2008 年 6 月 ACCA 考试 P1 真题
Section A – This ONE question is compulsory and MUST be attempted
1 .Rowlands & Medeleev(R&M),a major listed European civil engineering company,
was successful in its bid to become principal (lead) contractor to build the Giant
Dam Project in an East Asian country. The board of R&M prided itself in observing
the highest standards of corporate governance. R&M‘s client,the government of the
East Asian country,had taken into account several factors in appointing the
principal contractor including each bidder‘s track record in large civil engineering
projects,the value of the bid and a statement,required from each bidder,on how
it would deal with the‘sensitive issues’ and publicity that might arise as a result
of the project.
The Giant Dam Project was seen as vital to the East Asian country’s economic
development as it would provide a large amount of hydroelectric power. This was seen
as a ‘clean energy’ driver of future economic growth. The government was keen to
point out that because hydroelectric power did not involve the burning of fossil
fuels,the power would be environmentally clean and would contribute to the East
Asian country’s ability to meet its internationally agreed carbon emission targets.
This,in turn,would contribute to the reduction of greenhouse gases in the
environment. Critics,such as the environmental pressure group‘Stop-the-dam’,
however,argued that the project was far too large and the cost to the local
environment would be unacceptable. Stop-the-dam was highly organised and,according
to press reports in Europe,was capable of disrupting progress on the dam by measures
such as creating ‘human barriers’ to the site and hiding people in tunnels who
would have to be physically removed before proceeding. A spokesman for Stop-the-dam
said it would definitely be attempting to resist the Giant Dam Project when
construction started.
The project was intended to dam one of the region’s largest rivers,thus creating
a massive lake behind it. The lake would,the critics claimed,not only displace
an estimated 100,000 people from their homes,but would also flood productive
farmland and destroy several rare plant and animal habitats. A number of important
archaeological sites would also be lost. The largest community to be relocated was
the indigenous First Nation people who had lived on and farmed the land for an
estimated thousand years. A spokesman for the First Nation community said that the
‘true price‘ of hydroelectric power was ’misery and cruelty’。A press report
said that whilst the First Nation would be unlikely to disrupt the building of the
dam,it was highly likely that they would protest and also attempt to mobilise opinion
in other parts of the world against the Giant Dam Project.
The board of R&M was fully aware of the controversy when it submitted its tender
to build the dam. The finance director,Sally Grignard,had insisted on putting an
amount into the tender for the management of ‘local risks’。 Sally was also
responsible for the financing of the project for R&M. Although the client was
expected to release money in several ‘interim payments’ as the various parts of
the project were completed to strict time deadlines,she anticipated a number of
working capital challenges for R&M,especially near the beginning where a number
of early stage costs would need to be incurred. There would,she explained,also
be financing issues in managing the cash flows to R&M’s many subcontractors. Although
the major banks financed the client through a lending syndicate, R&M’s usual bank
said it was wary of lending directly to R&M for the Giant Dam Project because of
the potential negative publicity that might result. Another bank said it would
provide R&M with its early stage working capital needs on the understanding that
its involvement in financing R&M to undertake the Giant Dam Project was not disclosed.
A press statement from Stop-the-dam said that it would do all it could to discover
R&M’s financial lenders and publicly expose them. Sally told the R&M board that
some debt financing would be essential until the first interim payments from the
client became available.
When it was announced that R&M had won the contract to build the Giant Dam
Project,some of its institutional shareholders contacted Richard Markovnikoff,
the chairman. They wanted reassurance that the company had fully taken the
environmental issues and other risks into account. One fund manager asked if Mr
Markovnikoff could explain the sustainability implications of the project to assess
whether R&M shares were still suitable for his environmentally sensitive clients.
Mr Markovnikoff said,through the company‘s investor relations department, that
he intended to give a statement at the next annual general meeting (AGM) that he
hoped would address these environmental concerns. He would also,he said,make a
statement on the importance of confidentiality in the financing of the early stage
working capital needs.
(a) Any large project such as the Giant Dam Project has a number of
stakeholders.
Required:
(i) Define the terms ‘stakeholder’ and ‘stakeholder claim’, and identify
from the case FOUR of R&M’s external stakeholders as it carries out the Giant Dam
Project; (6 marks)
(ii) Describe the claim of each of the four identified stakeholders. (4 marks)
(b) Describe a framework to assess the risks to the progress of the Giant Dam
Project. Your answer should include a diagram to represent the framework. (6 marks)
(c) Using information from the case,assess THREE risks to the Giant Dam Project.
(9 marks)
(d) Prepare the statement for Mr Markovnikoff to read out at the AGM. The
statement you construct should contain the following.
(i) A definition and brief explanation of ‘sustainable development’; (3
marks)
(ii) An evaluation of the environmental and sustainability implications of
the Giant Dam Project; (8 marks)
(iii) A statement on the importance of confidentiality in the financing of
the early stage working capital needs and an explanation of how this conflicts with
the duty of transparency in matters of corporate governance. (6 marks)
Professional marks for layout, logical flow and persuasiveness of the statement.
(4 marks)
(e)Internal controls are very important in a complex civil engineering project
such as the Giant Dam Project.
Required:
Describe the difficulties of maintaining sound internal controls in the Giant
Dam Project created by working through sub-contractors.
Section B – TWO questions ONLY to be attempted
2 It was the final day of a two-week-long audit of Van Buren Company,a
longstanding client of Fillmore Pierce Auditors. In the afternoon,Anne Hayes,a
recently qualified accountant and member of the audit team,was following an audit
trail on some cash payments when she discovered what she described to the audit
partner, Zachary Lincoln,as an ‘irregularity’。A large and material cash payment
had been recorded with no recipient named. The corresponding invoice was handwritten
on a scrap of paper and the signature was illegible.
Zachary,the audit partner,was under pressure to finish the audit that afternoon.
He advised Anne to seek an explanation from Frank Monroe,the client‘s finance
director. Zachary told her that Van Buren was a longstanding client of Fillmore
Pierce and he would be surprised if there was anything unethical or illegal about
the payment. He said that he had personally been involved in the Van Buren audit
for the last eight years and that it had always been without incident. He also said
that Frank Monroe was an old friend of his from university days and that he was certain
that he wouldn‘t approve anything unethical or illegal. Zachary said that Fillmore
Pierce had also done some consultancy for Van Buren so it was a very important client
that he didn‘t want Anne to upset with unwelcome and uncomfortable questioning.
When Anne sought an explanation from Mr Monroe,she was told that nobody could
remember what the payment was for but that she had to recognise that ‘real’ audits
were sometimes a bit messy and that not all audit trails would end as she might like
them to. He also reminded her that it was the final day and both he and the audit
firm were under time pressure to conclude business and get the audit signed off.
When Anne told Zachary what Frank had said,Zachary agreed not to get the audit
signed off without Anne‘s support,but warned her that she should be very certain
that the irregularity was worth delaying the signoff for. It was therefore now Anne’
s decision whether to extend the audit or have it signed off by the end of Friday
afternoon.
Required:
(a) Explain why ‘auditor independence’ is necessary in auditor-client
relationships and describe THREE threats to auditor independence in the case. (9
marks)
(b) Anne is experiencing some tension due to the conflict between her duties
and responsibilities as an employee of Fillmore Pierce and as a qualified
professional accountant.
Required:
(i) Compare and contrast her duties and responsibilities in the two roles of
employee and professional accountant. (6 marks)
(ii) Explain the ethical tensions between these roles that Anne is now
experiencing. (4 marks)
(c) Explain how absolutist (dogmatic) and relativist (pragmatic) ethical
assumptions would affect the outcome of Anne’s decision. (6 marks)
(25 marks)
3
Mary Hobbes joined the board of Rosh and Company,a large retailer,as finance
director earlier this year. Whilst she was glad to have finally been given the chance
to become finance director after several years as a financial accountant,she also
quickly realised that the new appointment would offer her a lot of challenges. In
the first board meeting,she realised that not only was she the only woman but she
was also the youngest by many years.
Rosh was established almost 100 years ago. Members of the Rosh family have
occupied senior board positions since the outset and even after the company’s
flotation 20 years ago a member of the Rosh family has either been executive chairman
or chief executive. The current longstanding chairman,Timothy Rosh,has already
prepared his slightly younger brother,Geoffrey (also a longstanding member of the
board)to succeed him in two years’time when he plans to retire. The Rosh family,
who still own 40% of the shares,consider it their right to occupy the most senior
positions in the company so have never been very active in external recruitment.
They only appointed Mary because they felt they needed a qualified accountant on
the board to deal with changes in international financial reporting standards.
Several former executive members have been recruited as non-executives
immediately after they retired from full-time service. A recent death,however,
has reduced the number of non-executive directors to two. These sit alongside an
executive board of seven that,apart from Mary,have all been in post for over ten
years.
Mary noted that board meetings very rarely contain any significant discussion
of strategy and never involve any debate or disagreement. When she asked why this
was,she was told that the directors had all known each other for so long that they
knew how each other thought. All of the other directors came from similar
backgrounds,she was told,and had worked for the company for so long that they all
knew what was ‘best’ for the company in any given situation. Mary observed that
notes on strategy were not presented at board meetings and she asked Timothy Rosh
whether the existing board was fully equipped to formulate strategy in the changing
world of retailing. She did not receive a reply.
Required:
(a) Explain ‘agency’ in the context of corporate governance and criticise
the governance arrangements of Rosh and Company. (12 marks)
(b) Explain the roles of a nominations committee and assess the potential
usefulness of a nominations committee to the board of Rosh and Company. (8 marks)
(c) Define ‘retirement by rotation’ and explain its importance in the context
of Rosh and Company.
4
At an academic conference,a debate took place on the implementation of
corporate governance practices in eveloping countries. Professor James West from
North America argued that one of the key needs for developing countries was to
implement rigorous systems of corporate governance to underpin investor confidence
in businesses in those countries. If they did not, he warned, there would be no
lasting economic growth as potential foreign inward investors would be discouraged
from investing.
In reply,Professor Amy Leroi, herself from a developing country,reported that
many developing countries are discussing these issues at governmental level. One
issue,she said,was about whether to adopt a rules-based or a principles-based
approach. She pointed to evidence highlighting a reduced number of small and medium
sized initial public offerings in New York compared to significant growth in London.
She suggested that this change could be attributed to the costs of complying with
Sarbanes-Oxley in the United States and that over-regulation would be the last thing
that a developing country would need. She concluded that a principles-based
approach,such as in the United Kingdom,was preferable for developing countries.
Professor Leroi drew attention to an important section of the Sarbanes-Oxley
Act to illustrate her point. The key requirement of that section was to externally
report on - and have attested (verified) - internal controls. This was,she argued,
far too ambitious for small and medium companies that tended to dominate the
economies of developing countries.
Professor West countered by saying that whilst Sarbanes-Oxley may have had some
problems,it remained the case that it regulated corporate governance in the‘largest
and most successful economy in the world’。He said that rules will sometimes be
hard to follow but that is no reason to abandon them in favour of what he referred
to as ‘softer’ approaches.
(a) There are arguments for both rules and principles-based approaches to
corporate governance.
Required:
(i) Describe the essential features of a rules-based approach to corporate
governance; (3 marks)
(ii) Construct the argument against Professor West‘s opinion, and in favour
of Professor Leroi’s opinion that a principles-based approach would be preferable
in developing countries. Your answer should consider the particular situations of
developing countries. (10 marks)
(b) The Sarbanes-Oxley Act contains provisions for the attestation
(verification) and reporting to shareholders of internal controls over financial
reporting.
Required:
Describe the typical contents of an external report on internal controls. (8
marks)
(c)Construct the arguments in favour of Professor Leroi‘s remark that external
reporting requirements on internal controls were ‘too ambitious’ for small and
medium companies.