Series: MAY 2021

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  • 20 Marks

CSME – May 2021 – L2 – Q6 – Ethics in Business

Analysis of Mr. John’s actions regarding insider trading based on various ethical perspectives.

Mr John, a professional accountant, is the Chief Executive Officer of a company quoted on the Nigerian Stock Exchange. He also owns about 20% of the company’s shares worth hundreds of millions of Naira. Due to several factors, the company began performing poorly, leading to an unpublished financial report indicating a huge loss. In anticipation of a slide in the company’s share price, Mr. John instructed his stockbroker to sell half of his shares for potential repurchase once the price drops after the financial statements are released. He profited substantially from this transaction.

Required:

a. Analyse the action of Mr. John using:
i. The Model Code (3 Marks)
ii. Critical Theory (3 Marks)
iii. Moral Development of Accountants (4 Marks)

b. Advise Mr. John on the fundamental ethical principles which professional accountants are expected to comply with. (10 Marks)

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  • 5 Marks

CSME – May 2021 – L2 – Q5c – Risk Management and Corporate Strategy

Relating 'Impact and Likelihood' to 'Objective and Subjective' risk perception using a table.

Risk Assessment is a very important activity in an organisation. With the use of a table, relate ‘Impact and Likelihood’ to ‘Objective and Subjective’ risk perception.

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  • 5 Marks

CSME – May 2021 – L2 – Q5b – Risk Management and Corporate Strategy

Explanation of the ALARP principle with the aid of a diagram.

With the aid of a diagram, explain the concept of “As Low as Reasonably Practicable” (ALARP) principle. (5 Marks)

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  • 5 Marks

CSME – May 2021 – L2 – Q5a – Corporate Governance

Discussing four different ways in which agency conflict can arise between stakeholders.

Discuss FOUR of the different ways in which agency conflict can arise. (5 Marks)

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  • 20 Marks

CSME – May 2021 – L2 – Q4 – Corporate Social Responsibility (CSR)

Explanation of social responsibility levels by Gray, Owen, and Adams, and ethical stances by Johnson and Scholes.

Gray, Owen, and Adams (1996) provided a framework for classifying different groups of people and their views of the relationship between business organizations and society.

Required:

a. State and explain SEVEN levels or positions on social responsibility by Gray, Owen, and Adams (1996). (15 Marks)
b. State Johnson and Scholes FOUR possible ethical stances for a business entity. (5 Marks)

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  • 10 Marks

CSME – May 2021 – L2 – Q3b – Corporate Governance

Explanation of board responsibilities per ICSA guidelines that cannot be delegated.

Using the Institute of Chartered Secretaries and Administrators (ICSA) guidance note, explain responsibilities of board of directors that should not be delegated.

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  • 10 Marks

CSME – May 2021 – L2 – Q3a – Corporate Governance

Advising on voting rights to protect a shareholder's investment in a struggling company.

A friend of yours, who invested heavily in the ordinary shares of a company that has been struggling in recent years, came to you for advice. He is confused as to what he can do to protect his investment.

Advise him on:
i. How he can use his voting rights as a shareholder to secure his investment. (6 Marks)
ii. Limitations to the use of his voting rights. (4 Marks)

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  • 20 Marks

CSME – May 2021 – L2 – Q2 – Risk Management and Corporate Strategy

Examination of a risk manager’s role, specific risks managed, and purposes of risk monitoring.

“A risk manager is not a line manager and is not directly responsible for risk management but might help with the management of specific risks.”

Required:

a.
i. Review the statement above within the context of the role of a risk manager. (7 Marks)
ii. Evaluate THREE specific risks that can be managed. (3 Marks)

b. Discuss the purposes of risk monitoring. (10 Marks)

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  • 10 Marks

CSME – May 2021 – L2 – Q1 – Strategic Implementation

Assessing Davidson Ltd's key resources, strategic choices, and restructuring to address international opportunities.

Davidson Ltd is an automobile company based in Aba, Nigeria. It has been in
existence for nearly eighty years. The company originally began by supplying
components for small vehicles and was producing equipment during the Second
World War. However, in the nineties, it underwent rapid transformation under
the founder‟s son, Tony. Tony has diversified the company into supplying tricycle
components and spare parts to the Nigerian market. The company now employs
some 500 staff around the country and is well known for the quality of its
workmanship. The company operates under three divisions. One division is
concerned with the manufacture of tricycle components, a second division with
spare parts and the third division undertakes specific one–off work in automobile
and automobile design. The tricycle component division is by far the biggest and
accounts for seventy per cent of the total turnover. The smaller specialist
automobile design division is by far the most profitable in terms of return on
capital employed and it relies a great deal on a senior engineer, Emmanuel, who
has been with the company for more than twenty years.
Recently, the company was invited to send sample components to a Japanese car
manufacturer who is keen to commence operations in Nigeria. These components
are needed within eight months. However, Mr. Tony is concerned that his
company may not be able to meet the strict standard imposed by the Japanese
manufacturer. The deal, if it is sealed, would establish Davidson Ltd as an
important auto component supplier in South East Asia, thus, opening up the
potential for exports. Tony realises that the export potential is great and that any
initiative towards exports would get full backing from the government. While,
this is happening, the spare parts division is also showing signs of growth.
Recent reforms in part of North Africa has made companies in that region to be
very keen to modernise and innovate their old manufacturing processes and
Davidson had received business enquiries from the region.
Tony faces a dilemma. He knows that the opportunities that have presented
themselves would give the company a global presence. At the same time, he
knows that the company is solely under his management as chief executive.
Tony holds eighty percent of the shares. The other two directors hold ten percent
each. Although the other divisions have managing directors, they rely on him for
decision making. The current managing directors are family members. One is a brother in-law and the other a cousin. Their knowledge of the industry and its
workings is generally poor. He made these appointments to please his father so
that he could be left to run the company as he deems fit. Tony knows that to
satisfy the Japanese auto manufacturer, he needs to reorganise the automobile
design division and consider issues of Total Quality Management (TQM). This will
take time and requires that he delegates responsibilities to other divisions.
However, he feels uncomfortable doing this.
The company is at crossroads. The three divisions are doing well, but could do
even better, if their old, bureaucratic and hierarchical systems are reviewed.
Indeed, some of the younger managers and engineers would prefer a more open,
flexible management structure. Some of them have studied both engineering and
management in Holland and the United States, and are keen to see key
innovations in place. While Tony knows that these opportunities highlighted
above should not be missed, he has to ensure that they are handled successfully
so that the future is secured for Davidson Ltd. This requires that he takes some
tough decisions in restructuring the company within a few months.

Required:

Write a report to the Chief Executive of Davidson Ltd addressing the following issues:

a.
i. The key resources and implementation issues facing Davidson Ltd in the scenario above. (15 Marks)
ii. How the key resources will affect strategic choices. (7 Marks)
iii. How implementation issues will affect strategic choices. (8 Marks)

b. How should Tony restructure the company? (10 Marks)

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  • 10 Marks

PSAF – May 2021 – L2 – Q6b – The Budgeting Process in the Public Sector

Explanation of budget uses and steps for National Chart of Accounts application in public budgeting.

The importance of classification code as a system driven for budget cannot
be over emphasised as it forms the basis for budgeting and budgetary
control mechanism. Thus, for a country, state or local government to
achieve a reasonable level of success in accountability, transparency,
performance evaluation and adherence to Appropriation Act, the
application of unified chart of accounts is paramount.

Required:

Discuss FOUR uses of budget and FOUR steps to be followed to ensure completeness of using the National Chart of Accounts for budgeting.

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  • 20 Marks

CSME – May 2021 – L2 – Q6 – Ethics in Business

Analysis of Mr. John’s actions regarding insider trading based on various ethical perspectives.

Mr John, a professional accountant, is the Chief Executive Officer of a company quoted on the Nigerian Stock Exchange. He also owns about 20% of the company’s shares worth hundreds of millions of Naira. Due to several factors, the company began performing poorly, leading to an unpublished financial report indicating a huge loss. In anticipation of a slide in the company’s share price, Mr. John instructed his stockbroker to sell half of his shares for potential repurchase once the price drops after the financial statements are released. He profited substantially from this transaction.

Required:

a. Analyse the action of Mr. John using:
i. The Model Code (3 Marks)
ii. Critical Theory (3 Marks)
iii. Moral Development of Accountants (4 Marks)

b. Advise Mr. John on the fundamental ethical principles which professional accountants are expected to comply with. (10 Marks)

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  • 5 Marks

CSME – May 2021 – L2 – Q5c – Risk Management and Corporate Strategy

Relating 'Impact and Likelihood' to 'Objective and Subjective' risk perception using a table.

Risk Assessment is a very important activity in an organisation. With the use of a table, relate ‘Impact and Likelihood’ to ‘Objective and Subjective’ risk perception.

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  • 5 Marks

CSME – May 2021 – L2 – Q5b – Risk Management and Corporate Strategy

Explanation of the ALARP principle with the aid of a diagram.

With the aid of a diagram, explain the concept of “As Low as Reasonably Practicable” (ALARP) principle. (5 Marks)

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  • 5 Marks

CSME – May 2021 – L2 – Q5a – Corporate Governance

Discussing four different ways in which agency conflict can arise between stakeholders.

Discuss FOUR of the different ways in which agency conflict can arise. (5 Marks)

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  • 20 Marks

CSME – May 2021 – L2 – Q4 – Corporate Social Responsibility (CSR)

Explanation of social responsibility levels by Gray, Owen, and Adams, and ethical stances by Johnson and Scholes.

Gray, Owen, and Adams (1996) provided a framework for classifying different groups of people and their views of the relationship between business organizations and society.

Required:

a. State and explain SEVEN levels or positions on social responsibility by Gray, Owen, and Adams (1996). (15 Marks)
b. State Johnson and Scholes FOUR possible ethical stances for a business entity. (5 Marks)

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  • 10 Marks

CSME – May 2021 – L2 – Q3b – Corporate Governance

Explanation of board responsibilities per ICSA guidelines that cannot be delegated.

Using the Institute of Chartered Secretaries and Administrators (ICSA) guidance note, explain responsibilities of board of directors that should not be delegated.

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  • 10 Marks

CSME – May 2021 – L2 – Q3a – Corporate Governance

Advising on voting rights to protect a shareholder's investment in a struggling company.

A friend of yours, who invested heavily in the ordinary shares of a company that has been struggling in recent years, came to you for advice. He is confused as to what he can do to protect his investment.

Advise him on:
i. How he can use his voting rights as a shareholder to secure his investment. (6 Marks)
ii. Limitations to the use of his voting rights. (4 Marks)

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  • 20 Marks

CSME – May 2021 – L2 – Q2 – Risk Management and Corporate Strategy

Examination of a risk manager’s role, specific risks managed, and purposes of risk monitoring.

“A risk manager is not a line manager and is not directly responsible for risk management but might help with the management of specific risks.”

Required:

a.
i. Review the statement above within the context of the role of a risk manager. (7 Marks)
ii. Evaluate THREE specific risks that can be managed. (3 Marks)

b. Discuss the purposes of risk monitoring. (10 Marks)

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  • 10 Marks

CSME – May 2021 – L2 – Q1 – Strategic Implementation

Assessing Davidson Ltd's key resources, strategic choices, and restructuring to address international opportunities.

Davidson Ltd is an automobile company based in Aba, Nigeria. It has been in
existence for nearly eighty years. The company originally began by supplying
components for small vehicles and was producing equipment during the Second
World War. However, in the nineties, it underwent rapid transformation under
the founder‟s son, Tony. Tony has diversified the company into supplying tricycle
components and spare parts to the Nigerian market. The company now employs
some 500 staff around the country and is well known for the quality of its
workmanship. The company operates under three divisions. One division is
concerned with the manufacture of tricycle components, a second division with
spare parts and the third division undertakes specific one–off work in automobile
and automobile design. The tricycle component division is by far the biggest and
accounts for seventy per cent of the total turnover. The smaller specialist
automobile design division is by far the most profitable in terms of return on
capital employed and it relies a great deal on a senior engineer, Emmanuel, who
has been with the company for more than twenty years.
Recently, the company was invited to send sample components to a Japanese car
manufacturer who is keen to commence operations in Nigeria. These components
are needed within eight months. However, Mr. Tony is concerned that his
company may not be able to meet the strict standard imposed by the Japanese
manufacturer. The deal, if it is sealed, would establish Davidson Ltd as an
important auto component supplier in South East Asia, thus, opening up the
potential for exports. Tony realises that the export potential is great and that any
initiative towards exports would get full backing from the government. While,
this is happening, the spare parts division is also showing signs of growth.
Recent reforms in part of North Africa has made companies in that region to be
very keen to modernise and innovate their old manufacturing processes and
Davidson had received business enquiries from the region.
Tony faces a dilemma. He knows that the opportunities that have presented
themselves would give the company a global presence. At the same time, he
knows that the company is solely under his management as chief executive.
Tony holds eighty percent of the shares. The other two directors hold ten percent
each. Although the other divisions have managing directors, they rely on him for
decision making. The current managing directors are family members. One is a brother in-law and the other a cousin. Their knowledge of the industry and its
workings is generally poor. He made these appointments to please his father so
that he could be left to run the company as he deems fit. Tony knows that to
satisfy the Japanese auto manufacturer, he needs to reorganise the automobile
design division and consider issues of Total Quality Management (TQM). This will
take time and requires that he delegates responsibilities to other divisions.
However, he feels uncomfortable doing this.
The company is at crossroads. The three divisions are doing well, but could do
even better, if their old, bureaucratic and hierarchical systems are reviewed.
Indeed, some of the younger managers and engineers would prefer a more open,
flexible management structure. Some of them have studied both engineering and
management in Holland and the United States, and are keen to see key
innovations in place. While Tony knows that these opportunities highlighted
above should not be missed, he has to ensure that they are handled successfully
so that the future is secured for Davidson Ltd. This requires that he takes some
tough decisions in restructuring the company within a few months.

Required:

Write a report to the Chief Executive of Davidson Ltd addressing the following issues:

a.
i. The key resources and implementation issues facing Davidson Ltd in the scenario above. (15 Marks)
ii. How the key resources will affect strategic choices. (7 Marks)
iii. How implementation issues will affect strategic choices. (8 Marks)

b. How should Tony restructure the company? (10 Marks)

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  • 10 Marks

PSAF – May 2021 – L2 – Q6b – The Budgeting Process in the Public Sector

Explanation of budget uses and steps for National Chart of Accounts application in public budgeting.

The importance of classification code as a system driven for budget cannot
be over emphasised as it forms the basis for budgeting and budgetary
control mechanism. Thus, for a country, state or local government to
achieve a reasonable level of success in accountability, transparency,
performance evaluation and adherence to Appropriation Act, the
application of unified chart of accounts is paramount.

Required:

Discuss FOUR uses of budget and FOUR steps to be followed to ensure completeness of using the National Chart of Accounts for budgeting.

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