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ICAEW BTF - MEMORY RECAP QUESTIONS
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152 Q&A
Porter's 5 forces model, what is the purpose and what are the elements? Analyses the competitive aspect of the task environment:
- Bargaining power of suppliers
- Threat of substitute products or services
- Bargaining power of customers
- Threat of new entrants
- Rivalry among existing firms In terms of the management process, what does leading involve? Concerned with generating effort and commitment towards meeting objectives What are the different types of power and their meaning? Coercive - physical force or power of punishment Reward - e.g. power to pay you Legitimate - associated with a particular position Expert - from knowing lots Referent - through charisma/charm Negative - power to disrupt operations What are different types of manager? Line manager - traditional boss Staff manager - no actual power, has power through giving advice (e.g. HR)
Functional manager - best example is IT, hybrid of line and staff manager (has real power in some circumstances) Project manager - has power over a particular project/things that happen in a certain context Would a driver mislaying a tablet containing sensitive information constitute a cyber risk? Potentially yes, cyber risk also encompasses operational IT risks due to poor systems integrity so if the data would be accessible then this could be a cyber risk What are Mintzberg's 5 basic components of an organisation, and what do they do? Technostructure: designs systems and standardises work Strategic apex: those at the top (board, etc.) Middle line: middle management Operating core: front line workers Support staff: cleaning, catering, etc. What are the CATIVA criteria for good information processing? What are the ACIANA criteria for good information security systems? Completeness, accuracy, timeliness, inalterability, verifiability and assessability Availability, confidentiality, integrity, authenticity, non-repudiation, authorisation Difference between data and information?
What are the stages of the rational planning model? SWOT analysis (internal and external) Corporate appraisal Mission, goals and objectives GAP (difference between the appraisal and the mission) Strategic choice Implementation --> review and control (feedback loop) What is cost leadership, differentiation, and focuses? Cost leadership simply about producing at the lowest cost in the industry as a whole (note that not necessarily charging the lowest prices Differentiation about providing a product or service that the industry believes to be unique Focus/niche means restricting activities to one section of the market (can have both a cost focus niche and differentiation niche) When would we use a SWOT analysis? At the corporate appraisal stage What is risk exposure? Simply a measure of the way a business is faced by risks, whether financial/business/etc. What are the fundamental and enhancing qualitative characteristics of financial reporting? Fundamental: relevance and faithfulness of representation Enhancing: understandability, comparability, verifiability and timeliness What is tactical information? What about operational, strategic, and planning? Helps deal with short-term issues and opportunities. Operational is to do with the day-to-day, strategic information has longer term concerns, and planning information is explicitly to do with plans.
When would we like to use a management information system? To help us make STRUCTURED decisions. These can be reduced to a series of rules which, if followed, will lead to the correct decision being made. What are the factors for a balanced scorecard model? What are some example metrics? Customer: satisfaction, returns rates, etc. Internal business processes: product quality, failure rates, etc. Innovation and learning: employee retention, time to market for new products, etc. Financial: gross margin, net margin, etc. What is a fundamental accounting principal with regards to assets and liabilities? When in doubt, understate assets and overstate liabilities What does integrity imply? Professional responsibility Is anyone allowed to say they are an accountant and offer a full range of accountancy services? No - while accountant is not a protected term, there are some things (like insolvency/statutory audit) that require certification What is the FRRP and what do they do? Financial reporting review panel - they investigate departures from accounting standards by large companies such as those listed on LSE For the AGM of a public company, which committees must be represented by their respected chairs? Can the chairman be a member of the remuneration committee?
Exercising authority (traditional power), autonomy (giving more freedom), leadership (inspiring effort from others, more innate). What are examples of different business cultures (Ray Quinn)? Human relations culture (inward looking and flexible) - IT department Internal process culture (inward looking and controlling) - call centre Open systems culture (outward looking and flexible) - media company Rational goal culture (outward looking and controlling) - supermarket What are the implications of Taylorism for organisational management? Main motivator is high wages Managers job is just to tell people what to do Workers jobs are to do what they are told and get paid Essentially people are like machines! What are Herzberg's motivating factors? How do they relate to the Maslow hierarchy of needs? Hygiene factors are like at the bottom of the hierarchy, if they are absent they will demotivate. Motivating factors are towards the top, these are required for positive motivation. Hygiene factor is like health and safety, motivating factor is like a sense of achievement. What are stages of group formation? Forming, storming, norming, performing What are Belbin's ream roles? Leader - like a strategist, not imposing Shaper - like a deputy, may be aggressive and challenging Plant - thoughtful and thought provoking - plants seeds and ideas
Evaluator - the sanity check Resource investigator - acts as bridge to outside world Company worker - practical and efficient, actually does the work Team worker - deals with relationships within the team Finisher - enforce deadlines What are the 4 Cs of HRM? What are hard and soft approaches? Commitment, competence, congruence, cost-effectiveness (short term) Hard approach emphasises the resources element of HRM (Taylorism). Soft approach emphasises the 4 Cs. Difference between IT support and delivery? Support is things like anti-virus and password controls, delivery is things like payroll and circulation reports. What are the sales orientation, product orientation, and production orientation? Sales - just push the product they are available Production - maximise output, not that bothered about the customer Product - Product comes before necessarily considering customer need What are the 4 Ps? What do they relate to? Product, Price, Promotion, Place These are the key components of the marketing mix What are push and pull marketing techniques? Push - e.g. trade journal (encourage intermediary to stock product) Pull - e.g. advertising (persuade the ultimate customer to buy) What are the additional 3 Ps of the services marketing mix? People, Processes, Physical evidence
a newspaper. Greater need to delegate, better communication between strategic apex and operating core, large spans of control. What are mechanistic and organic structures? Mechanistic structures are like bureaucracies, large technostructure and standardisation. Organic organisations like a combination between adhocracy and professional bureaucracy. Good example is google, committed and competent staff with shared values and culture. What are Mintzberg's 5 Ps of strategy? What are 3 levels of strategy? Plan - e.g. a budget Ploy - tactics Pattern - consistency of behaviour Position - how business relates to its environment Perspective - attitude/way of looking at the world Corporate (executive level), Business (Tactical level), Functional (operational) What is an alternative to strategic planning? Emergent approach - basically the opposite of rational planning. Examples might include viagra/adult friend finder. How might we approach strategic options generation? What about strategic options evaluation? Porters generic strategies, Ansoff's product/market strategies Stakeholder analysis, risk analysis How might we evaluate static environments? What about dynamic ones? What about aspects of the environment more generally? 4 Ss - static, single, simple, safe 4 Ds - dynamic, diverse, difficult, dangerous
PESTEL analysis: political, economic, social, technological, ecological, legal What are Kotler's four kinds of competitor and response profiles? Brand competitors (coke/pepsi) - basically the same Industry competitors (tesco/spa) - similar industry profile Generic competitors (Ipad/Thomas cook - compete for same income) Form competitors (match/lighter) - satisfy the same need Response profiles:
- laid back (no response)
- tiger (aggressive response)
- selective (reacts to some but not all)
- stochastic (unpredictable) What are the 9 Ms of a typical resource audit? Machinery Make-up Management MI Markets Materials Men Methods Money Analysing Porter's value chain, what are primary activities and supporting activities? Primary activities (inbound logistics, operations, outbound logistics, marketing and sales, service) Supporting activities (firm infrastructure, human resource management, technology development, procurement) What is the BCG matrix, what should a company do in each quadrant? Low market share and high growth - question mark. Should harvest or build.
Suitability --> are we capable? Acceptability --> are the shareholders happy? Feasibility --> do we have enough money? How can we break down risk? Business risk and non-business risk. Business risks are specific to the business and its choices rather than more general. Non-business risk can be broken down into financial risk (credit and market risk), and operational risk (general risk everyone faces to do with processes/people/law/etc.) What are 4 key risk concepts that determine the scale of risk? Exposure - measure of the way a business is faced by risk Volatility - how the factor to which a business is exposed is likely to alter Impact - what loss will be suffered by the undesired outcome? Probability - how likely is that outcome to occur? What is involved in the risk management process? Awareness and identification, analysis (probability*impact) then response and control. How might we respond to different types of risk? High probability and impact - avoid (don't do) High probability but low impact - reduction (make less likely) Low probability but high impact - sharing (transfer through insurance) Low probability and impact - accept (do nothing) What are key differences between crises and disasters? A crisis impacts on customers, employees and other stakeholders, it therefore impacts externally. Can have a financial crisis (go bust), PR crisis (major cock- up), or strategic crisis (out of touch). By contrast, disaster typically doesn't have a direct impact on stakeholders. Disasters can lead to a crisis if left unchecked. A good example might be a fire
at an office or factory. Disasters threaten business operations but can be mitigated with good contingency planning. What are the key characteristics of good information? ACCURATE: accurate, complete, cost-beneficial, user-targeted, relevant, authoritative, timely, easy to use What are the 4 Vs of big data? Which is unique to big data? Volume, Velocity, Variety, Veracity Key point is the velocity which is unique What is the distinction between structured and unstructured data? Structured - obtained with a particular purpose in mind (e.g. survey) Unstructured - obtained without a particular purpose (e.g. captured data from smartphones, or user generated data like tweets) What are the two underlying assumptions that financial information must be prepared under? What does the IASB say are the key qualitative characteristics of useful financial statements? Accruals basis accounting and going concern. Understandability, relevance, reliability, comparability. What is a management information system? How does it differ from an information management system? MIS converts data from mainly internal sources into information enabling managers to make better decisions. An example would be management accounts. Information management systems are more general. What are types of information management system and their uses? Executive support system: pools internal and external sources, allows senior managers make strategic, unstructured decisions.
Financial reporting (external audience, financial statements, tax, external regulation How do not for profit organisations measure their performance? The three Es (efficiency, economy, effectiveness) What are critical success factors and key performance indicators? Give an example of a pizza place. Critical success factors are generic things an organisation must do well to succeed. Key performance indicators are how we measure the achievement of CSFs. For example, a pizza place might have the CSF of speed of service, and a KPI may be number of complaints, mystery shopper results, how many times they had to give free pizza, etc. How can we distinguish debt holders and equity holders in terms of risk and return? Debt holders face lower risk but lower returns (debt often secured by fixed/floating charges, rank higher to receive capital back) Equity holders face higher risk but can enjoy higher returns What are key benefits of financial inter-mediation? Small amounts deposited by savers can be combined. Short-term savings can be transferred into long-term borrowings, search costs are reduced and risk is spread. What are key different forms of money transmission? General clearing - mainly cheques, takes 3-4 days Electronic funds transfer (EFT) - mainly debit/credit cards BACS - type of EFT that deals with salaries, standing orders, diret debits CHAPS - same day clearing for large payments
SWIFT - similar to CHAPS but for international payments What is a primary and secondary bank? Primary: normal retail banks. Operate cheque accounts and deal with clearing. Secondary: merchant banks, generally deal in debt, do not take part in clearing. What are the two bodies of the bank of England that ensure financial stability? Financial Policy Committee - macroprudential responsibility for identifying, monitoring, and taking action to reduce risk (e.g. bank capital/equity ratios) Prudential Regulation Authority - supervise safety of regulated firms (deposit taking institutions, insurers and investment banks) What is the legal relationship between the bank and its customer? What are the 4 elements? Receivable/payable relationship Bailor/bailee relationship Principal/agent relationship (cheques) Mortgagor/mortgagee relationship What are some key duties and rights of the bank? Duties: honour cheques, repay amount deposited on demand, provide bank statement, confidentiality, reasonable notice of account closure Rights: charge reasonable fees, use customers money in a legal and morally acceptable way, be repaid overdrawn balances on demand, be indemnified against possible losses What are some key money market financial instruments? Treasury bills: very secure and liquid, but low returns Deposits: slightly higher risk and return than treasury bills (though not much)
A bill of exchange is drawn up by the exporter and sent to the buyers bank. The bank accepts the obligation to pay the bill, meaning payment is guaranteed. The seller may then sell/discount the bill to a third party in return for cash now (provides liquidity and mitigates risk of irrecoverable debt. Letter of credit provides a payment method where the exporter makes a deal with the buyer and a participating bank before the sale takes place. Seller (exporter) receives immediate payment less some discount, and the buyer gets a credit period before paying. Can also get more straightforward export credit insurance. What are the three basic aspects of the professional accountants work? Maintaining control and safeguarding assets Financial management Financial reporting What are criteria for ICAEW membership? 2 A levels or equivalent, 450 days training with an approved organisation, professional examinations, certificate of suitability of membership, admission and subscription fees. To maintain membership must obey rules and regulations, undertake continuing professional development. For public practice: must hold a practicing certificate, code of ethics, and be covered by professional indemnity insurance. What are the reserved areas of practice? According to the companies act, what does being a qualified chartered accountant allow you to be appointed as?
- Statutory audit
- Investment business
- Insolvency practice
- Probate
Note that accountant is not a protected term. According to the companies act this qualifies you to be company secretary if the company is listed. What are the 5 fundamental ethical principals? Confidentiality, Objectivity, Professional competence and due care, Integrity, Professional behaviour What is IFAC and its aims? What are the UK members? What is the CCAB and who are the members? IFAC is the international federation of accountants - aims to protect public interest by ensuring high quality practices in accounting. Members are basically every UK accounting body. CCAB is the consultative committee of accountancy bodies. UK members are ICAEW, ICAS, Chartered accountants Ireland, ACCA, CIPFA. Notably CIMA is not a member since the focus is generally more on audit since accounting more regulated by the FRC. What area the three elements of regulation in the accounting profession?
- Government legislation
- The profession (self regulation)
- Oversight mechanism (FRC) What is the PO team, and what do they have statutory power over? An organ of the FRC, main responsibility for supervision of auditing profession, statutory monitoring of the quality of auditing. Also has some non- audit areas where is makes recommendations: education, training, standards, ethical matters, professional conduct, etc. ICAEW and CCAB members have commitment to consider PO recommendations and either implement them or give a reason why they have not. With audit, the PO team can change audit procedures of firms, make recommendations for regulatory action, and refer matters to the PD team. What are the two main branches of the FRC?
