(ii) the strategy of the business regarding its treasury policies. (3 marks)
(Marks will be awarded in part (b) for the identification and discussion of relevant points and for the style. of the
report.)
第1题:
(c) Discuss the ethical and social responsibilities of the Beth Group and whether a change in the ethical and
social attitudes of the management could improve business performance. (7 marks)
Note: requirement (c) includes 2 professional marks for development of the discussion of the ethical and social
responsibilities of the Beth Group.
第2题:
(b) Discuss the relative costs to the preparer and benefits to the users of financial statements of increased
disclosure of information in financial statements. (14 marks)
Quality of discussion and reasoning. (2 marks)
第3题:
(d) Draft a letter for Tim Blake to send to WM’s investors to include the following:
(i) why you believe robust internal controls to be important; and
(ii) proposals on how internal systems might be improved in the light of the overestimation of mallerite at
WM.
Note: four professional marks are available within the marks allocated to requirement (d) for the structure,
content, style. and layout of the letter.
(16 marks)
You will be aware of the importance of accurate resource valuation to Worldwide Minerals (WM). Unfortunately, I have to
inform. you that the reserve of mallerite, one of our key minerals in a new area of exploration, was found to have been
overestimated after the purchase of a mine. It has been suggested that this information may have an effect on shareholder
value and so I thought it appropriate to write to inform. you of how the board intends to respond to the situation.
In particular, I would like to address two issues. It has been suggested that the overestimation arose because of issues with
the internal control systems at WM. I would firstly like to reassure you of the importance that your board places on sound
internal control systems and then I would like to highlight improvements to internal controls that we shall be implementing
to ensure that the problem should not recur.
(i) Importance of internal control
Internal control systems are essential in all public companies and Worldwide Minerals (WM) is no exception. If anything,
WM’s strategic position makes internal control even more important, operating as it does in many international situations
and dealing with minerals that must be guaranteed in terms of volume, grade and quality. Accordingly, your board
recognises that internal control underpins investor confidence. Investors have traditionally trusted WM’s management
because they have assumed it capable of managing its internal operations. This has, specifically, meant becoming aware
of and controlling known risks. Risks would not be known about and managed without adequate internal control
systems. Internal control, furthermore, helps to manage quality throughout the organisation and it provides
management with information on internal operations and compliance. These features are important in ensuring quality
at all stages in the WM value chain from the extraction of minerals to the delivery of product to our customers. Linked
to this is the importance of internal control in helping to expose and improve underperforming internal operations.
Finally, internal control systems are essential in providing information for internal and external reporting upon which, in
turn, investor confidence rests.
(ii) Proposals to improve internal systems at WM
As you may be aware, mineral estimation and measurement can be problematic, particularly in some regions. Indeed,
there are several factors that can lead to under or overestimation of reserves valuations as a result of geological survey
techniques and regional cultural/social factors. In the case of mallerite, however, the issues that have been brought to
the board’s attention are matters of internal control and it is to these that I would now like to turn.
In first instance, it is clear from the fact that the overestimate was made that we will need to audit geological reports at
an appropriate (and probably lower) level in the organisation in future.
Once a claim has been made about a given mineral resource level, especially one upon which investor returns might
depend, appropriate systems will be instituted to ask for and obtain evidence that such reserves have been correctly and
accurately quantified.
We will recognise that single and verbal source reports of reserve quantities may not necessarily be accurate. This was
one of the apparent causes of the overestimation of mallerite. A system of auditing actual reserves rather than relying
on verbal evidence will rectify this.
The purchase of any going concern business, such as the mallerite mine, is subject to due diligence. WM will be
examining its procedures in this area to ensure that they are fit for purpose in the way that they may not have been in
respect of the purchase of the mallerite mine. I will be taking all appropriate steps to ensure that all of these internal
control issues can be addressed in future.
Thank you for your continued support of Worldwide Minerals and I hope the foregoing goes some way to reassure you
that the company places the highest value on its investors and their loyalty.
Yours faithfully,
Tim Blake
Chairman
第4题:
(ii) Determine whether your decision in (b)(i) would change if you were to use the Maximin and Minimax
regret decision criteria. Your answer should be supported by relevant workings. (6 marks)
第5题:
(ii) Comment briefly on the use of its own tree plantations as a source of raw materials by Our Timbers Ltd.
(3 marks)
第6题:
(ii) Recommend which of the refrigeration systems should be purchased. You should state your reasons
which must be supported by relevant calculations. (3 marks)
第7题:
(iii) Whether or not you agree with the statement of the marketing director in note (9) above. (5 marks)
Professional marks for appropriateness of format, style. and structure of the report. (4 marks)
(iii) The marketing director is certainly correct in recognising that success is dependent on levels of service quality provided
by HFG to its clients. However, whilst the number of complaints is an important performance measure, it needs to be
used with caution. The nature of a complaint is, very often, far more indicative of the absence, or a lack, of service
quality. For example, the fact that 50 clients complained about having to wait for a longer time than they expected to
access gymnasium equipment is insignificant when compared to an accident arising from failure to maintain properly a
piece of gymnasium equipment. Moreover, the marketing director ought to be aware that the absolute number of
complaints may be misleading as much depends on the number of clients serviced during any given period. Thus, in
comparing the number of complaints received by the three centres then a relative measure of complaints received per
1,000 client days would be far more useful than the absolute number of complaints received.
The marketing director should also be advised that the number of complaints can give a misleading picture of the quality
of service provision since individuals have different levels of willingness to complain in similar situations.
The marketing director seems to accept the current level of complaints but is unwilling to accept any increase above this
level. This is not indicative of a quality-oriented organisation which would seek to reduce the number of complaints over
time via a programme of ‘continuous improvement’.
From the foregoing comments one can conclude that it would be myopic to focus on the number of client complaints
as being the only performance measure necessary to measure the quality of service provision. Other performance
measures which may indicate the level of service quality provided to clients by HFG are as follows:
– Staff responsiveness assumes critical significance in service industries. Hence the time taken to resolve client
queries by health centre staff is an important indicator of the level of service quality provided to clients.
– Staff appearance may be viewed as reflecting the image of the centres.
– The comfort of bedrooms and public rooms including facilities such as air-conditioning, tea/coffee-making and cold
drinks facilities, and office facilities such as e-mail, facsimile and photocopying.
– The availability of services such as the time taken to gain an appointment with a dietician or fitness consultant.
– The cleanliness of all areas within the centres will enhance the reputation of HFG. Conversely, unclean areas will
potentially deter clients from making repeat visits and/or recommendations to friends, colleagues etc.
– The presence of safety measures and the frequency of inspections made regarding gymnasium equipment within
the centres and compliance with legislation are of paramount importance in businesses like that of HFG.
– The achievement of target reductions in weight that have been agreed between centre consultants and clients.
(Other relevant measures would be acceptable.)
第8题:
(c) Explanatory notes, together with relevant supporting calculations, in connection with the loan. (8 marks)
Additional marks will be awarded for the appropriateness of the format and presentation of the schedules, the
effectiveness with which the information is communicated and the extent to which the schedules are structured in
a logical manner. (3 marks)
Notes: – you should assume that the tax rates and allowances for the tax year 2006/07 and for the financial year
to 31 March 2007 apply throughout the question.
– you should ignore value added tax (VAT).
第9题:
(ii) Identify the points that must be confirmed and any action necessary in order for capital treatment to
apply to the transaction. (4 marks)
第10题:
(ii) The answers to any questions that the potential investors may raise in connection with the maximum
possible investment, borrowing to finance the subscription and the implications of selling the shares.
(7 marks)
Note: you should assume that Vostok Ltd and its trade qualify for the purposes of the enterprise investment
scheme and you are not required to list the conditions that need to be satisfied by the company, its
shares or its business activities.
第11题:
3 (a) Discuss why the identification of related parties, and material related party transactions, can be difficult for
auditors. (5 marks)
第12题:
第13题:
(b) Discuss the key issues which will need to be addressed in determining the basic components of an
internationally agreed conceptual framework. (10 marks)
Appropriateness and quality of discussion. (2 marks)
第14题:
(c) State one advantage to a business of keeping its working capital cycle as short as possible.
(2 Marks)
第15题:
(b) ‘Strategic positioning’ is about the way that a company as a whole is placed in its environment and concerns its
‘fit’ with the factors in its environment.
With reference to the case as appropriate, explain how a code of ethics can be used as part of a company’s
overall strategic positioning. (7 marks)
第16题:
(b) Comment (with relevant calculations) on the performance of the business of Quicklink Ltd and Celer
Transport during the year ended 31 May 2005 and, insofar as the information permits, its projected
performance for the year ending 31 May 2006. Your answer should specifically consider:
(i) Revenue generation per vehicle
(ii) Vehicle utilisation and delivery mix
(iii) Service quality. (14 marks)
difference will reduce in the year ending 31 May 2006 due to the projected growth in sales volumes of the Celer Transport
business. The average mail/parcels delivery of mail/parcels per vehicle of the Quicklink Ltd part of the business is budgeted
at 12,764 which is still 30·91% higher than that of the Celer Transport business.
As far as specialist activities are concerned, Quicklink Ltd is budgeted to generate average revenues per vehicle amounting to
£374,850 whilst Celer Transport is budgeted to earn an average of £122,727 from each of the vehicles engaged in delivery
of processed food. It is noticeable that all contracts with major food producers were renewed on 1 June 2005 and it would
appear that there were no increases in the annual value of the contracts with major food producers. This might have been
the result of a strategic decision by the management of the combined entity in order to secure the future of this part of the
business which had been built up previously by the management of Celer Transport.
Each vehicle owned by Quicklink Ltd and Celer Transport is in use for 340 days during each year, which based on a
365 day year would give an in use % of 93%. This appears acceptable given the need for routine maintenance and repairs
due to wear and tear.
During the year ended 31 May 2005 the number of on-time deliveries of mail and parcel and industrial machinery deliveries
were 99·5% and 100% respectively. This compares with ratios of 82% and 97% in respect of mail and parcel and processed
food deliveries made by Celer Transport. In this critical area it is worth noting that Quicklink Ltd achieved their higher on-time
delivery target of 99% in respect of each activity whereas Celer Transport were unable to do so. Moreover, it is worth noting
that Celer Transport missed their target time for delivery of food products on 975 occasions throughout the year 31 May 2005
and this might well cause a high level of customer dissatisfaction and even result in lost business.
It is interesting to note that whilst the businesses operate in the same industry they have a rather different delivery mix in
terms of same day/next day demands by clients. Same day deliveries only comprise 20% of the business of Quicklink Ltd
whereas they comprise 75% of the business of Celer Transport. This may explain why the delivery performance of Celer
Transport with regard to mail and parcel deliveries was not as good as that of Quicklink Ltd.
The fact that 120 items of mail and 25 parcels were lost by the Celer Transport business is most disturbing and could prove
damaging as the safe delivery of such items is the very substance of the business and would almost certainly have resulted
in a loss of customer goodwill. This is an issue which must be addressed as a matter of urgency.
The introduction of the call management system by Quicklink Ltd on 1 June 2004 is now proving its worth with 99% of calls
answered within the target time of 20 seconds. This compares favourably with the Celer Transport business in which only
90% of a much smaller volume of calls were answered within a longer target time of 30 seconds. Future performance in this
area will improve if the call management system is applied to the Celer Transport business. In particular, it is likely that the
number of abandoned calls will be reduced and enhance the ‘image’ of the Celer Transport business.
第17题:
(ii) Briefly discuss TWO factors which could reduce the rate of return earned by the investment as per the
results in part (a). (4 marks)
第18题:
(ii) Briefly explain the extent to which the application of sensitivity analysis might be useful in deciding
which refrigeration system to purchase and discuss the limitations inherent in its use. (3 marks)
第19题:
(ii) Advise Clifford of the capital gains tax implications of the alternative of selling the Oxford house and
garden by means of two separate disposals as proposed. Calculations are not required for this part of
the question. (3 marks)
第20题:
(iv) The stamp duty and/or stamp duty land tax payable by the Saturn Ltd group; (2 marks)
Additional marks will be awarded for the appropriateness of the format and presentation of the memorandum
and the effectiveness with which the information is communicated. (2 marks)
第21题:
(ii) Explain why Galileo is able to pay the inheritance tax due in instalments, state when the instalments are
due and identify any further issues relevant to Galileo relating to the payments. (3 marks)
第22题:
(ii) vehicles. (3 marks)
第23题:
JJG Co is planning to raise $15 million of new finance for a major expansion of existing business and is considering a rights issue, a placing or an issue of bonds. The corporate objectives of JJG Co, as stated in its Annual Report, are to maximise the wealth of its shareholders and to achieve continuous growth in earnings per share. Recent financial information on JJG Co is as follows:
Required:
(a) Evaluate the financial performance of JJG Co, and analyse and discuss the extent to which the company has achieved its stated corporate objectives of:
(i) maximising the wealth of its shareholders;
(ii) achieving continuous growth in earnings per share.
Note: up to 7 marks are available for financial analysis.(12 marks)
(b) If the new finance is raised via a rights issue at $7·50 per share and the major expansion of business has
not yet begun, calculate and comment on the effect of the rights issue on:
(i) the share price of JJG Co;
(ii) the earnings per share of the company; and
(iii) the debt/equity ratio. (6 marks)
(c) Analyse and discuss the relative merits of a rights issue, a placing and an issue of bonds as ways of raising the finance for the expansion. (7 marks)