CIMA BA4 cheat sheet

Ethical stance options for a professional accountant: absolutism (fixed universal rules), relativism (norms vary by culture or group), and teleology/consequentialism (judge the act by its outcomes).

Teleological reasoning evaluates an action by its results; deontological reasoning evaluates the act itself against duties and rules regardless of outcome.

Kohlberg's stages of moral development: pre-conventional (obedience and self-interest), conventional (conformity and social order), post-conventional (social contract and universal principles).

Threat categories under the CIMA/IESBA Code of Ethics: self-interest, self-review, advocacy, familiarity, and intimidation; a threat is countered by eliminating it or applying safeguards.

Conceptual framework sequence: identify threats, evaluate their significance, then address them by eliminating the circumstance, applying safeguards, or declining the engagement.

CIMA Code fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour.

Confidentiality exceptions: disclosure is permitted where required by law, permitted by the client or employer, or there is a professional duty or right to disclose.

An ethical conflict resolution sequence: consult internal policies, escalate to the board or audit committee, seek advice from the professional body, and consider legal advice before resigning.

Independence in assurance requires both independence of mind (state of mind) and independence in appearance (avoiding facts a reasonable third party would see as compromising).

Agency problem: separation of ownership (shareholders) from control (directors) creates scope for managers to pursue self-interest at owners' expense; governance mechanisms are the monitoring response.

Key governance mechanisms: board structure and independence, audit and remuneration committees, internal and external audit, disclosure and transparency, and shareholder rights.

UK Corporate Governance Code: comply-or-explain; the chair should be independent on appointment, and at least half the board excluding the chair should be independent non-executives.

Board role split: the chair leads the board and its effectiveness; the CEO leads the executive; combining the roles concentrates power and weakens monitoring.

Audit committee composition: independent non-executive directors, with the chair of the board not a member; responsibilities include external auditor appointment recommendations and internal control oversight.

Remuneration committee sets executive pay and is composed of independent non-executive directors to reduce self-dealing in pay-setting.

Shareholder activism and the takeover market are external governance controls; the annual general meeting is the formal mechanism for shareholder approval and challenge.

Stakeholder vs shareholder models: the shareholder (Anglo-American) model prioritises shareholder value; the stakeholder (Rhineland/continental) model includes employees, lenders and wider interests.

Contract formation elements: offer, acceptance, consideration, intention to create legal relations, and capacity; absence of any element means no enforceable contract.

Invitation to treat vs offer: goods displayed in a shop, advertisements and price lists are generally invitations to treat, not offers that acceptance can convert into a contract.

Acceptance must be unqualified and communicated to the offeror; a counter-offer destroys the original offer (offer and acceptance must match exactly).

Consideration must be sufficient but need not be adequate; past consideration is generally not good consideration, and performance of an existing duty is generally not consideration.

Terms: conditions are fundamental terms whose breach allows termination and damages; warranties are minor terms whose breach gives damages only; innominate terms are classified by effect of breach.

Exclusion clauses are enforceable only if incorporated (by signature, reasonable notice or course of dealing) and construed strictly against the party relying on them.

Remedies for breach: damages aim to put the claimant in the position had the contract been performed (expectation measure); equitable remedies include specific performance and injunction.

Company law basics: separate legal personality means the company contracts and is liable in its own name; limited liability caps shareholders' exposure to unpaid share capital.

Wrongful trading: directors can be personally liable where they continued trading when they knew or ought to have concluded insolvent liquidation was inevitable; fraudulent trading requires intent to defraud.

Employee vs independent contractor: tests include control, integration/organisation, economic reality (multiple factor) and mutuality of obligation; only employees gain unfair dismissal and redundancy rights.

Employment contract terms: express terms, implied terms (mutual trust and confidence, duty of fidelity, reasonable care), and statutory terms; a written statement of particulars is required within two months of start.

Wrongful dismissal concerns breach of the contract (for example dismissal without contractual notice); unfair dismissal concerns statutory fairness of the reason and process.

Fair dismissal requires a potentially fair reason (capability, conduct, redundancy, statutory restriction, some other substantial reason) plus a reasonable procedure and response.

Automatically unfair dismissal grounds include union membership or activity, asserting statutory rights, pregnancy and maternity, whistleblowing, and health and safety activity.

Redundancy requires a genuine redundancy situation (closure, workplace closure, or reduced need for employees) and fair selection with consultation; failure renders it unfair.

Discrimination protected characteristics include age, disability, sex, race, religion or belief, sexual orientation, gender reassignment, marriage/civil partnership and pregnancy/maternity.

Types of discrimination: direct, indirect, harassment, victimisation, and failure to make reasonable adjustments for disabled employees.

Remedies for unfair dismissal: reinstatement, re-engagement, or compensation comprising a basic award (age and service based) and a compensatory award for loss.