manufacturing process
LO 1c, 1e
16 Glenway Ltd sells package holidays from a chain of retail outlets. Brantham Ltd sells new and used
cars from a chain of car dealerships. Glenway Ltd and Brantham Ltd are:
A brand competitors
B industry competitors
C generic competitors
D form competitors
LO 1c, 1e
17 Hairdooz Ltd operates a large chain of hairdressing salons. Peter, a Management Consultant, has
undertaken a review of the company’s activities in providing its services to customers. In terms of
Porter’s Value Chain, Peter has been asked to focus on the primary activities of the company. Peter
will, therefore, be analysing which three of the following?
A Inbound logistics
B Procurement
C Firm infrastructure
D Marketing and sales
E Service
LO 1e
18 A consultant has told Nag plc’s board that the strategic planning process should result in a strategic
plan, a business plan and an operational plan. The consultant gave the board two definitions.
Definition 1: A business plan sets out the markets the business intends to serve, how it will serve each
market and what finance is required
Definition 2: A strategic plan sets out how overall objectives are to be achieved, by specifying what is
expected from specific functions, stores and departments

Requirement
Are these definitions accurate or inaccurate?
Option Definition 1 Definition 2
1 Accurate Inaccurate
2 Inaccurate Inaccurate
3 Accurate Accurate
3 Inaccurate Accurate
A Option 1
B Option 2
C Option 3
D Option 4
LO 1e
19 Simian plc operates in the financial services sector. Its marketing director is developing the firm’s
marketing plan. An external marketing consultant has recommended that the PESTEL framework
should be used as part of this process.
Requirement
Which of the following statements correctly describes the reason why the PESTEL framework might
prove useful?
A It will identify Simian plc’s strengths and weaknesses
B It will allow a detailed analysis of the structure of the financial services industry
C It will act as a detailed checklist to assist in understanding the different influences in Simian plc’s
environment
D It will help to identify the relative levels of interest and power of Simian plc’s stakeholders
LO 1e
20 Asif plc is a large supermarket chain which manages all its distribution internally. Each of the 120
stores is a profit centre. As part of its strategy development process, Asif plc has identified the
following two strategies.
Strategy (1): Offer its distribution capability from warehouse to stores as a service to other
supermarkets
Strategy (2): Train some store staff in the handling of personal safety issues
Requirement
Identify whether each strategy is a corporate strategy.
A Strategy (1): A corporate strategy; Strategy (2): Not a corporate strategy
B Strategy (1): Not a corporate strategy; Strategy (2): Not a corporate strategy
C Strategy (1): A corporate strategy; Strategy (2): A corporate strategy
D Strategy (1): Not a corporate strategy; Strategy (2): A corporate strategy
LO 1e
21 The specialist services division of Klaxon plc uses highly-qualified professional staff to provide its
government-accredited service to its customers. The company has prepared a draft Five Forces
Analysis. The following two statements are included in the draft analysis:

Statement (1): Government subsidies for existing providers will be removed, so there will be
increased rivalry
Statement (2): Two key customers of the specialist service will merge, so there will be increased
rivalry
Requirement
LO 1e
22 Simone, the strategy director of Principle plc recently undertook a review of a number of the
company’s product lines using the BCG matrix to develop recommendations. For one particular
product, ZD737, the model recommended that a ‘harvest’ or a ‘hold’ strategy should be adopted.
Requirement
Which of the following did the BCG matrix classify the ZD737 as?
A A dog
B A question mark
C A cash cow
D A star
LO 1e

Chapter 5: Introduction to risk management
1 In terms of financial risk, credit risk is:
A economic loss due to the default of a customer
B risk of choosing the wrong strategy
C risk that customers do not buy the company’s products in the expected quantities
D exposure to economic loss due to changes in market prices or rates
LO 1f
2 A highly geared company’s financial risk is most likely to increase when it increases its:
A operations
B geographical reach
C borrowings
D share capital
LO 1f
3 The strategy director of Milton plc is assessing a project that he may recommend to the board of
directors. He is concerned about the risk-averse attitude of the board to similar projects in the past.
In terms of risk, risk aversion is a measurement of:
A the probability of risk arising
B project uncertainty
C the impact of risk
D appetite for risk
LO 1f
4 The following statements have been made in relation to risk and uncertainty.
Statement (1): Risk is the variation in an outcome.
Statement (2): Uncertainty denotes the inability to predict an outcome.
Requirement
Identify whether each statement is true or false.
A Statement (1) true; Statement (2) false
B Statement (1) false; Statement (2) false
C Statement (1) true; Statement (2) true
D Statement (1) false; Statement (2) true
LO 1f
5 Norman Ltd developed a new product for use in the home improvement market. Tests on the
product proved successful although in extreme conditions the product was very flammable. The
company decided not to launch the product. In response to the risks highlighted in the product tests,
this decision is an example of managing risk through:
A risk avoidance
B risk reduction
C risk transfer
D risk acceptance
LO 1f
ICAEW 2023 5: Introduction to risk management 25

6 The following statements have been made about risk attitudes.
Statement (1): A risk-seeking attitude means that an investment should not be undertaken if there is
an alternative investment offering a higher risk.
Statement (2): A risk neutral attitude means an investment should not be undertaken if there is an
alternative investment offering a lower return.
Requirement
LO 1f
7 Jenny is a Risk Manager at Fortune Ltd. She is investigating the potential gross risk arising from a
decision to incorporate lower quality materials into the production process for one of the company’s
key products. In assessing potential gross risk Jenny needs to take account of the:
A level of exposure and probability of occurrence
B potential loss and probability of occurrence
C potential loss and level of volatility
D level of exposure and level of volatility
LO 1f
8 Smertin and Jones is a firm providing advice on all aspects of personal finance. Their industry is
heavily regulated. A newspaper article predicts that private medical insurance, a further area of the
firm’s business, may become subject to new regulatory requirements from next year. This possibility
is an example of:
A business risk
B financial risk
C event risk
D market risk
LO 1f
9 A project will yield either a profit of £100,000 or a loss of £50,000. The profit will arise with a
probability of 0.8 and the loss will arise with a probability of 0.2. The project contains:
A uncertainty only
B risk only
C both uncertainty and risk
D neither risk nor uncertainty
LO 1f
10 A risk-minimising investor has the following four investment opportunities.

Which two of the four investments will the investor possibly choose?

Risk
+ Investment 1
+ Investment 2
+ Investment 3
+ Investment 4
Return
A Investments 2 and 4
B Investments 1 and 4
C Investments 2 and 3
D Investments 3 and 4
LO 1f
11 Which of the following is the best definition of the risk concept of ‘exposure’?
A How the factor to which a company is exposed is likely to alter
B The amount of the loss if the undesired outcome occurs
C The measure of the way in which a business is faced by risks
D The likelihood that the undesirable outcome occurs
LO 1f
12 Which of the following sequences represents the order in which an organisation should respond to
risk?
A Reduction, avoidance, sharing (or transfer), acceptance (or retention)
B Avoidance, reduction, sharing (or transfer), acceptance (or retention)
C Reduction, sharing (or transfer), avoidance, acceptance (or retention)
D Avoidance, sharing (or transfer), reduction, acceptance (or retention)
LO 1f
13 Briggs plc analysed a risk faced by its Scarborough division on a risk map. It concluded that the
matter has a low impact but there is a high probability of its occurrence. Which of the following risk
responses is most appropriate?
A Risk avoidance
B Risk reduction
C Risk transfer
D Risk acceptance
LO 1f
14 An organisation responds to an identified risk by restructuring. Which category of control has it

used?
A Physical controls

B System controls
C Management controls
D Financial controls
LO 1f
15 Grenville Ltd is renewing its buildings and contents insurance policy for its factories. In terms of risk
management, this is an example of:
A risk avoidance
B risk reduction
C risk transfer
D risk retention
LO 1f
16 What type of risk includes process risk, people risk and event risk?
A Operational risk
B Financial risk
C Business risk
D Strategy risk
LO 1f
17 For many years, Manley plc’s main source of revenue was the sale of 8mm colour films for cameras.
This source of revenue fell sharply after the introduction of digital cameras. In relation to the success
of digital cameras, Manley plc was the victim of:
A operational risk
B financial risk
C business risk
D market risk
LO 1f
18 A company has automated production and this resulted in redundancies of some employees paid on
an hourly basis (ie, variable labour). The company borrowed heavily to finance the purchase of the
machinery needed. The effects of these changes on the company’s financial risk are that:
A both changes (machinery and borrowing) increase the company’s financial risk
B automation increases financial risk, borrowing decreases it
C automation decreases financial risk, borrowing increases it
D both changes (machinery and borrowing) decrease the company’s financial risk
LO 1f
19 Matrix Ltd has recently failed to supply raw materials in line with the terms of its contract with
Banfield plc. As a result, Banfield plc has had to delay the delivery of products to a major customer.
For Banfield plc, the failure of Matrix Ltd to meet its contractual obligations is an example of:
A financial risk
B product risk
C business risk
D event risk
LO 1f

20 In which order should the following aspects of the risk management process take place?
1 Risk response and control
2 Risk analysis and measurement
3 Risk awareness and identification
4 Risk monitoring and reporting
A 1, 2, 4, 3
B 3, 2, 1, 4
C 2, 3, 1, 4
D 4, 2, 1, 3
LO 1f
21 Candle plc is concerned about the risk management of its information systems function. Its systems
director has suggested wholly outsourcing information systems management to a third-party
provider. This action would be a form of:
A risk reduction
B risk transfer
C risk avoidance
D risk retention
LO 1f
22 Which of the following risks faced by Lump plc should be classified as business risk?
A Product risk
B Event risk
C Process risk
D Financial risk
LO 1f
23 Hammer plc makes a range of agricultural machines and other agricultural equipment for sale in its
home market. Hammer plc has a large share of this market, but it has several competitors who sell
similar machinery.
Requirement
Which of the following would normally be classified as an operational risk for Hammer plc?
A The risk that the Production Director will be recruited by Tiller plc, a key competitor
B The risk that a new type of irrigation system will fail to find a large enough market
C The risk of competitors moving their production overseas and being able to cut costs
D The risk of resource depletion, meaning that new sources of metal will have to be found
LO 1f
24 St Stephen’s Hospital has an electricity generator on standby at all times. The purpose of the
generator is to provide an electricity supply to the hospital’s operating theatres and life support
machines in the event of a power cut.
Requirement
The electricity generator forms part of St Stephen’s Hospital’s:
A crisis management

B disaster prevention
C operational planning
D strategic planning
LO 1g
25 Greenwood Ltd is a wholesaler of coffee. The business has contracts with all the major coffee chains
to supply coffee beans and fixes the price it charges them every month. Greenwood Ltd buys the
coffee beans on the international coffee market for which it pays the market price on the day of
purchase.
Requirement
The process of buying and selling coffee beans presents which of the following risks to Greenwood
Ltd?
A Credit risk
B Strategy risk
C Product risk
D Market risk
LO 1f
26 An investor has been offered the opportunity to invest in four projects. The investor has assessed the
level of risk associated with each project, alongside the expected return.
Requirement
Assuming that the investor is risk averse, which two investments from the following list will they
select?
Investment Risk (standard deviation) Expected return on investment
1 8% 12%
2 6% 11%
3 7% 11%
4 5% 10%
A Investment 1 and Investment 2

B Investment 1 and Investment 3
C Investment 2 and Investment 4
D Investment 3 and Investment 4
LO 1f
27 According to the report produced by ICSA Solutions – Building a resilient organisation – which of the
following are potential problems to successfully building a resilient organisation?
(1) Directors delegate delivery of resilience policies and procedures to operational managers
(2) Business functions focus specifically on resilience programmes for their own areas
A Neither of them
B 1 only
C 2 only
D Both 1 and 2
LO 1g

28 Abdullah owns a clothes shop in a busy town centre. The shop is open six days per week. Last week,
Abdullah’s sales were as follows:
Monday 2,500
Tuesday 2,700
Wednesday 3,000
Thursday 3,500
Friday 3,500
Saturday 4,000
Requirement
What was the median value of Abdullah’s daily sales last week?
A £3,000
B £3,200
C £3,250
D £3,500
LO 3f
29 Which two of the following statements is true of the median?

A It can be distorted by very large or very small exceptional values.
B It may not return a value that is the same as an actual value in the data set.
C It takes into account all the data in the data set.
D It is difficult to identify in large data sets as the values have to be ordered.
LO 3f
30 Which of the following measures of central tendency can be used when the data is qualitative rather
than quantitative?
A Mean
B Median
C Mode
D Standard deviation
LO 3f
31 Which two of the following are advantages of the mean?

A it is widely understood
B it is not distorted by outliers
C it takes into account the values of all items in the data set
D it always takes a value that is the same as an actual value in the data set
LO 3f
32 The marketing department has estimated the following sales volume for a new product for the
following year:

Probability Sales volume
Worst case 0.2 2,200
Most likely 0.5 2.600
Best case 0.3 2,700
Requirement
What is the expected value of sales volume?
A 2,450
B 2,500
C 2,550
D 2,600
LO 3f
33 The management accountant has recorded daily production in the factory for the last year. She has
calculated that the mean daily production was 10,000 units, with a variance of 400 units.
Requirement
What was the coefficient of variation?
A 0.2%
B 4%
C 20 units
D 400 units
LO 3f
34 The board of Theta Ltd has to choose which of two new products to launch next year, as they only
have sufficient production capacity to launch one. Projected daily contribution of the two products,
are as follows:
Product A Product B
Mean contribution £6,000 £5,000
Standard deviation £100 £90
Coefficient of variation 1.67% 1.80%
Requirement
Which of the following statements is correct?
A product B should be launched as it has a lower risk
B product A should be launched as it has a higher return in spite of the higher risk
C product A should be launched as it has a higher return and a lower risk
D it is not clear which product should be launched without more detail about the risk preferences
of Theta Ltd
LO 3f
35 An investor has been offered two possible investments – Investment A and Investment B. Details of
the historic average returns and standard deviation of each investment are as follows:

Investment A Investment B
Average return 5% 20%
Coefficient of variation 0% 5%
The investor has selected Investment B.

Requirement
The investor has selected Investment B.
Which of the following approaches to risk could the investor be said to have demonstrated?
(1) A risk averse
(2) A risk neutral approach
(3) A risk seeking approach
A 1 only
B 2 only
C 3 only
D (2) and (3)
LO 3f
36 The risk committee has identified a new risk relating to the potential damage that would be suffered
in a catastrophic event. The calculation of the gross risk is as follows:
Impact Probability Gross risk

A £1,000,000 1% £ 10,000
A loss of more than £500,000 would seriously threaten the survival of the company.
Requirement
Which of the following would be the most appropriate way to deal with the risk?
A Accept it as the gross risk is quite low
B Insure the risk as the potential impact is high
C Avoid the activities that create the risk as the potential impact is high
D Take actions that could reduce the probability of the event occurring
LO 1f
37 Which two of the following statements about the normal distribution are correct?
A the mean is less than the median, which is less than the mode
B the distribution is a continuous distribution
C the closer a range of values is to the mean, the higher is the probability of that range of values
occurring
D 99% of values lie within one standard deviation above and one standard deviation below the
mean
LO 3f
38 A distribution is left skewed (negatively skewed). Which statement is correct?

A The mean is lower than the median, which is lower than the mode.
B The mean is higher than the median, which is higher than the mode.
C The median is lower than the mean, which is lower than the mode.
D The median is higher than the mean, which is higher than the mode.
LO 3f

39 A manufacturing company identifies health and safety risks in all of its operational sites. If the cost of
reducing those risks further is considered to be reasonable, then action is taken to reduce them. If
the cost of reducing the risks is disproportionate given the reduction of risk that would be achieved,
then the action is not taken.
Requirement
What is this approach to risk management referred to as?
A ALARP
B Avoidance
C Transfer
D Accept
LO 1f

Chapter 6: The finance function and financial
information
1 Collinson plc is a medium-sized group operating at four locations in the UK. It operates a centralised
finance function and is concerned that the function as a whole is not performing well. Centralisation
of this finance function is least likely to be effective in:
A external reporting to shareholders
B recording financial transactions
C managing cash
D internal reporting to operational managers
LO 3a, 3b
2 Maureen is employed in the finance function of Gralam plc. Her duties are to ensure that the
company always has sufficient funds available to meet both its short-term and long-term financial
requirements. It is clear that Maureen is employed by Gralam plc in its:
A financial reporting section
B management accounting section
C treasury management section
D transaction processing section
LO 3a, 3e
3 Which three of the following are characteristics of management accounting information rather than
financial reporting information?
A It is both forward looking and historical
B It is governed by statute
C It is primarily used by shareholders
D It is likely to include a statement of cash flows
E It is likely to include a cash flow forecast
F It is likely to include budgetary information
LO 3a
4 Harold is an accountant with Farnworth plc. He was asked to join a project team examining the
company’s compliance with both FRC and IASB standards. It appears, therefore, that Harold has been
recruited into this project team to exploit his expertise in:
A financial reporting
B performance measurement
C corporate governance
D information systems
LO 3a
5 Novel plc is establishing its accounting and finance function. The company has been told there are
two purposes of published, audited financial statements. These are to help users assess how
effectively managers are running a business, and to make judgements about the likely levels of risk
and return in the future.
ICAEW 2023 6: The finance function and financial information 35

Requirement
Which of the following user groups of Novel plc’s published, audited financial statements is most
likely to use accounting information for these purposes?
A Community representatives
B Employees
C Shareholders
D Managers
LO 3a, 3b
6 When a company’s finance function prepares financial statements in accordance with legal rules and
accounting standards, it is engaged in the support activity of:
A record-keeping and stewardship
B planning and control
C external reporting
D internal reporting
LO 3a
7 Mainstream Ltd’s finance director is establishing an effective system in the finance function for
producing management accounting reports. Which issue should be the finance director’s primary
consideration?
A The information needs of the company’s managers
B The need for effective internal control mechanisms
C The need for cost-effectiveness
D The need for effective information security
LO 3a, 3e
8 Tram plc’s finance function must provide information to management on the company’s balanced
scorecard. This role is undertaken as part of Tram plc’s:
A statutory audit requirement
B financial reporting function
C treasury management process
D performance measurement system
LO 3a, 3d
9 ‘Effectiveness’, ‘economy’ and ‘efficiency’ are often mentioned with reference to resource use. Match
these terms with the definitions below:
(1) A reduction or containment of costs
(2) Achieving maximum output at minimum cost
(3) The measure of achievement by reference to objectives
A 1 = effectiveness; 2 = economy; 3 = efficiency
B 1 = economy; 2 = efficiency; 3 = effectiveness
C 1 = efficiency; 2 = effectiveness; 3 = economy
D 1 = economy; 2 = effectiveness; 3 = efficiency
LO 3d

10 Which statement about critical success factors (CSFs) for a business is true?
A Low costs will always be a CSF; high sales revenue will always be a CSF.
B Low costs will always be a CSF; high sales revenue will not always be a CSF.
C Low costs will not always be a CSF; high sales revenue will always be a CSF.
D Low costs will not always be a CSF; high sales revenue will not always be a CSF.
LO 1a, 3d
11 Three basic approaches to performance measures are measures of economy, efficiency, and
effectiveness. Economy is measured by:
A the amount of resources used for the tasks that have been achieved
B the success in achieving goals and targets
C team member satisfaction and the motivational climate
D the success of the team or work group in controlling its costs
LO 3d
12 A consultant has made two statements about the primary focus of the users of financial statements of
an entity.
Statement (1): The primary focus of suppliers is on the entity’s risk and return.
Statement (2): The primary focus of shareholders is on the entity’s solvency.
Requirement
LO 3a, 3d, 3f
13 Tom works in the finance function of Bateman Ltd, which trades with many companies around the
world. His duties involve managing the company’s foreign exchange requirements. From this it can
be seen that Tom is employed by Bateman Ltd in its finance function’s:
A financial reporting section
B management accounting section
C treasury management section
D financial transaction recording section
LO 3a, 3b
14 Chinward Ltd manufactures garden furniture from recycled wood and wishes to apply the
sustainability reporting standards issued by the Global Reporting Initiative (GRI) in its sustainability
reporting.
Statement (1): Under the environmental section of the report, the company should identify the total
weight of wood used in the manufacture of its products in the financial period.
Statement (2): Under the social section of the report, the company should identify the number of new
workers employed in the financial period by age, gender and region.
Requirement

LO 3d
15 Historically, the role of the finance function at Delbin plc has been viewed primarily in terms of
reporting and control. However, the senior management team at Delbin plc are keen for the finance
function to have more of a role as a business partner.
Requirement
In which of the following should members of the finance function expect to become increasingly
involved as a result of the business partnering role?
(1) Formulating strategies
(2) Commercial decision making and negotiations
(3) Provision of accurate accounting information.
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3
LO 3a
16 Which two of the following encourage organisations to improve reporting of their economic,
environmental and social impact?
A The International Accounting Standards Board (IASB)
B The Task Force on Climate-related Financial Disclosures (TCFD)
C Global Reporting Initiative (GRI) standards
D The Climate Disclosure Standards Board framework (CDSB)
E The Triple Bottom Line approach
LO 3d, 3e
17 A factory emits greenhouse gasses which are currently within government limits. The finance director
is concerned that changes in legislation may be introduced soon that would reduce the amount of
greenhouse gasses that the company is allowed to emit, leading to a requirement to invest in new
machinery or reducing production to reduce pollution.
Requirement
In terms of the Task Force on Climate-related Financial Disclosure categories of risk from climate
change, what is the risk that the finance director is concerned about an example of?
A Physical
B Market
C Policy and legal
D Technology
LO 3d, 3f
18 Moreton plc produces monthly variance reports for all its production managers. These show the
extent and cause of all variances from the company’s production plans. The reports enable managers
to take corrective action during the following month. In terms of financial information, these reports
can be classified as:

A planning information
B operational information
C tactical information
D strategic information
LO 3a, 3c
19 The area outside an information system boundary is known as the:

A location
B setting
C context
D environment
LO 3c
20 The directors of Royguard plc have recently decided to establish an extensive management
information system within one of its subsidiaries. In arriving at this decision, the directors were likely
to have been conscious that the subsidiary’s operations were largely characterised by:
A structured decisions
B unstructured decisions
C non-programmable decisions
D non-routine decisions
LO 3d
21 The information systems manager of Detrex plc wants all data input into the company’s databases to
be complete and accurate. As part of his information management role, he makes use of range
checks. The use of range checks should help to deliver:
A completeness only
B accuracy only
C both accuracy and completeness
D neither accuracy nor completeness
LO 3d
22 The manager of Hettie plc’s information systems wants all data input into the company’s databases to
be accurate and complete. As part of her information management role, she makes use of control
totals. The use of control totals should help to deliver:
A accuracy only
B completeness only
C both accuracy and completeness
D neither accuracy nor completeness
LO 3c
23 Ranger plc’s information systems manager wants all data on the company’s databases to be the same
as their sources and not to have been accidentally or deliberately altered, destroyed or disclosed. His
concern, therefore, is with:
A data accuracy
B data integrity
C data authenticity

D data completeness
LO 3c
24 Zing plc’s information system automatically maintains a log of user activity. This log contains details
of identity, log-on and log-off times and details of processing carried out and access attempts made.
All transactions are tagged to identify the person responsible for that processing. The log-on details
of the user determine processing access.
Requirement
Which three of the following control objectives does this system effectively address?
A prevention
B detection
C deterrence
D correction
E accuracy
F completeness
LO 3c
25 Which of the following statements concerning management information systems and transaction
processing systems is correct?
A A management information system is likely to be the foundation of a transaction processing
system.
B Management information systems and transaction processing systems are usually independent.
C Management information systems and transaction processing systems are synonymous.
D A transaction processing system is likely to be the foundation of a management information
system.
LO 3c
26 Which of the following characteristics relates to strategic information as opposed to operational

information?
A often based on estimates
B often very detailed
C mostly very accurate
D usually routine
LO 3a, 3c
27 The depreciation policies adopted by Plumtree Ltd have not changed for the past five years.
According to the IFRS Conceptual Framework, this supports the qualitative characteristic for its
financial information of:
A understandability
B relevance
C timeliness
D comparability
LO 3a, 3c

28 As a result of reading the financial statements of Tatra plc, Michaela decided to increase her
shareholding in the company. In terms of the IFRS Conceptual Framework, this confirms that the
information in Tatra plc’s financial statements was:
A positive
B timely
C material
D relevant
LO 3a
29 Changes to Merrick Ltd’s transaction processing system can only be made by people who are
accountable for the changes. This contributes towards which one of the essential qualities of a secure
information system?
A confidentiality
B integrity
C non-repudiation
D authorisation
LO 3c
30 Each month the Business School at Newtown University receives financial performance data for the
previous month. Each month the senior managers of the Business School complain that they cannot
rely on this information as it contains errors. The information, therefore, is often ignored by
managers. In terms of the qualities of a secure information system, the actions of the managers show
that the system lacks the quality of:
A confidentiality
B availability
C non-repudiation
D authorisation
LO 3c
31 Which of the following issues are key in relation to information processing in a company’s accounting
systems?
Issue 1: Completeness
Issue 2: Non-repudiation
Issue 3: Verifiability
A Issues 1 and 2 only
B Issues 2 and 3 only
C Issues 1 and 3 only
D Issues 1, 2 and 3
LO 3a, 3c
32 In relation to users of financial information, which of the following statements is true?

A External users evaluate the performance of a company’s management using management
accounting.
B Financial reporting provides information to managers and people outside the company, such as
investors.
C Management accounting provides information to managers and people outside the company,
such as investors.

D Financial reporting generates confidential information for internal decision makers such as
executives and management.
LO 3a
33 The IFRS conceptual Framework states that, to support the effective working of capital markets for
the benefit of businesses, financial statements must have which two fundamental qualitative
characteristics?
A Understandability
B Relevance
C Faithfulness of representation
D Comparability
E Timeliness
F Verifiability
LO 3a
34 Russell is an accountant working for Forsell plc. He has made the following points concerning
financial statements. Which of Russell’s points is true?
A Financial statements are used mainly by management.
B Financial statements are used by parties internal to the business only.
C Financial statements are used only by investors.
D Financial statements are used by investors, payables (creditors) and management.
LO 3a
35 Which of the following definitions best describes the characteristic of integrity in relation to the
security of data and information systems?
A Data can be accessed as and when required, by authorised people
B Data stored in the system is the same as its sources and has not been altered or corrupted
C Data is obtained from reliable and verifiable sources
D Data cannot be accessed by anyone who does not have the right to see it
LO 3c

Chapter 7: Business finance
1 A family-owned removals company has liquidity problems and needs an injection of funds. From the
following list identify which would be classified as a source of short-term finance for this company.
A Share capital
B Bank loan
C Factoring
D Commercial mortgage
LO 3h, 3i
2 A consultant has made the following statements concerning each possible relationship between a
bank and its customer.
Statement (1): In the fiduciary relationship the bank is expected to act with good faith towards the
customer.
Statement (2): In the mortgagor/mortgagee relationship the bank asks the customer to secure a loan
with a charge over the customer’s liabilities.
Statement (3): In the bailor/bailee relationship the bank accepts the customer’s property for storage
and undertakes to take reasonable care to safeguard it against loss or damage.
Requirement
Identify which of the statements about these relationships are true.
A Statements (1) and (2) only
B Statements (2) and (3) only
C Statements (1) and (3) only
D Statements (1), (2) and (3)
LO 3g
3 The directors at Landsaver plc want to raise long-term finance by issuing shares in the company. They
have been told that the way to do this is ‘by accessing the market’ but they are not sure what this
means. A market where new securities are bought and sold for the first time is known as:
A a futures market
B a secondary capital market
C a primary capital market
D a money market
LO 3h
4 A consultant has made the following statements about venture capital.

Statement (1): Venture capitalists may realise their investment by selling their shares following
flotation on the stock exchange.
Statement (2): Venture capitalists never sit on the board of a company.
Statement (3): Venture capitalists normally expect a company’s existing owners to bear a substantial
part of the risk.
Requirement
Which of the statements are true?
ICAEW 2023 7: Business finance 43

LO 3h
5 The following is a definition of what type of market?

‘A short-term wholesale market for securities maturing in one year, such as certificates of deposit,
treasury bills and commercial paper.’
A Capital market
B The London Stock Exchange
C AIM (Alternative Investment Market)
D Money market
LO 3h, 3i
6 Which of the following is an example of an institutional investor?

A The Bank of England
B The Financial Reporting Council
C The Financial Conduct Authority
D A unit trust
LO 3h, 3i
7 In which of the following projects would a venture capital organisation be least likely to invest?
A A business start-up
B A management buyout
C Renovation of a production facility
D A rapidly growing company, looking to expand into new markets
LO 3h, 3i
8 Which of the following forms of new share issues would normally be underwritten?
A Introduction
B Offer for sale by tender
C Placing
D Rights issue
LO 3i
9 Grid plc wants to be listed on the London Stock Exchange. An adviser has stated that the following
are methods by which a company can obtain a new London Stock Exchange listing for its shares.
Method 1: Offer for sale
Method 2: Placing
Method 3: Rights issue
Method 4: Offer for subscription
Requirement
Which of these methods are available to Grid plc?
A Methods 1, 2 and 3 only
B Methods 2, 3 and 4 only

C Methods 1, 2 and 4 only
D Methods 1, 3 and 4 only
LO 3i
10 Which of the following is a function of financial regulators?

A The provision of financial advice and information to businesses
B Reduction of risk for clients via aggregation of funds
C Maturity transformation
D Prudential control of financial institutions
LO 3h, 3i
11 Which of the following is an advantage to the shareholders of a company that is obtaining a listing
on the London Stock Exchange?
A disclosure requirements are reduced
B larger dividends can be paid
C shares become more readily marketable
D the company becomes entitled to put ‘plc’ (public limited company) after its name
LO 3h, 3i
12 Which type of finance should be used to fund an increase in inventory?

A immediate finance
B short-term finance
C medium-term finance
D long-term finance
LO 3h
13 Which of the following is the source of finance which a company can draw on most easily in practice?
A cash generated from retained earnings
B new share issues
C rights issues
D bank borrowings
LO 3h, 3i
14 All of the following statements about leases are correct, except one. Which is the exception?
A The lease period can be less than the useful life of the asset.
B Lessees may be liable to pay interest on the lease.
C The lessee owns the asset outright from the time of purchase.
D Lessors may be responsible for repairs and maintenance on the asset being leased.
LO 3h, 3i
15 Which of the following statements about venture capital is most valid?

A Venture capital is a low risk and low return form of finance.
B Companies listed on major stock exchanges normally use venture capital to raise new finance.
C Venture capital can be appropriate for a management buyout.

D Venture capital normally takes the form of debt finance.
LO 3h, 3i
16 Which of the following is a source of long-term finance?

A Trade credit from suppliers
B Bank overdraft
C Factoring of trade debts
D Mortgage on property
LO 3h, 3i
17 What is the following statement a definition of?

‘A document issued by a bank on behalf of a customer, authorising a person to draw money to a
specified amount from its branches or correspondents, usually in another country, when the
conditions set out in the document have been met.’
A Bill of exchange
B Export guarantee
C Payment gateway
D Letter of credit
LO 3j
18 Which of the following services is least likely to be offered by a factoring company to its client?
A Provision of finance by advancing 80% of invoice value immediately, and the remainder on
settlement of the debt by the client’s customer
B Taking over responsibility for administration of the client’s sales ledger
C Deciding what credit limits the client should give customers
D Taking over responsibility for irrecoverable debts
LO 3h, 3i
19 Ken plc’s new building programme is likely to start within the next 90 days, but the precise start date
and timing of the cash flows are still uncertain. The company has £150,000 available in cash in
anticipation of the investment. Which of the following is the least appropriate use of the funds in the
interim period?
A Investment in equities
B Treasury bills
C Bank deposits
D Local authority deposits
LO 3h, 3i
20 Which of the following contractual relationships between a bank and a customer concerns the bank
accepting customer property for storage in its safe deposit?
A Receivables/payables
B Principal/agent
C Bailor/bailee
D Mortgagor/mortgagee
LO 3g

21 Which of the following sources of finance involves the business requesting a specific sum of money
from individuals, usually via the internet?
A Alternative investment market
B Business angels
C Venture capital
D Crowdfunding
LO 3h
22 Financial instruments with maturities of less than one year are traded in the:
A equity market
B capital market
C money market
D fixed-income market
LO 3h, 3i
23 A consultant has stated that a 30-year Treasury bond issued in the last year can be sold in four
different categories of market.
(1) The money market
(2) The capital market
(3) The primary market
(4) The secondary market
Requirement
Which of these markets are available for the sale?
A 1 and 3 only
B 1 and 4 only
C 2 and 3 only
D 2 and 4 only
LO 3h, 3i
24 Sunita Ltd has the choice of two investments carrying similar levels of risk. One is short-term and the
other is a long-term bond. Sunita Ltd should expect the interest on the longer-term bond to be:
A normally higher
B lower
C normally the same
D impossible to tell
LO 3f, 3h
25 Which part of the Bank of England is responsible for the stability and resilience of the UK’s financial
system as a whole?
A Financial Conduct Authority
B Monetary Policy Committee
C Financial Policy Committee
D Prudential Regulation Authority
LO 3g

26 Adventurous plc has recently sent goods to its first non-UK customer but has taken out insurance
because it is worried about the possibility of payment default. What type of risk does such a non-
payment represent?
A Physical risk
B Credit risk
C Trade risk
D Liquidity risk
LO 3j
27 Cinq plc has been offered support by a commercial organisation in respect of its receivables ledger.
Under the offer, Cinq plc will pay the commercial organisation a premium and in return the
commercial organisation will pay Cinq plc the value of customer debt if it becomes irrecoverable.
Requirement
What service is the commercial organisation offering Cinq plc?
A Non-recourse debt factoring
B Finance against sales
C Receivables insurance
D Receivables management
LO 3h
28 Lion plc is seeking to raise debt finance. It is planning to offer a series of £10,000 loan stock to
investors. The loan stock will each be redeemed at £9,500 and attracts 5% interest per annum.
Requirement
Which of the following statements concerning the loan stock is correct?
A It is a floating rate note which is redeemed at a £500 premium.
B It is a bond which is redeemed at a £500 premium.
C It is a floating rate note which is redeemed at a £500 discount.
D It is a bond which is redeemed at a £500 discount.
LO 3h
29 Which two of the following statements about the Green Bond Principles are true?
A It should be stated in the legal documentation that the proceeds of issuing the bond will be
used for projects that should provide clear environmental benefits.
B The finance should only be used for climate change mitigation or climate change adaptation.
C There must be an external review of the bond to ensure that it complies with the Green Bond
Principles.
D The proceeds from the issue of the bond should be kept in a separate account or tracked by the
issuer.
E The bond should be traded on the green exchange in Luxembourg.
LO 3h, 3i
30 The following extract has been taken from the statement of financial position of a manufacturing
company:

£
Inventory 20,000
Trade receivables 21,000
Cash and cash equivalents 5,000
Total current assets 46,000
Total assets 46,000
Current liabilities
Trade payables 15,000
Tax payable 4,000
Total current liabilities 19,000
Requirement
What best describes the approach taken to managing the financing of its current assets?
A Aggressive
B Neutral
C Defensive
D Efficient
LO 3h

Chapter 8: The accountancy profession
1 The objective of the accountancy profession can best be described as:
A providing financial information about an entity to external users, which is useful to them in
making economic decisions and for assessing the stewardship of the entity’s management
B measurement, disclosure or provision of assurance about financial information that helps
managers, investors, tax authorities and other decision makers make resource allocation
decisions
C identifying, measuring, accumulating, analysing, preparing, interpreting and communicating
information used by management to plan, evaluate and control an entity and to assure
appropriate use of and accountability for its resources
D managing all the processes associated with the raising and use of financial resources in a
business
LO 4a
2 Which of the following element is least likely to characterise a profession?

A Restrictions on membership to ensure the skill and competence of members
B A high degree of autonomy and independence
C Core values are established which members are expected to maintain
D The profession’s rules and regulations are established solely by government legislation
LO 4a
3 Professions often set out codes of ethics and conduct. These are an example of which common
attribute of professions?
A Professional values
B Self-regulation
C Co-regulation
D Formal regulatory process
LO 4a
4 Legislation requires certain activities to be carried out by members of bodies that are ‘recognised
professional regulators’.
Requirement
Which three of the following activities are included in such requirements?
A Insolvency
B Management consultancy
C Investment business
D Taxation
E Payroll
F Statutory audit
LO 4b
5 Paula recently established her own accountancy practice from small retail premises in Hightown. She
operates as a sole trader. Paula passed the last of her ICAEW examinations last month although she is
not yet permitted to offer statutory audit, insolvency, investment business or probate services. She
has already been successful in attracting several clients to her new practice. She has not yet become
ICAEW 2023 8: The accountancy profession 51

a member of ICAEW but she is registered with an approved body for supervision under the money
laundering regulations.
Which of the following statements is correct?
Requirement
A Paula cannot call herself an accountant.
B ICAEW can legally stop Paula from practising as a sole trader.
C Paula can offer any accountancy services she considers appropriate.
D Paula can offer any accountancy services except those in the reserved areas.
LO 4b
6 In relation to which of the following does the Financial Reporting Council have statutory powers?
A Regulation of the auditing profession
B Professional discipline of accountants
C Registration of students into the accountancy profession
D Continuing professional education and development
LO 4b
7 Upholding professional ethics is a key part of being a professional accountant. Which of the
following duties of an accountant only applies to those employed in the public sector?
A Protect the public interest
B Apply laws and regulations
C Protect the profession’s reputation and standing
D Protect taxpayers’ money
LO 4b
8 Chris runs his own printing company. He is experiencing financial difficulties and some of his credit
suppliers are threatening to take him to court. He needs some advice and has seen an advertisement
in his local paper for an accountancy service that is much cheaper than he expected. He calls the
accountant to check that the price is not a misprint and is surprised at some of the answers he is
given to his questions.
The accountant made the following statements to Chris.
Statement (1): Anyone is free to advertise as an ‘accountant’ and offer the full range of accountancy
services, with no exceptions.
Statement (2): ICAEW members are open to competition from anyone, whether professionally
qualified or not, who chooses to enter the market.
Statement (3): There is no legal requirement for an accountant to be a paid-up member of one of the
CCAB bodies.
Which of the following statements are true?
Requirement
A (1) and (2) only
B (2) and (3) only
C (1) and (3) only
D (1), (2) and (3)
LO 4b
9 The following statements have been made about the purpose of regulating professions.

Statement (1): Regulation of professions should protect the public from being misled or from
suffering from abuse of power through knowledge or monopoly.
Statement (2): Regulation of professions should protect the profession’s vested interests from
competition in order to maintain public trust.
Requirement
LO 4a, 4b
10 The financial statements of Anson plc, a listed company, depart from relevant accounting standards
and the provisions of the Companies Act 2006. The company is likely to be referred to which of the
following regulatory bodies?
A The Prudential Regulation Authority
B The Financial Conduct Authority
C ICAEW
D The Financial Reporting Council
LO 4b
11 The following statements concern the role of the ICAEW.

Statement (1): The CCAB has delegated the responsibility for determining the eligibility to practice of
all accountants to the ICAEW.
Statement (2): The ICAEW is only responsible for discipline in respect of ICAEW members.
Requirement
LO 4a, 4b
12 Who is responsible for supervising member firms of the ICAEW in respect of anti-money laundering?
A The Financial Conduct Authority (FCA)
B The ICAEW
C The Office of Professional Body AML Supervision (OPBAS)
D HMRC
LO 4b
13 The following are potential actions that could be taken to help reduce climate change:
(1) Persuading organisations to take steps to tackle climate change
(2) Helping organisations to manage the significant risks that climate change brings
(3) Setting targets relating to climate change, comparing actual performance against targets and
interpreting the results
ICAEW 2023 8: The accountancy profession 53

Requirement
Which of the following actions might accountants be expected to play?
A 1 and 2 only
B 2 and 3 only
C 1 and 3 only
D 1, 2 and 3
LO 4h
14 Solutions to sustainability can be divided into solutions based on regulation and solutions based on
market forces.
Requirement
Which one of the following is an example of a solution based on market forces?
A Taxes and tariffs such as pollution taxes
B Green finance strategies such as green bonds
C Grants to help organisations reduce their carbon emissions
D Audits of sustainability reports to meet mandatory reporting requirements
LO 4h

Chapter 9: Governance and ethics
1 In a market-based financial system, the financial system will be characterised by:
A comparatively more government regulation than a bank-based system
B comparatively less close relationships between banks and businesses than in a bank-based
system
C comparatively more risk averse households than in a bank-based system
D households with less access to investment in physical assets than in a bank-based system
LO 4f
2 In the country of Zanadu, the population has a risk seeking attitude towards financial matters.
Zanadu’s financial system is likely to be:
A a market-based system
B a stakeholder system
C a bank-based system
D a public policy system
LO 4f
3 Under a unitary board structure, a company’s board of directors is responsible for both management
of the business and reporting to:
A the non-executive directors
B the supervisory board
C the company’s employees
D the company’s shareholders
LO 4e
4 The agency problem is behind the need for sound corporate governance. The ‘principal’ in this
agency relationship is:
A customers as a body
B shareholders as a body
C managers as a body
D directors as a body
LO 4c
5 A consultant has made the following statements, which he maintains are drawn from the definition of
corporate governance in the OECD’s Principles of Corporate Governance.
Statement (1): Corporate governance comprises the practices and procedures for ensuring that a
company is run in such a way that it achieves its objectives.
Statement (2): Corporate governance is a set of relationships between a company’s management, its
board, its shareholders and other stakeholders.
Requirement
Which two of the following are principles in the Wates Principles?
A Statement (1) matches; Statement (2) does not match
B Statement (1) does not match; Statement (2) does not match
C Statement (1) matches; Statement (2) matches
ICAEW 2023 9: Governance and ethics 55

D Statement (1) does not match; Statement (2) matches
LO 4c
6 A financial system comprises which three of the following?

A Governance structures
B Intermediaries
C Securities
D Markets
E Regulators
LO 4c
7 Woolmer plc adopts corporate responsibility as a key element in its strategies. This will mean that the
company seeks to:
A meet the minimum obligations it owes to stakeholders
B exceed the minimum obligations it owes to stakeholders
C meet the minimum obligations it owes to shareholders
D exceed the minimum obligations it owes to shareholders
LO 4h
8 In seeking to address the problem of the separation of ownership and control, corporate governance
attempts to align the interests of which two of the following stakeholders?
A Investors
B Employees
C Regulators
D Managers
E Auditors
LO 4d
9 The stewardship approach to corporate governance requires directors of limited companies:

A to act at all times in the best interests of the company
B to allow shareholders to see detailed accounting records on request
C to hold regular monthly meetings to answer shareholders’ questions
D to consult the shareholders over difficult management decisions
LO 4g
10 The board of directors of Lake plc is concerned that the current chief executive’s actions are
undermining the ethical culture at the company. She fails to listen to the concerns of managers about
unfair treatment of suppliers, and she has failed to learn from a recent scandal in which the company
was fined for data protection breaches.
Requirement
To improve the ethical culture at Lake plc, which of the following is the most important action for the
board to take?
A Draft a corporate code of ethics for Lake plc’s employees
B Rewrite Lake plc’s policies regarding suppliers and customers
C Demonstrate leadership by encouraging Lake plc’s chief executive to be more open

D Brief shareholders more fully about Lake plc’s incentive scheme for managers
LO 4i
11 Protea plc manufactures sporting equipment for leisure centres. The Chair is Jonathan Potter, and the
Chief Executive is his daughter Elise. All of the directors receive bonuses based on annual profits.
The company’s sales are made by individual salespeople who routinely bypass the company’s strict
credit check procedures. A number of irrecoverable debts have arisen in the current year that would
have affected profitability and the share price, if the Finance Director had not manipulated the
accounts.
Requirement
From this information, what are the likely corporate governance issues at Protea plc?
A Domination by a small group
B Emphasis on short-term profitability
C Lack of supervision of employees
D All of the above
LO 4c, 4i
12 Which of the following is a list of the five key elements of good corporate governance?
A Board of directors, senior management, employees, external auditors, internal auditors
B Senior management, shareholders, employees, external auditors, lenders
C Board of directors, senior management, shareholders, external auditors, internal auditors
D Senior management, stakeholders, internal auditors, employees, government regulators
LO 4d
13 Ultra Zeta AG is a company based in Germany. The business has a dual board structure for its Board
of Directors.
Requirement
Which of the following types of board forms part of the company’s board structure?
A Unitary board
B Supervisory board
C Non-executive board
D Executive board
LO 4f, 4g
14 The national culture in the country of Erewhon is characterised by a high ‘power distance’ score, and
an acceptance that power is distributed unequally, and concentrated in the hands of a small number
of key individuals.
By contrast, the country of Wenland has a lower ‘power distance’ score, and people strive to get
power distributed more evenly.
The following statements have been made:
(1) The corporate governance code in Erewhon prohibits the role of CEO and chair being
combined, but the code in Wenland permits this.
(2) The corporate governance code in Wenland requires a higher proportion of independent NEDs
on the board than the code in Erewhon does.

Requirement
Based on the ‘power distance’ scores of the two countries, identify if each of the above statements is
likely to be true or false.
A Statement 1 = True; Statement 2 = True
B Statement 1 = True; Statement 2 = False
C Statement 1 = False; Statement 2 = True
D Statement 1 = False; Statement 2 = False
LO 4f
15 Which of the following statements about whistle-blowing is/are true?

(1) Whistle-blowing involves the disclosure by an employee of illegal or unethical behaviour in the
workplace.
(2) Employees should always report concerns about unethical behaviour to their line manager in the
first instance.
A Neither of them
B 1 only
C 2 only
D Both of them
LO 4i
16 Which three of the following are core aspects of South Africa’s King Report?
A Good corporate citizenship
B Equality
C Leadership
D Sustainability
E Responsibility
LO 4c
17 Goldenwood plc is a multinational company that makes sweets and sugary drinks targeted at
children between the ages of 4 and 8 years old. The company regularly advertises its products
during prime time children’s television programmes and on popular YouTube channels with high
numbers of child subscribers. In recent weeks, the company has received adverse publicity because
of its targeting of young children which has been branded as ‘unethical’.
Requirement
Which business function is impacted by this ethical issue?
A Operations
B Procurement
C Human Resources
D Marketing
LO 1c, 4i
18 Which two of the following are principles in the Wates Principles?

A Board composition
B Board committees
C Director responsibilities

D Protection of minority shareholders
E Reporting and transparency
LO 4f
19 Which two statements about the Wates Principles are true?

A They are mandatory for all private companies with a turnover of £200 million or more.
B They use a “apply or explain” approach.
C The code requires the board to establish oversight for the identification and mitigation of risks.
D They consist of five principles.
E They can be used by companies with a premium listing instead of the UK corporate governance
code.
LO 4f
20 The following are potential aims for sustainability:

(1) End poverty
(2) Fight inequality
(3) Stop climate change
Requirement
Which of the aims above are overall aims of the UN Global Goals for sustainable development?
A 1 and 2 only
B 2 and 3 only
C 1 and 3 only
D 1, 2 and 3
LO 4h

Chapter 10: Corporate governance
1 Jacob has just been appointed as a Non-executive Director of Pulsemania plc, a premium listed
company. A consultant told him that under the UK Corporate Governance Code he has the following
responsibilities as a non-executive director.
Responsibility 1: Appointing and removing executive directors
Responsibility 2: Reporting on the performance of the company
Responsibility 3: Holding executive directors to account for their performance
Responsibility 4: Developing and implementing internal controls
Which of the points listed by the consultant correctly identify Jacob’s responsibilities as a non-
executive director?
Requirement
A 1 and 2
B 2 and 3
C 1 and 3
D 2 and 4
LO 4e, 4g
2 The chair of Raygold plc, a premium listed company, is considering which of the company’s non-
executive directors can be classified as independent. Even if a non-executive director has worked as
an employee for the company in the past, they may still be classified as independent if the period of
employment finished at least:
A two years ago
B three years ago
C four years ago
D five years ago
LO 4e, 4g
3 Jumpers plc has just obtained a premium listing on the London Stock Exchange. A consultant has
made the following two statements about the company and the UK Corporate Governance Code.
Statement (1): As Jumpers plc has a premium listing, the Listing Rules mean that the Code applies so
the company must never depart from any of its requirements.
Statement (2): If Jumpers plc had joined the FTSE 100, compliance with the Code would be a
statutory requirement.
Requirement
LO 4e
4 According to the UK Corporate Governance Code, a company should seek to improve corporate
governance by ensuring that:
A the chair and chief executive are the same individual in order to avoid confusion over who has
responsibility for running the company
ICAEW 2023 10: Corporate governance 61

B the chair and chief executive are different individuals in order to prevent one person having too
much power within the company
C the chair and chief executive are different individuals in case one dies or becomes incapacitated
by ill health
D the company chairman does not take up outside directorships
LO 4e
5 The UK Corporate Governance Code contains principles for the level and make-up of directors’
remuneration. A consultant has listed the following as being among these principles.
Principle 1: Only basic salary should be pensionable
Principle 2: Directors should not be rewarded for poor performance
Principle 3: Obtain the auditor’s approval of the remuneration set
Which of the points listed by the consultant correctly reflect the principles and provisions of the UK
Corporate Governance Code?
Requirement
A 1 and 2 only
B 2 and 3 only
C 1 and 3 only
D 1, 2 and 3
LO 4e
6 The board of directors of Kempton plc, a premium listed company, is considering the membership of
its remuneration committee. In this regard, which statement is true?
A The chair of the board must be one of the members of the remuneration committee.
B The chair of the board may be both a member and chair of the remuneration committee.
C The chair of the board may be a member but cannot chair the remuneration committee.
D The chair of the board cannot be a member of the remuneration committee.
LO 4e
7 Which statement about the requirements of the UK Corporate Governance Code is true?
A Non-executive directors of premium listed companies, once appointed, only need to be
submitted for re-election every three years.
B In annual and half-yearly financial statements, the board should state whether it considers it is
appropriate to adopt the going concern basis of accounting.
C Directors’ notice or service contracts should not exceed three years.
D The annual report should state the company’s business model but its strategy for delivering the
objectives of the company may remain confidential.
LO 4e
8 Flange plc is a small premium listed company. As a minimum, how many directors are required for its
audit committee?
A One
B Two
C Three
D Four
LO 4e

9 According to the UK Corporate Governance Code, which of the following is responsible for making
recommendations in regard to the appointment, reappointment and removal of the external
auditors?
A The nomination committee
B The remuneration committee
C The audit committee
D The non-executive directors
LO 4e
10 Merton plc is a small premium listed company. As a consequence, the company:

A must comply with all the requirements of the UK Corporate Governance Code
B is governed by other corporate governance regulations than the UK Corporate Governance
Code
C can be flexible in how it applies the UK Corporate Governance Code
D is not affected by the requirements of the UK Corporate Governance Code
LO 4e
11 In relation to the fundamental accounting principles directors are expected to report in the
company’s annual financial statements on:
A the going concern status of the company
B the materiality of specific company transactions
C the accruals approach to accounting in the company
D the consistency of treatment of particular items or transactions by the company
LO 4e, 4g
12 Hilditch plc is currently creating a list of potential members of its audit committee. Under the UK
Corporate Governance Code, the list must comprise only:
A independent non-executive directors who all have recent and relevant financial experience
B independent non-executive directors with at least one who has recent and relevant financial
experience
C non-executive directors with recent and relevant financial experience
D executive directors with at least one who has recent and relevant financial experience
LO 4e, 4g
13 Under the requirements of the UK Corporate Governance Code, who is responsible for monitoring a
company’s risk management and internal control systems?
A The executive directors only
B The non-executive directors only
C The entire board of directors
D The audit committee
LO 5c, 5e, 5f
14 Megan is a full-time Executive Director of Rifkind plc, a premium listed company. She does not
currently hold any non-executive directorships in any other companies. The executive directors of
Carnforth plc, another premium listed company, have asked Megan to become a non-executive

director of Carnforth plc in addition to her existing role with Rifkind plc. The guidance provided by
the UK Corporate Governance Code means that:
A Megan will be allowed to accept the offer
B Megan will not be allowed to accept the offer
C Megan will only be allowed to accept the offer if she buys shares in both companies
D Megan will only be allowed to accept the offer if the non-executive directors of both companies
agree
LO 4e
15 Cheshunt plc is considering the re-appointment of its external (statutory) auditors. Which of the
following is responsible for appointing the external auditors?
A The nomination committee
C The board of directors
D The audit committee
LO 4e
16 Sheila is a non-executive director Forton plc, a premium listed company. According to the UK
Corporate Governance Code, which of the following statements about her remuneration is correct?
A Her remuneration should reflect her expertise
B Sheila should decide her remuneration in conjunction with the remuneration committee
C Her remuneration should reflect her time commitment and responsibilities
D Her remuneration is negotiated with the remuneration committee and may include performance
related elements and share options
LO 4e
17 With regard to the board of directors of a premium listed company (excluding the chairman), the UK
Corporate Governance Code requires that the proportion who are independent non-executive
directors should be:
A between 10% and 24%
B between 25% and 39%
C between 40% and 49%
D 50% or over
LO 4e
18 Fox plc, a premium listed company, has engaged its external (statutory) auditors to provide the
company with consultancy services. Which entity would usually be expected to examine the
implications of this engagement?
A The board of directors
C The audit committee
D The non-executive directors
LO 4g
19 The appointment of suitably qualified, independent external (statutory) auditors is the decision of a
listed company’s:

A shareholders
B audit committee
C board of directors
D finance director
LO 4g
20 Sumatra plc operates its own internal audit function. It chooses not to make use of an external
supplier for these services. It is therefore vital that the company has arrangements to ensure that
there is no compromise of the:
A independence of the internal auditors
B integrity of information security systems
C stewardship of directors
D rigour of financial reporting processes
LO 4g
21 Vidal is the Chief Executive of Plainton plc, a premium listed company. His fellow directors want him
to replace the company’s existing Chair, who is due to retire shortly. They also want him to stay as
Chief Executive for the first year of his chairship, while a new Chief Executive is sought.
The guidance in the UK Corporate Governance Code recommends that:
Requirement
A Vidal should assume both roles concurrently subject to consultation with major shareholders
B Vidal should not assume both roles concurrently nor go on to be the company’s Chair
C Vidal can assume both roles concurrently subject to the board setting out their reasons at the
time of appointment and in the next annual report
D Vidal can only assume both roles concurrently if the non-executive directors of the company
agree
LO 4e, 4g
22 Shona has just been appointed as a Director of Impala plc. Following her appointment, she will be
subject to election by shareholders:
A at the first AGM after her appointment and then at intervals of no more than three years after that
B at the first AGM after her appointment and then at intervals of no more than two years after that
C only at the first AGM after her appointment
D at every AGM
LO 4e
23 Zyntec plc is a listed company that has recently had an external audit. As well as whether the financial
statements give a ‘true and fair view’ of the company’s performance and financial position, which of
the following will the external auditors have reported on?
A The experience and ability of the chief finance officer
B Whether the staff in the finance function are compliant with CPD requirements
C The company’s compliance with the UK Corporate Governance Code
D The standard of the work performed by the internal audit function
LO 4g

24 The ability to meet the needs of the present without compromising the ability of future generations
to meet their own needs is best described as:
A corporate responsibility
B sustainability
C business ethics
D natural capital
LO 4h
25 Sustainability is about the long-term use of both tangible and intangible resources. Green plc
manufactures customised furniture for customers from recycled materials.
Requirement
Which two of the following represent intangible resources of Green plc?
A The design expertise of its employees
B Stationery supplies to the factory office
C Recycled timber received from suppliers
D Its reputation in the community
E Its head office premises
LO 4h

Chapter 11: The economic environment of
business and finance
1 Anu manufactures pieces of classic furniture. Anu predicts that ‘if people’s incomes rise next year,
then the demand for my furniture will increase’.
Requirement
The accuracy of Anu’s prediction depends on whether the pieces of furniture he produces:
A are normal goods
B have few substitutes
C have many complements
D have few complements
LO 5a
2 Potatoes are a Giffen good. An increase in the price of potatoes will cause:
A an increase in demand for potatoes
B a decrease in demand for substitutes for potatoes
C a decrease in demand for potatoes
D an increase in demand for substitutes for potatoes
LO 5a
3 Y is a complement of X in consumption. An increase in the price of Y will:

A increase the demand for Y and decrease the demand for X
B decrease the demand for Y and increase the demand for Y
C increase the demand for both Y and X
D decrease the demand for both Y and X
LO 6a
4 A brand of cheese is an inferior good. A consultant has made two statements about the cheese.
Statement (1): Demand for the cheese will rise as incomes rise.
Statement (2): Demand for the cheese only exists because of the effects of advertising.
Requirement
LO 5a
5 The market for a product is a natural monopoly. Production of the product must be associated with:
A high marginal costs
B low marginal costs
C economies of scope acting as a barrier to entry
ICAEW 2023 11: The economic environment of business and finance 67

D low fixed costs
LO 5b
6 The cross elasticity of demand between the Terra product and the Nova product is zero. The two
products are:
A complements
B substitutes
C veblen goods
D unrelated
LO 5a
7 The UK government has recently imposed a maximum price on Pratex which is set at a lower level
than its equilibrium price. In future, therefore, it can be expected that there will be:
A excess supply of the product
B excess demand for the product
C no effect on supply but an increase in demand
D no effect on demand but a decrease in supply
LO 5a, 5b
8 An analyst with Lanes plc has drawn a supply curve for one of the company’s major products, the
Ledo. The curve is a vertical straight line. This indicates that supply of the Ledo is:
A perfectly inelastic
B of unitary elasticity
C perfectly elastic
D one
LO 5a
9 There has been a significant rise in factor costs for the Tempo product during recent months. It can
be expected that there will be:
A a contraction in demand and supply
B an expansion in demand and supply
C a contraction in demand and an expansion in supply
D an expansion in demand and a contraction in supply
LO 5a
10 In the market for the Optica product competitors do not compete through price. Instead, they spend
substantial sums of money on raising consumer awareness through advertising. There is some
differentiation between products, often achieved through branding. There are many buyers and
sellers in the market for the product.
Requirement
The market for the Optica product is characterised as:
A monopolistic competition
B oligopoly
C perfect competition

D monopoly
LO 5b
11 Which three of the following are associated with conditions of perfect competition?
A Suppliers are price-makers
B Suppliers earn ‘normal’ profits
C Consumers lack influence over market price
D Differentiated products
E A single selling price
LO 5b
12 Gromet plc has been able to achieve significant external economies of scale. This indicates that the
market for the company’s only product has been:
A static, so forcing the company to achieve economies of scale in production
B growing, so enabling the economies of scale to be achieved
C contracting, so enabling the company to cut costs in distribution
D volatile, meaning that internal economies of scale were unattainable
LO 5b
13 If the price of a particular product is £9.00 per unit, on average 150 units of the product are sold per
month. At a price of £10.00 per unit, on average 110 units per month are sold. The price elasticity of
demand for the product is:
A –0.42
B –2.40
C –0.27
D –0.11
LO 5a
14 The minimum price for a good is set by the government above the current free market equilibrium
price.
Requirement
What will be the effect (if any) on demand for and supply of the good in the short term?
A Demand for the good will fall; supply of the good will rise
B Demand for the good will rise; supply of the good will fall
C Both demand for and supply of the good will rise
D There will be no effect on either demand for or supply of the good
LO 5a, 5b
15 Bench Ltd produces chairs. An economist predicts that, if average incomes rise next year, demand for
the chairs will increase in direct proportion to the rise in incomes (assuming all other factors remain
unchanged).
Requirement
The accuracy of the economist’s prediction depends on whether the chairs:
A are normal goods
B have many complementary goods

C have few complementary goods
D have few substitutes
LO 5a
16 The basic economic problem facing all national economies is:

A maximising economic growth
B unemployment
C inflation
D allocating scarce resources
LO 5c
17 Which of the following is regarded by economists as a factor of production?

A Demand
B Enterprise
C Supply
D Innovation
LO 5c
18 Which of the following is a source of economies of scale?

A The introduction of a new product
B Bulk buying
C The use of skills in production
D Cost savings resulting from new production techniques
LO 5c
19 The marginal propensity to consume measures:

A the relationship between changes in consumption and changes in consumer utility
B the proportion of household incomes spent on consumer goods
C the proportion of total national income spent on consumer goods
D the relationship between changes in income and changes in consumption
LO 5c
20 Which of the following is the correct sequence in a business cycle?

A Boom, Recession, Depression, Recovery
B Recession, Recovery, Boom, Depression
C Boom, Recovery, Recession, Depression
D Recovery, Recession, Depression, Boom
LO 5c
21 The recession phase of the business cycle will normally be accompanied by all of the following
except:
A a rise in the rate of inflation

B a fall in the level of national output

C an improvement in the trade balance
D a rise in the level of unemployment
LO 5c
22 The government may seek to reduce the rate of demand-pull inflation by any of the following means
except:
A reducing interest rates
B increasing VAT
C applying more stringent controls over bank lending
D reducing public expenditure
LO 5c
23 Which of the following would lead to demand pull inflation?

A Rising import prices
B Increase in wages
C Increases in indirect taxation
D High consumer expenditure such that aggregate demand exceeds aggregate supply
LO 5c
24 Which of the following are effects of reduced interest rates?

(1) Consumer spending will increase
(2) Business investment will be encouraged
(3) Saving will increase
A 1 only
B 1 and 2 only
C 2 and 3 only
D 1, 2 and 3
LO 5c
25 Which of the following is a fiscal policy measure by government?

A To raise short-term interest rates in the money markets
B To support the exchange rate for the country’s currency
C To control growth in the money supply
D To alter rates of taxation
LO 5c
26 ‘Supply side’ economics concerns:

A the behaviour of the microeconomic supply curve
B the supply of factors of production in response to changing levels of factor rewards
C the behaviour of the aggregate supply curve in connection with the levels of prices, incomes and
employment
D the effect that an increase in the supply of money has on inflation
LO 5c

27 If the government wishes to increase consumer spending, it should increase the rate of:
A income tax
B corporation tax
C import duties
D social security payments
LO 5c
28 Changes in the supply of a product which arise due to reduced costs of its manufacture will be
represented on the product’s supply curve by:
A a shift to the right in the supply curve
B a shift to the left in the supply curve
C movements along the supply curve
D none of these
LO 5a
29 Pinewood Ltd produces two complementary products, the Buggle and the Chine.
Requirement
Which of the following describes the cross elasticity of demand between the two products?
A Negative
B Indeterminate
C Zero
D Positive
LO 5a
30 The government of Zeeland is concerned about demand pull inflation.

Requirement
Which of the following statements describes the impact and cause of demand pull inflation on
Zeeland’s economy?
A Price rises because of persistent excess of supply over demand in the economy as a whole.
B Price rises because of persistent excess of demand over supply in the economy as a whole.
C Price falls because of persistent excess of supply over demand in the economy as a whole.
D Price falls because of persistent excess of demand over supply in the economy as a whole.
LO 5c
31 What does quantitative easing involve?

A increasing quotas for the imports of certain products
B increasing government borrowing and increasing government spending
C buying government bonds from the private sector to increase liquidity
D issuing more bank notes and coins into the economy to increase the money supply
LO 5c
32 Under what circumstances is quantitative easing most likely to be used?

A interest rates are high and liquidity in the system is low
B interest rates are high and liquidity in the system is high

C interest rates are low and liquidity in the system is low
D interest rates are low and liquidity in the system is high
LO 5c
33 Which statement best reflects recent government policy in the UK over the past decade?
A low inflation combined with an expansionary fiscal policy
B low inflation combined with a neutral fiscal policy
C high inflation combined with an expansionary fiscal policy
D high inflation combined with a neutral fiscal policy
LO 5c

Chapter 12: External regulation of business
1 The government has intervened to impose a limit on businesses’ carbon emissions. This is an
example of regulation designed to address market failure caused by:
A asymmetric information
B equity
C market imperfection
D externalities
LO 5b, 5d
2 The government has passed regulations to change how car hire companies check whether hirers are
licensed to drive in the UK. Speedy Hire plc is a major player in the UK car hire business. In
anticipation of the new regulations the company implemented procedures which exceeded the
requirements of the regulations. Speedy Hire plc’s response to the new regulations was:
A innovation
B entrenchment
C mere compliance
D full compliance
LO 5d
3 Ferndale plc is a multinational company. It has been charged with collusive behaviour in its UK
operations. If found guilty, the company could, amongst other sanctions, receive a fine of:
A up to 10% of annual worldwide revenues
B up to 10% of annual UK revenues
C up to 20% of annual worldwide revenues
D up to 20% of annual UK revenues
LO 5d
4 Government intervention in a market economy can lead to an increase in economic welfare if:
A it sets a good’s maximum price above its equilibrium price
B the market mechanism has failed to allow for externalities
C it sets a good’s minimum price above its equilibrium price
D the demand for inferior goods rises as incomes increase
LO 5b, 5d
5 The Fenno product is manufactured in the UK but is also imported into the UK from France. The UK
government has recently decided to apply an import quota on imports of the product from France.
The quota is below the current level of imports. This action will have the effect of:
A only French suppliers suffering a lower price
B both UK and French suppliers suffering a lower price
C only UK suppliers enjoying a higher price
D both UK and French suppliers enjoying a higher price
LO 5d
ICAEW 2023 12: External regulation of business 75

6 Anti-monopoly legislation is an example of government intervention to address market failure
caused by:
A market imperfection
B externality
C asymmetric information
D inequity
LO 5b, 5d
7 Competition legislation prohibits conduct that damages competition, including abuse by a business
of its dominant position. Which three of the following are types of conduct that will be considered as
an abuse if the business is in a dominant position?
A Imposing transfer pricing
B Limiting production markets or technical developments to the prejudice of consumers
C Applying different trading conditions to equivalent transactions, thereby placing certain parties
at a competitive disadvantage
D Attaching unrelated supplementary conditions to contracts
E Providing public goods on behalf of the government
LO 5b, 5d
8 In which of the following circumstances would a cartel be most likely to operate?

A A market with a undifferentiated product and a large number of producers
B A market with differentiated products and few producers
C A market with a large number of producers and where demand for the product is inelastic
D A market with few producers and an undifferentiated product
LO 5b, 5d
9 The benefit of anti-monopoly enforcement is that:

A it encourages firms to engage in research, which leads to new products being produced
B it deters firms from engaging in collusion, price-fixing and deceptive advertising
C it forces firms to produce efficiently
D the revenue from fines can be used for socially worthwhile causes
LO 5b, 5d
10 Anti-monopoly laws are based on the proposition that the best way to achieve efficiency and avoid
excessive prices is through:
A regulation
B increased competition
C public ownership
D oligopoly
LO 5b, 5d
11 The following statements have been made about anti-monopoly legislation and market regulation.
Statement (1): Anti-monopoly legislation compensates for lack of competition, and market regulation
promotes competition.
Statement (2): Anti-monopoly legislation promotes competition and market regulation compensates
for lack of competition.

Statement (3) Anti-monopoly legislation and market regulation promote competition.
Are these statements true or false?
Option Statement (1) Statement (2) Statement (3)
1 True False True
2 True False False
3 False True True
4 False True False
Requirement
A Option 1
B Option 2
C Option 3
D Option 4
LO 5b, 5d
12 Measures taken by government to redistribute wealth are a form of intervention aimed at addressing
problems concerned with:
A asymmetric information
B market imperfection
C lack of equity
D externalities
LO 5b, 5d
13 Two large listed companies recently colluded with each other to fix the price of a product they both
sell in the UK market. Collusion of this type is an example of market failure due to:
A inequality of resources
B external costs
C market power
D resource immobility
LO 5b, 5d
14 Jerome is a director of Newport plc, a listed company. During the year he made a loan to his sister
Jane, out of company funds that has not yet been repaid. When asked by the external auditors about
this, Jerome said that it is unlikely that Jane can repay the money because she has been experiencing
financial difficulties for several years.
Statement (1): Jerome has committed the offence of market manipulation under the Financial
Services Act 2012.
Statement (2): Jerome could be disqualified as a director under the Company Directors
Disqualification Act 1986.
Requirement
' Statement (1) false; Statement (2) true /2G
ICAEW 2023 12: External regulation of business 77

15 The government of Myland was unhappy with the prices charged to customers for mobile data by
mobile phone operators and recently conducted a review into the industry. The review
recommended that prices should be regulated and capped at a maximum daily price that is below
the market price.
The impact of this pricing rule on market failure is best described as:
Requirement
A failing to address market failure because there is no impact on the price charged
B influencing the demand for and supply of mobile data
C persuading mobile phone operators to reduce their prices
D taking control of the mobile phone industry
LO 5d
16 The government of Dryland wishes to encourage more people to eat fruit and vegetables. Currently,
the price of fruit and vegetables are high in comparison to people’s incomes and so the government
is seeking ways of increasing supply from producers to lower the price people pay.
Which of the following methods should the government use to increase supply of fruit and
vegetables?
Requirement
A Increasing indirect taxation on fruit and vegetables
B Paying subsidies to fruit and vegetable producers
C Persuading producers to lower their prices
D Set a maximum price for fruit and vegetables
LO 5a, 5d

Chapter 13: Data analysis
1 A company correctly records and analyses all its sales transactions. At the end of each month, a
report is produced for the sales director listing details of every sales transaction: customer, products,
quantities and prices. Which of the following describes the quality of the report’s data and
information?
A good quality of data, but poor quality of information
B good quality of both data and information
C poor quality of data, but good quality of information
D poor quality of both data and information
LO 6a
2 Big Dave Ltd collects data about customers and what they buy as well as certain items of personal
information. It analyses this data to identify relationships between the different variables, such as
what products appeal most to people of certain age groups.
Requirement
What type of analysis is this an example of?
A Descriptive statistics
B Exploratory data analysis
C Confirmatory data analysis
D Relativity analysis
LO 6a
3 Which of the following is the best description of professional scepticism?

A All information should be challenged, and should be assumed to be incorrect until it has been
proved otherwise.
B Forecasts that appear optimistic should be ignored, while forecasts that are pessimistic should
be assumed to be correct.
C Assessing the information critically, being alert to possible misstatements due to error and fraud.
D Refusing to accept that information is correct until it has been certified by a qualified accountant.
LO 6a
4 A schools inspector sits in on classes and makes an assessment of the teacher. The teacher is given a
grade from 1 to 5 where 5 is excellent and 1 is inadequate. Without realising that she is doing this,
the inspector tends to give more generous grades to teachers of maths and science, and lower
grades to teachers of arts and humanities. Before becoming an inspector, she was a science teacher.
Requirement
What type of bias is the inspector introducing into her rankings?
A survivorship bias
B cognitive bias
C observer bias
D self-selection bias
LO 6c
5 An external auditor is auditing the accuracy of purchase invoices in the accounting system of a client.
The auditor has formulated a hypothesis that errors occur in 2% of invoices. A sample of 30 invoices
ICAEW 2023 13: Data analysis 79

was taken, and errors occurred in 3% of these. This was not considered to be significantly different
from the hypothesis, and the auditor concluded that errors occur in 2% of invoices.
Subsequently, the internal auditors checked all of the invoices entered into the system for the
previous year and identified an error rate of 4%.
Requirement
What type of error did the external auditor make in concluding that the error rate was 2%?
A a type I error
B a type II error
C omitted variable bias
D selection bias
LO 6c
6 A data analyst at a major retail chain has performed some analysis in which he has calculated the
mean monthly expenditure, and the average number of visits per month by the chain’s customers.
The information was prepared by using details of credit and debit card payments to enable the
analyst to track all purchases made by a particular customer. Approximately 60% of purchases in the
stores are made using credit and debit cards, and the analyst claims to have tracked the purchases of
10% of card users.
Requirement
In evaluating the statistics produced by the analyst, which of the following conclusion would you
reach?
A Given that 10% of the card users were used in the sample, the statistics are likely to be
representative of the population.
B The data in the sample may suffer from selection bias so it should be recognised that the
statistics may not be an accurate reflection of the whole population.
C Since only a sample of customers was used, the data analysis is likely to be wrong and should
therefore be ignored.
D The data in the sample suffers from omitted variable bias so it should be recognised that the
statistics may not be an accurate reflection of the whole population.
LO 6b
7 The directors of a business have asked you to prepare a presentation in which you provide an
overview of the trends in sales over the last 10 years. The company has three main product lines.
Requirement
Which type of chart would be most useful for providing a good overview of the trends in sales over
the last 10 years?
A A clustered bar chart
B A component bar chart
C A pie chart
D A line chart
LO 6b
8 Arkwright Ltd analyses huge quantities of data about a wide variety of issues from a wide variety of
sources. Arkwright Ltd is seeking competitive advantage from:
A its transaction processing system
B big data
C cybersecurity

D its strategic planning process
LO 6a, 6e
9 The ability to stream big data into an organisation’s systems in real time is an example of which
feature of big data?
A Volume
B Veracity
C Velocity
D Variety
LO 6e
10 Which of the following features of big data concerns the fact that data sets contain anomalies and
errors?
A Veracity
B Variety
C Volume
D Velocity
LO 6e
11 Big Data analytics typically involves the analysis of unstructured data. Which of the following is an
example of unstructured data for a company that operates a chain of coffee shops?
A Spreadsheet analysis of the purchase of new chairs for store refurbishments
B Data tables showing monthly sales figures at each store
C A table of supplier names and addresses
D Email communications between a customer and the marketing department
LO 6a
12 Data science has great importance to big data and data analytics.
Statement (1) Data science deals with analysing and interpreting data rather than how it is collected.
Statement (2) One objective of data science is to extract value from data.
Requirement
LO 6f
13 Finax plc is a credit referencing organisation. It collects data on the credit transactions of millions of
people and commercial organisations worldwide. Vertex Ltd has an arrangement with Finax plc to
access its store of big data so that it can make decisions on whether to extend credit to new
customers.
Requirement
Which type of big data does Finax plc supply?
A Created big data

B Provoked big data
C Transacted big data
D Compiled big data
LO 6a
14 There are several sources of big data available to business organisations.

Statement (1): Open data is data primarily sourced from public sector data, such as transport data
and government financial data.
Statement (2): Human-sourced data is primarily from social networks, emails and text messages.
Requirement
LO 6a
15 The characteristic that determines whether information is both of good quality and valuable is:
A accuracy
B accessibility
C timeliness
D relevance
LO 6a
16 Last year Rillet Ltd invested in a new information system to collect and analyse big data in regards to
the sale of one its products. Once collected and analysed, the information was then reported to the
board of directors. The directors were so happy with the system that it was expanded to report on all
of the company’s products. However, for one of the products, an error in the system meant that a
pattern in regards to sales was identified that did not actually exist. As a consequence, the directors
made a business decision that made a substantial loss.
Requirement
Which of the following risks of big data does this describe?
A Information overload
B Workforce skills
C Data dependency
D Data security
LO 6c, 6e
17 The following statements about using spreadsheets in the budgeting process have been made:
(1) The budgets of the different departments can be easily consolidated into a budget for the whole
organisation
(2) Spreadsheets ensure that no errors occur in calculations
(3) Budget templates can be used to help department managers prepare their budgets
Requirement
Which of the statements above are correct?

A 1 and 2 only
B 2 and 3 only
C 1 and 3 only
D 1, 2 and 3
LO 6d
18 The ICAEW has issued a guidance document ‘Principles of good spreadsheet practice’.
Requirement
Which of the following is an aim of the ICAEW principles of good spreadsheet practice?
A To provide detailed guidance about spreadsheet design
B To reduce the amount of time wasted by poor spreadsheet design
C To provide detailed guidance on the use of formulae in spreadsheets
D To provide detailed guidance on formatting spreadsheets
LO 6d
19 The following statements about spreadsheet practice have been made

(1) Never embed in a formula a number that might change or need to be changed
(2) Keep formulae as short and simple as practicable
(3) Have a formula for the calculation of an important value in several different cells to ensure that
the calculation is not lost
Requirement
Which of the above statements are consistent with the ICAEW ‘Principles of good spreadsheet
practice?’
A 1 and 2 only
B 2 and 3 only
C 1 and 3 only
D 1, 2 and 3
LO 6d
20 The following are principles of good spreadsheet practice:

(1) Build in checks, controls and alerts from the outset
(2) Include an ‘About’ or ‘Welcome’ sheet to document the spreadsheet
(3) Separate and clearly identify inputs, workings and outputs
Requirement
Which of the principles above can reduce the problems that occur when a spreadsheet is inherited
by a new user?
A 1 and 2 only
B 2 and 3 only
C 1 and 3 only
D 1, 2 and 3
LO 6d
21 Data Analysts often use samples taken from a population in order to find out more about that
population. A sample should be representative.

Requirement
Which of the following best describes the meaning of a representative sample?
A A sample where the size of the sample is greater than 30 items
B A sample that includes data from all sub classes of the population
C A sample that reflects characteristics of the population as a whole
D A sample that is chosen randomly
LO 6b
22 A market research company wishes to select a sample of voters to call ahead of a local election. The
company has obtained a copy of the electoral register for the local area, which contains the names of
all individuals who are entitled to vote. All individuals have been assigned a register number, starting
from 0001, and there are approximately 10,000 individuals on the register.
The market research company uses a random number generator to generate a number (n) between
0 and 500. The first individual chosen for the sample will be the individual with the register number n.
Subsequent individuals are chosen by choosing the individual whose register number is 500 higher
than the previous individual (ie, the second individual will have a register number equal to n + 500,
the third n+ 1,000 etc). In this way, the market research company aims to select a sample of 20
individuals from the local area.
Requirement
Which method of sampling is this an example of?
A Stratified sampling
B Simple random sampling
C Cluster sampling
D Systematic sampling
LO 6b

Chapter 14: Developments in technology
1 Digital contracts and technology that records transactions are of great relevance to the modern-day
accountant.
Statement (1): Self-verifying smart contracts invoke the automatic execution of defined rules to
securely hold and transfer legal title to an asset and how to account for it.
Statement (2): Distributed ledger technology and triple entry bookkeeping allow every accounting
transaction recorded by an entity to be posted to a public ledger.
Requirement
LO 6h
2 Which type of cyber-attack involves criminals recording what a user types onto their keyboard?
A Phishing
B Keylogging
C Ad clicker
D Screenshot manager
LO 6g
3 Amos Green, the financial controller of Little Ltd, recently received an email that appeared to be from
the company’s bank. It instructed Amos to click on a link and confirm some of the company’s security
information. Just days later, Amos noticed that money had been transferred unexpectedly out of
Little Ltd’s bank account.
Requirement
Of which of the following cyber-attacks is Little Ltd a victim?
A File hijacking
B Webcam manager
C Phishing
D Keylogging
LO 6g
4 FromUsToYou plc is a courier company that promises to deliver parcels to consumers only when the
consumer is home. A consultant has made the following statements about the types of risk which
face FromUsToYou plc.
Statement (1) A competitor could deliberately breach our methods of communicating with both
consumers and courier drivers online, in order to disrupt our services and cause us embarrassment.
Statement (2) A courier driver could mislay her tablet computer, which contains sensitive data about
our customers.
Requirement
Identify whether each statement is an accurate description of cyber risk.
ICAEW 2023 14: Developments in technology 85

LO 6g
5 A cyber security consultant has listed the following actions that a small to medium-sized business can
take to reduce the risk of cyber-attack:
Action 1: Implement access controls
Action 2: Install internet gateways
Action 3: Use patch management software
Requirement
Which of these actions are included in the UK government’s Cyber Essentials scheme?
A Actions 1 and 2 only
B Actions 2 and 3 only
C Actions 1 and 3 only
D Actions 1, 2 and 3
LO 6g
6 Hannon Ltd in an online retailer. The company has recently suffered a cyber-attack which resulted in
the company’s website being overwhelmed with vast amounts of traffic which caused it to crash.
Requirement
Which of the following best describes the type of attack Hannon Ltd has suffered?
A Distributed denial of service attack
B Hacking
C Phishing
D Keylogging
LO 6g
7 Which two of the following are suggested by the National Crime Agency to reduce the risk of cyber-
attacks?
A Encourage staff to use the same password for different systems to ensure they do not forget
their passwords
B Install updates to software and operating systems regularly
C Avoid using password management apps
D Use two factor authentication methods at log in
E Monitor unusual activities on the system using data analytics
LO 6g
8 Rees Ltd uses data analytics to enhance transparency. Insights into which of the following are
provided for Rees Ltd by using data analytics in this way?
A customer buying patterns
B customer needs
C new products and services
D risk identification
LO 6a, 6f

9 Many companies’ accounting systems automatically download bank transactions from the banks’
own systems. The accountant then has to record the credit side of cash receipts and the debit side of
cash payments.
Bob Ltd has an accounting system that ‘guesses’ where the credit and debit sides of bank
transactions should be recorded based on past experience of transactions with similar references.
The accountant at Bob Ltd only has to confirm that the system has the correct transaction by clicking
a ‘confirm’ button, or changing the account if the accounting system has guessed the wrong account.
The transaction is then recorded.
Requirement
What is the process by which Bob Ltd’s accounting system guesses where the payments and receipts
should be recorded an example of?
A data analytics
B machine learning
C automation
D audit analytics
LO 6i
10 Which of the following is a disadvantage for a small business, of using cloud accounting?
A It is expensive, difficult and time-consuming for the business to upgrade cloud accounting
software.
B Only one person in the business can have access to the cloud accounting software at any one
time.
C Accounting data has to be moved from computer to computer manually by the business’s
finance function employees.
D The small business relies completely on the security and backup measures of the provider of the
cloud accounting software.
LO 6h
11 Priya is investigating the use of cloud accounting for her employer, Withit plc. She has discovered
that accounting information stored in the cloud can be added to or accessed from anywhere, using
any device with an internet connection. She is making a recommendation to her managers on the
use of cloud accounting which contains the following statements.
Statement (1): With the adoption of cloud accounting, Withit’s project managers at client sites can
check whether a payment has been received.
Statement (2): With the adoption of cloud accounting, accounts staff will have the ability to work from
home.
Requirement
LO 6h
12 A system that allows people who do not know each other to trust a shared record of events is an
example of which type of technology?
A distributed ledger

B cloud computing
C internet of things
D data analytics
LO 6h
13 Tech Ltd has invented a device that allows the temperature controller of the user’s home to be
adjusted automatically by an app on their smartphone, using data about the weather.
Requirement
Of which of the following types of technology is this an example?
A distributed ledger
B cloud computing
C internet of things
D data analytics
LO 6h
14 Distributed ledger technology and advanced accounting systems may have impacts on the work of
the auditor.
Statement (1): The rate of technological change, such as with distributed ledger technology, is so fast
that auditing regulations in regards to the audit of transactions are now irrelevant.
Statement (2): The use of advanced accounting software reduces the need for auditors to audit
transactions and verify the ownership of assets.
Requirement
LO 6h, 6i
15 Software and other modern technologies used by businesses that provide automated and improved
financial services is referred to as what?
A Cognitive technologies
B Internet of things
C Crypto currencies
D Fintech
LO 6h
16 A retail company has developed a sophisticated analytics system to predict what products will
become more and more popular. The system involves a computer model that learns from the data,
identifying new relationships between different variables used in making predictions, so that the
predictions are becoming more and more accurate.
Requirement
What type of technology is the company using?
A Machine learning
B Robotic process automation

C An expert system
D Blockchain
LO 6h, 6i

Chapter 15: Practice exam
1 Organisations can be defined or described in various ways.
Requirement
Which three of the following are the key characteristics that are shared by all organisations?
A Synergy
B Social arrangement
C Collective goals
D Specialisation
E Controlled performance
F Exchange of goods and services
LO 1a
2 Cruciform is a charity providing medical services in South America. The Chief Executive is preparing
a brochure which outlines the services provided by the charity. In the brochure, the Chief Executive
states that the charity wants to be the largest global provider of charitable medical services by 20X5.
Requirement
By highlighting this, the Chief Executive is stressing the charity’s:
A vision
B mission
C primary objective
D secondary objective
LO 1a, 1b
3 The directors of Gordon Ltd have recently appointed two members of its unionised workforce to an
internal committee. The committee makes suggestions to the company’s main board of directors
about all aspects of the company’s strategies and policies.
Requirement
These appointments illustrate the company’s concern for which stakeholder?
A Lenders
B Suppliers
C Customers
D Trade unions
LO 1a. 5e
4 Karen is a General Manager with Websellers Ltd. The company is restructuring. Karen is trying to
persuade the Managing Director to set up a separate marketing department within the new
structure.
Requirement
Which of the following statements that she has made is true?
A Marketing is the principal function of the company.

B All the different business functions should blend to achieve customer satisfaction.
C A company cannot practise marketing without a marketing department.
ICAEW 2023 Chapter 15: Practice exam 91

D ‘Advertising’ is synonymous with ‘marketing’.
LO 1c
5 Alain is a Manager with Glasnow Ltd. He always looks for opportunities to praise his subordinates
and takes great pleasure in promoting staff who perform well.
Requirement
As far as his subordinates are concerned, Alain’s actions meet their:
A self-actualisation needs
B status/ego needs
C social needs
D safety needs
LO 1d
6 Humberts is a restaurant that specialises in Mediterranean cuisine with a modern style. It has recently
employed Juan, a marketing consultant, to review the service customers receive when they have a
meal.
Requirement
Which three aspects of the marketing mix will Juan consider when reviewing the restaurant’s service
to customers, and which would he not consider when reviewing the marketing mix for a product?
A Place
B People
C Promotion
D Price
E Processes
F Product
G Physical evidence
LO 1c
7 Martina is a Human Resources Manager with Wardman Ltd. She is working on a project to increase
the spans of control of managers in the company’s largest subsidiary. She needs to identify any
factors about the subsidiary that indicate increases in spans of control are possible.
Requirement
Which of the following factors identified by Martina suggests that increased spans of control are
possible?
A Subordinates carry out very similar tasks
B Subordinates are geographically dispersed
C Frequent, time-consuming problems arise
D Managers are engaged in large amounts of non-supervisory work
LO 2b
8 Romulus Ltd and Remus Ltd have recently agreed to cooperate to exploit the possibilities that both
companies have in a particular overseas market. No separate company has been established for this
purpose because the companies’ Chief Executives, who have known each other for many years, have
agreed matters informally.
Requirement
This arrangement is an example of a:

A licensing agreement
B joint venture
C strategic alliance
D group structure
LO 2a
9 Aiysha works in a factory that makes televisions. Her manager, Delia, sets a target for how many
televisions the team needs to assemble per week. These targets flow from Delia’s own objectives
which are set by the directors.
Requirement
Which part of the organisation does Aiysha work for?
A The middle line
B The strategic apex
C The technostructure
D The operating core
LO 1c, 2a
10 The board of directors of Waterfall plc, a highly geared construction company, is evaluating whether
to invest in the building of a new reservoir. This would represent a new strategic direction for
Waterfall plc.
Requirement
Which of the following features of this strategic decision indicates a lack of feasibility?
A The investment carries a high level of risk for Waterfall plc
B The new reservoir is not expected to increase shareholder wealth in the short term
C Waterfall plc has access to funds of £23 million but the reservoir will cost £40 million
D The environmental impact of the new reservoir has been criticised by local community groups
LO 1b
11 Hightech Ltd is based in the west of England where it manufactures and sells high quality PCs. There
are many competitors in the personal computer industry, from international and national business
through to local computer shops across the regions. Price cuts and other sales promotions to win
business are used regularly by its competitors, but Hightech Ltd sets its own prices rather than
following what its competitors do.
Requirement
What type of competitor is Hightech Ltd?
A A stochastic competitor
B A selective competitor
C A tiger competitor
D A laid-back competitor
LO 1b, 1e
12 How is cyber risk classified?

A As a strategy risk
B As an operational risk
C As a financial risk

D As an enterprise risk
LO 1f
13 Stewardship of the organisation’s financial resources is part of which of its finance function’s tasks?
A Financial reporting
B Recording financial transactions
C Treasury management
D Management accounting
LO 3a, 3b
14 The finance director of Boiled Sweets plc wants to specify the levels of performance that underpin
the company’s control system.
Requirement
Which three of the following are the main components of the company’s control system?
A Measurement of actual performance and comparison against targets
B Identification of deviations from the plan
C Establishment of standards or targets to express planned performance
D Follow-up action to correct adverse results or to exploit favourable variances
E Measurement of ideal performance
F Devising the plan
LO 3b
15 Which aspects of an organisation’s performance with respect to sustainability are measured using
‘triple bottom line’ measures?
A Economy, effectiveness, efficiency
B Economic, social, environmental
C Profitability, liquidity, investment
D Productivity, activity, profitability
LO 3d, 4i
16 Which three of the following are components of the COSO internal control framework?
A Information and communication
B Control environment
C Internal audit
D Project management
E Monitoring activities
LO 3b
17 GoodGreen plc prides itself on the environmentally friendly nature of its operations. It applies the
triple bottom line approach to the reporting of its performance.
Statement (1): The social aspect of the triple bottom line measures issues such as diversity and
equality in respect of the company’s workers.
Statement (2): The economic aspect to the triple bottom line measures issues such as the eradication
of bribery, fraud and money laundering.

Requirement
LO 3d, 4i
18 Any person who brings together providers and users of finance, whether as broker or principal, is
known as:
A a business angel
B a venture capitalist
C an investment banker
D a financial intermediary
LO 3g, 3h
19 A consultant has made the following statements about an overdraft facility.

Statement (1): Interest is paid on the full facility.
Statement (2): Legal documentation is minimal in comparison with other types of loan.
Statement (3): The facility is repayable on demand.
Statement (4): Assets are not normally required as security.
Requirement
Which of these statements are true?
A Statements (1), (2) and (3) only
B Statements (2), (3) and (4) only
C Statements (1), (2) and (4) only
D Statements (1), (3) and (4) only
LO 3h
20 Which of the following trading risks faced by a business is the inability to finance the credit given to
customers?
A Physical risk
B Liquidity risk
C Trade risk
D Credit risk
LO 1f
21 The age of the population of Westland is negatively skewed. The median age is 55 years, while the
mode is 62 years. Which of the following statements about the mean age of the population is
correct?
A The mean age is less than 55 years.
B The mean age is between 55 and 62 years.
C The mean age is greater than 62 years.
D The mean could be within any of the ranges specified in A to C.
LO 3f

22 Which of the following measures of spread is most useful when comparing the risk of two data sets,
where the values of the data in the first set are much smaller than the values of the data in the second
set?
A range
B coefficient of variation
C standard deviation
D variance
LO 3f
23 Having a questioning mind, and being alert to the possibility of misstatement in financial statements
due to error or fraud, are features of a professional accountant’s:
A professional ethics
B professional behaviour
C professional scepticism
D professional competence
LO 4a, 6a
24 In both bank-based and market-based financial systems, financial intermediation is of increased

importance because of its ability to address the market imperfection of:
A monopoly
B asymmetric information
C trade barriers
D tariffs and quotas
LO 5b, 5d
25 Chris runs his own printing company. He is experiencing financial difficulties and some of his credit
suppliers are threatening to take him to court. He needs some advice and has seen an advertisement
in his local paper for an accountancy service that is much cheaper than he expected. He calls the
accountant to check that the price is not a misprint and is surprised at some of the answers he is
given to his questions.
The accountant made the following statements to Chris.
Statement (1): Anyone is free to advertise as an ‘accountant’ and offer the full range of accountancy
services, with no exceptions.
Statement (2): ICAEW members are open to competition from anyone, whether professionally
qualified or not, who chooses to enter the market.
Statement (3): There is no legal requirement for an accountant to be a paid-up member of one of the
CCAB bodies.
Which of the following statements are true?
Requirement
A (1) and (2) only
B (2) and (3) only
C (1) and (3) only
D (1), (2) and (3)
LO 4b

26 The principal factor affecting the nature of business ethics over time is:
A the expectations of society
B the values of senior management
C company policies
D government regulation
LO 4h
27 Which of the following is one of the five OECD Principles of Corporate Governance?
A promote transparent and fair financial reporting
B support the rights of shareholders
C treat major shareholders equitably
D ensure real time, accurate disclosure and transparency
LO 4c, 4f
28 The ability of markets to allocate resources efficiently within a financial system is often restricted by
market imperfections.
Requirement
Which three of the following are market imperfections associated with financial markets?
A Lack of codes of practice
B Information asymmetry
C Transaction costs
D Lack of regulation
E Insider dealing
LO 5b
29 The body responsible for promoting high standards of corporate governance in the UK is the:
A FRC
B OECD
C CCAB
D Bank of England
LO 4b, 4e
30 The board of directors of Lake plc is concerned that the current chief executive’s actions are
undermining the ethical culture at the company. She fails to listen to the concerns of managers about
unfair treatment of suppliers, and she has failed to learn from a recent scandal in which the company
was fined for data protection breaches.
Requirement
To improve the ethical culture at Lake plc, which of the following is the most important action for the
board to take?
A draft a corporate code of ethics for Lake plc’s employees
B rewrite Lake plc’s policies regarding suppliers and customers
C demonstrate leadership by encouraging Lake plc’s chief executive to be more open
D brief shareholders more fully about Lake plc’s incentive scheme for managers
LO 4c, 4d, 4g
ICAEW 2023 &KDSWHU3UDFWLFHH[DP 97

31 Jemson plc, a premium listed company, wishes to comply with the principles and provisions of the
UK Corporate governance code. The company has 10 directors, including the chair. The chair is a
non-executive director.
Requirement
In order to comply with the provisions of the UK corporate governance code, how many non-
executive directors (excluding the chair) must Jemson plc have?
A three
B four
C five
D six
LO 4d, 4e
32 The Wates Principles include six principles and provide guidance for each principle
Requirement
Which of the following statements is true of companies that adopt the Wates principles?
A They must apply the principles and explain any departure from the guidance.
B They must apply the principles and explain how they have applied them. They do not need to
follow the guidance.
C They must apply the principles or explain any departure from them. They do not need to follow
the guidance.
D They must apply the principles and explain how they have applied them. They must explain any
departure from the guidance.
LO 4c, 4e
33 A market trader has noticed that when the price of cakes rises, consumers tend to buy more biscuits
instead.
Requirement
The effect operating here is:
A the income effect
B the diminishing marginal utility effect
C the substitution effect
D the price elasticity of demand
LO 5a
34 Which of the following are examples of complementary goods?

A Milk and orange juice
B Pepsi and Coca-Cola
C French fries and tomato sauce
D Lamb and beef
LO 5a
35 Redium is a normal good which has become increasingly unfashionable during the past year.
Requirement
What changes to supply, demand and market price will this change in tastes have created?
A No impact on the demand curve, but a fall in market price and a fall in quantity supplied

B A shift in the demand curve to the right, a fall in market price and a fall in quantity supplied
C A shift in the demand curve to the left, a fall in market price and a fall in quantity supplied
D No impact on the demand curve, no impact on the supply curve but a fall in market price
LO 5a
36 Which of the following is an example of government intervention to correct a market failure?

A An increase in corporation tax during an economic boom
B An increase in the rate of value added tax (VAT) on all goods and services
C The taxation of goods with negative externalities
D The taxation of Giffen goods
LO 5b, 5d
37 The price of Yellands has fallen by 4%. Over the same period demand for Dellows, where there has
been no price change, has risen by 6.5%.
Requirement
The cross elasticity of demand between the two products is:
A –1.625
B –0.620
C 1.625
D 0.620
LO 5a
38 Economists in Zedland believe that the country’s economy is entering a recovery phase.
Requirement
Which of the following features of the Zedland economy would support this view?
A Rising levels of demand being met by increased production
B Rising levels of demand being met by price increases
C Capacity and labour being fully utilised
D Bottlenecks occurring in industries which are unable to meet demand
LO 5c
39 The government may place an additional tax on cigarettes to raise revenue for healthcare spending.
The demand for cigarettes is price inelastic.
Requirement
Which of the following statements is true?
A The tax on cigarettes may not raise as much additional revenue as anticipated because the
demand for cigarettes is likely to become more elastic over time.
B The tax will not raise much additional revenue in the short term or the long term because
demand is price inelastic.
C No additional tax revenue will be raised because sellers of cigarettes will lower their price by the
amount of the tax so the price of cigarettes to consumers will not change.
D This will raise additional revenue in the short term and the long term because there are no
substitutes for cigarettes.
LO 5d

40 Webcraft plc has a dominant position in its markets. It has received notice that it is being investigated
under Chapter 1 of the Competition Act 1998.
The following activities have been colluded in by Webcraft plc.
Activity 1: Limiting production markets
Activity 2: Agreeing with another organisation to limit competition
Activity 3: Restricting technical developments
Requirement
Which of the activities may, individually, have given rise to such a notice?
A Activity 1 only
B Activity 2 only
C Activity 3 only
D Activities 1, 2 and 3
LO 5b, 5d
41 Distributed denial of service (DDoS) attacks are used to bring down a business’ website by
overwhelming it with a wave of internet traffic.
Requirement
Which of the following are used to create the wave of internet traffic in such an attack?
A Netbots
B Netdrops
C Botdrops
D Botnets
LO 6g
42 A hospital has recently been the victim of a cyber-attack. While investigating the causes and
consequences of the attack, the hospital’s board identified that old versions of software were being
used in its administrative systems, which made them more vulnerable to attack.
Requirement
Which of the following would have been most effective in helping the hospital protect itself from the
attack in this scenario?
A Firewalls
B Access control
C Encryption
D Patch management
LO 6g
43 The chief executive of Table plc is not convinced about the usefulness of much of the information in
the company’s financial statements. He makes three statements about the specific characteristics of
the information that he believes may undermine its usefulness.
Statement (1): It lacks timeliness
Statement (2): A high level of regulation applies to it
Statement (3): It contains a high level of aggregation
Requirement
Which of these statements identify characteristics that are likely to undermine the information’s
usefulness?

LO 3a
44 An information system combines data and analytical models to help with semi-structured and
unstructured problem solving of an operational nature.
Requirement
This is called:
A an expert support system
B a decision support system
C a knowledge work system
D an office automation system
LO 3c, 6a
45 Compared with operations management, which of the following is a characteristic that is unique to
big data?
A Volume
B Variety
C Velocity
D Visibility
LO 6e
46 Which three of the following are ways in which data analytics of big data can create value for a
business?
A Risk management
B Innovation
C Development of corporate mission
D Change management
E Performance improvement
F Creation of HR policies
LO 6e, 6f
47 Modern businesses may create digital assets and earn revenue by licensing other organisations to
use them.
Statement (1): Watermarks can be used to protect the security of digital assets.
Statement (2): Once a user has obtained a licence to use a digital asset they are free to use or
distribute the asset as they wish.
Requirement


LO 6h
48 Which of the following is an organisation least likely to achieve as a result of using big data and data
analytics?
A More precisely targeted marketing messages
B Faster processing of high volume, routine transactions
C More effective decision making in relation to inventories and pricing
D A better understanding of customer’s buying patterns
LO 6e, 6f
49 Vifpost is a logistics company that delivers parcels for corporate clients. It uses the latest Radio
Frequency Identification (RFID) technology to track its packages.
Requirement
Which of the following most accurately describes the type of technology Vifpost is using to help track
its packages?
A Artificial Intelligence
B Big data
C Expert systems
D Internet of Things
LO 6h

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The Institute of Chartered Accountants in England and Wales

1 Introduction to business 1 105

2 Managing a business 7 109

3 Organisational and business structures 13 113

4 Introduction to business strategy 19 119

5 Introduction to risk management 25 123

6 The ﬁnance function and ﬁnancial information 35 129

7 Business ﬁnance 43 135

8 The accountancy profession 51 141

9 Governance and ethics 55 145

10 Corporate governance 61 149

11 The economic environment of business and ﬁnance 67 153

12 External regulation of business 75 159

13 Data analysis 79 163

14 Developments in technology 85 167

15 Practice exam 91 171

Appendix: Mock Exam guidance notes 181

ICAEW 2023 Contents iii

iv Business, Technology and Finance ICAEW 2023

Professional skills focus: Assimilating and using information

Professional skills focus: Applying judgement

Professional skills focus: Concluding, recommending and communicating

ICAEW 2023 Introduction v

Option Proﬁt-oriented organisation Non-proﬁt oriented organisation

1 Output of goods/services Minimise costs

2 Output of goods/services Provision of goods/services

3 Maximisation of wealth Minimise costs

4 Maximisation of wealth Provision of goods/services

ICAEW 2023 1: Introduction to business 1

6 To establish whether a particular organisation should be classiﬁed as a business or not, it is necessary

9 A major airline, FlotAir plc, has been drawing up a mission statement.

2 Business, Technology and Finance ICAEW 2023

ICAEW 2023 1: Introduction to business 3

15 To what does the term ‘triple bottom line’ refer?

4 Business, Technology and Finance ICAEW 2023

ICAEW 2023 1: Introduction to business 5

ICAEW 2023 2: Managing a business 7

6 Which of the following managers is operating as a functional manager?

8 Business, Technology and Finance ICAEW 2023

ICAEW 2023 2: Managing a business 9

17 The main inﬂuences on a business’s pricing are:

20 What are the four elements of the procurement mix?

10 Business, Technology and Finance ICAEW 2023

ICAEW 2023 2: Managing a business 11

ICAEW 2023 3: Organisational and business structures 13

8 In terms of structure, Platlet plc is a wide, ﬂat organisation.

14 Business, Technology and Finance ICAEW 2023

10 Which three of the following are characteristics of limited companies?

ICAEW 2023 3: Organisational and business structures 15

16 Business, Technology and Finance ICAEW 2023

ICAEW 2023 3: Organisational and business structures 17

18 Business, Technology and Finance ICAEW 2023

ICAEW 2023 4: Introduction to business strategy 19

Option Encourages new entrants Erects a barrier to new entrants

1 High competition Low capital costs

2 A monopoly supplier of a vital High competition

3 One large customer A monopoly supplier of a vital