C5 - Student Guidance Notes

Student Guidance Notes

September 2004

Guide C05

Guidance notes for students planning to sit C05 Fundamentals of Ethics, Corporate Governance and Business Law of the new 2006 CIMA Certificate in Business Accounting syllabus

This guide outlines the issues relating to transition from C05 Business Law of the 2000 syllabus to C05 Fundamentals of Ethics, Corporate Governance and Business Law of the new 2006 CIMA Certificate in Business Accounting syllabus. The first section of this guide compares the two syllabuses, highlighting the differences between them. The second part of this guide focuses on the assessment strategy for the new C05 Fundamentals of Ethics, Corporate Governance and Business Law exam. The third part of this guide lists additional (or changed) learning outcomes in the new syllabus. If you have any further queries relating to this guide, please contact the CIMA Contact Centre: Telephone+ 44 (0)20 8849 2251 Email: [email protected]

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Syllabus Comparison New Syllabus

Old Syllabus

C05 Fundamentals of Ethics, Corporate Governance and Business Law A. Ethics and Business 15% B. Ethical Conflict 10% C. Corporate Governance 10% D. Comparison of English Law with Alternative Legal Systems 10%

C05 Business Law

E. The Law of Contract 20%

5(ii) Establishing Contractual Obligations 10% 5(iii) Performing the Contract 10% 5(iv) Contractual Breakdown 10% 5(v)The law of employment 10% 5(vi) Company formation 15% 5(vii) Corporate administration 10% 5(viii) Corporate finance 10% 5(ix) Corporate management 15%

F. The Law of Employment 10% G. Company Administration and Finance 25%

Comparison and Comments

New section New section New section 5(i) The English legal system 10%

This has the same weighting as the comparable section in the old syllabus but has the additional comparative law content. This has been included to recognise the global nature of business and the increase in international regulations. The material remains unchanged between the three old sections and the single new section. Since law represents 65% of the new paper the allocation to contract law is similar to that previously seen, that is 20/65 or approximately 30% of the law content. No change in material or study weighting. The law relating to companies is now in one section rather than four. The material remains unchanged.

Aims There are four aims dealing with the new material seen in this paper. The first three cover ethics, the role of the professional accountant in relation to the profession, business and society and corporate governance. Law has developed to include a comparison of English law with alternative legal systems and how the rapid growth of international regulations is affecting business.

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Assessment There will be a computer based assessment (CBA) of 2 hours duration, comprising 75 compulsory questions, each with one or more parts. The current Business Law paper requires a CBA of 60 minutes duration with 40 questions with one or more parts. A variety of objective test question types and styles will be used within the assessment. As well as the conventional multiple choice format other possible styles include: • filling in the blank in a sentence • listing items in rank order • stating a definition (in not more than __ words) • identifying a key issue, for example advantage/ disadvantage (in not more than __ words) • calculating one specific figure, for example profit for a period. • completing a blank or partially completed prescribed format using terms and/or numbers, for example an overhead cost table • identifying points on a graph or diagram, for example a break even point • identifying a specific term describing action/valuation seen in a scenario, for example the conditions for a recession • matching items together or with a description, for example “are the following cash or non-cash items” • interpreting numerical or graphical data.

For further information about computer based assessment please visit the website at www.cimaglobal.com/cba

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Learning Outcomes Additional (or changed) learning outcomes The following learning outcomes were either not included in the corresponding “old” syllabus or have experienced a change: • • • • • • • • • • • • • • • • • • • • • • • • •

apply the values and attitudes that provide professional accountants with a commitment to act in the public interest and with social responsibility; explain the need for a framework of laws, regulations and standards in business and their application; explain the nature of ethics and its application to business and the accountancy profession; identify the difference between detailed rules-based and framework approaches to ethics; dentify the need for continual personal improvement and life long learning; identify the need to develop the virtues of reliability, responsibility, timeliness, courtesy and respect; explain the ethical principles of integrity, objectivity, professional competence, due care and confidentiality; identify concepts of independence, scepticism, accountability and social responsibility; explain the reasons why CIMA and IFAC each have a ‘Code of Ethics for Professional Accountants’. explain the relationship between ethics, governance, the law and social responsibility; describe the consequences of unethical behaviour to the individual, the profession and society; identify situations where ethical dilemmas and conflicts of interest occur; explain how ethical dilemmas and conflicts of interest can be resolved. define corporate governance; explain the interaction of corporate governance with business ethics and company law; describe the history of corporate governance internationally; explain the effects of corporate governance on directors’ behaviour and their duties of skill and care; explain different board structures, the role of the board and corporate governance issues; describe the types of policies and procedures that best practice companies introduce; explain the regulatory governance framework for companies illustrate the operation of the doctrine of precedent by reference to the essential elements of the tort of negligence and its application to professional advisers; compare the elements of alternative legal systems, Sharia Law and the role of international legal regulations. explain how the law determines whether negotiating parties have reached agreement and the role of consideration in making that agreement enforceable; explain when the parties will be regarded as intending the agreement to be legally binding and how an agreement may be avoided because of misrepresentations; explain how the contents and the terms of a contract are established and the possible repercussions of non-performance; 4

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• • • • • • •

explain the type of breach necessary to cause contractual breakdown and the remedies which are available for serious and minor breaches of contract. explain the difference between employees and independent contractors and how the contents of a contract of employment are established; explain the essential characteristics of the different forms of business organisations and the implications of corporate personality; explain the differences between public and private companies and establishing a company by registration or purchasing “off the shelf”; explain the voting rights of directors and shareholders and identify the various types of shareholder resolutions; explain the maintenance of capital principle and the procedure to increase and reduce share capital, including the repercussions of issuing shares for an improper purpose; explain the procedure for the appointment, retirement, disqualification and removal of directors and their powers and duties during office;

Transition Arrangements Exams based on the CIMA Certificate in Business Accounting 2006 Syllabus, will be available at CIMA approved CBA centres from 2 October 2006. Exams based on the CIMA Certificate in Business Accounting 2000 Syllabus, will be available at CIMA approved CBA centres until the 1 March 2007. Exams based on the 2000 and 2006 Syllabus will be available concurrently between the 2 October 2006 and the 1 March 2007.

Conclusion This paper has seen a substantial change. The law material has been maintained, indeed enhanced with the addition of some comparative law. The new sections on ethics and corporate governance now cover one third of the syllabus. However, the assessment has also been extended with a computer based assessment (CBA) of two hours compared to the one hour for Business Law and the number of questions rising from 40 to 75. It is worth noting that since questions in the CBA are selected by section according to study weighting, there are likely to be approximately 50 questions related to law (65/100 * 75). This exceeds that for the previous paper in total.

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