ACCA考试P1-P3模拟题及解析4

　　以下是高顿网校小编为学员整理的：ACCA P1-P3模拟题及解析。
 

　　P&J is a long established listed company based in Emmland, a highly developed and relatively prosperous country.

　　For the past 60 years, P&J has been Emmland’s largest importer and processor of a product named X32, a compound used in a wide variety of building materials, protective fabrics and automotive applications. X32 is a material much valued for its heat resistance, strength and adaptability, but perhaps most of all because it is flexible and also totally fireproof. It is this last property that led to the growth of X32 use and made P&J a historically successful company and a major exporter.

　　X32 is mined in some of the poorest developing countries where large local communities depend heavily on X32 mining for their incomes. The incomes from the mining activities are used to support community development,including education, sanitation and health facilities in those developing countries. The X32 is then processed in dedicated X32 facilities near to the mining communities, supporting many more jobs. It is then exported to Emmland for final manufacture into finished products and distribution.

　　Each stage of the supply chain for X32 is dedicated only to X32 and cannot be adapted to other materials. In Emmland, P&J is the major employer in several medium-sized towns. In Aytown, for example, P&J employs 45% of the workforce and in Betown, P&J employs 3,000 people and also supports a number of local causes including a children’s nursery, an amateur football club and a number of adult education classes. In total, the company employs 15,000 people in Emmland and another 30,000 people in the various parts of the supply chain (mining and processing) in developing countries. Unlike in Emmland, where health and safety regulations are strong, there are no

　　such regulations in most of the developing countries in which P&J operates.

　　Recently, some independent academic research discovered that X32 was very harmful to human health, particularly in the processing stages, causing a wide range of fatal respiratory diseases, including some that remain inactive in the body for many decades. Doctors had suspected for a while that X32 was the cause of a number of conditions that P&J employees and those working with the material had died from, but it was only when Professor Harry Kroll discovered how X32 actually attacked the body that the link was known for certain. The discovery caused a great deal of distress at P&J, and also in the industries which used X32.

　　The company was faced with a very difficult situation. Given that 60% of P&J’s business was concerned with X32,Professor Kroll’s findings could not be ignored. Although demand for X32 remained unaffected by Kroll’s findings in the short to medium term, the company had to consider a new legal risk from a stream of potential litigation actions against the company from employees who worked in environments containing high levels of X32 fibre, and workers in industries which used X32 in their own processes.

　　In order to gain some understanding of the potential value of future compensation losses, P&J took legal advice and produced two sets of figures, both describing the present value of cumulative future compensation payments through litigation against the company. These forecasts were based on financial modelling using another product of which the company was aware, which had also been found to be hazardous to health.

　　In 5 years In 15 years In 25 years In 35 years

　　$(M) $(M) $(M) $(M)

　　Best case      5 30 150 400

　　Worst case     20 80 350 1,000

　　The finance director (FD), Hannah Yin, informed the P&J board that the company could not survive if the worst-case scenario was realised. She said that the actual outcome depended upon the proportion of people affected, the period that the illness lay undetected in the body, the control measures which were put in place to reduce the exposure of employees and users to X32, and society’s perception of X32 as a material. She estimated that losses at least the size of the best case scenario were very likely to occur and would cause a manageable but highly damaging level of losses.

　　The worst case scenario was far less likely but would make it impossible for the company to survive. Although profitable, P&J had been highly geared for several years and it was thought unlikely that its banks would lend it any further funds. Hannah Yin explained that this would limit the company’s options when dealing with the risk. She also said that the company had little by way of retained earnings.

　　Chief executive officer, Laszlo Ho, commissioned a study to see whether the health risk to P&J workers could be managed with extra internal controls relating to safety measures to eliminate or reduce exposure to X32 dust. The confidential report said that it would be very difficult to manage X32 dust in the three stages of the supply chain unless the facilities were redesigned and rebuilt completely, and unless independent breathing apparatus was issued to all 2 people coming into contact with X32 at any stage. FD Hannah Yin calculated that a full refit of all of the company’s mines, processing and manufacturing plants (which Mr Ho called ‘Plan A’) was simply not affordable given the current market price of X32 and the current costs of production. Laszlo Ho then proposed the idea of a partial refit of the

　　Aytown and Betown plants because, being in Emmland, they were more visible to investors and most other stakeholders.

　　Mr Ho reasoned that this partial refit (which he called ‘Plan B’) would enable the company to claim it was making progress on improving internal controls relating to safety measures whilst managing current costs and ‘waiting to see’how the market for X32 fared in the longer term. Under Plan B, no changes would be made to limit exposure to X32 in the company’s operations in developing countries.

　　Hannah Yin, a qualified accountant, was trusted by shareholders because of her performance in the role of FD over several years. Because she would be believed by shareholders, Mr Ho offered to substantially increase her share options if she would report only the ‘best case’ scenario to shareholders and report ‘Plan B’ as evidence of the company’s social responsibility. She accepted Mr Ho’s offer and reported to shareholders as he had suggested. She also said that the company was aware of Professor Kroll’s research but argued that the findings were not conclusive

　　and also not considered a serious risk to P&J’s future success.

　　Eventually, through speaking to an anonymous company source, a financial journalist discovered the whole story and felt that the public, and P&J’s shareholders in particular, would want to know about the events and the decisions that had been taken in P&J. He decided to write an article for his magazine, Investors in Companies, on what he had discovered.
 

　　(a) Define ‘social footprint’ and describe, from the case, four potential social implications of Professor Kroll’s discovery about the health risks of X32. (10 marks)

　　(b) Describe what ‘risk diversification’ means and explain why diversifying the risk related to the potential claims against the use of X32 would be very difficult for P&J. (10 marks)

　　(c) As an accountant, Hannah Yin is bound by the IFAC fundamental principles of professionalism.

　　Required: Criticise the professional and ethical behaviour of Hannah Yin, clearly identifying the fundamental principles of professionalism she has failed to meet. (9 marks)

　　(d) Writing as the journalist who discovered the story, draft a short article for the magazine Investors in Companies. You may assume the magazine has an educated readership. Your article should achieve the following:

　　(i) Distinguish between strategic and operational risk and explain why Professor Kroll’s findings are a strategic risk to P&J; (8 marks)

　　(ii) Discuss the board’s responsibilities for internal control in P&J and criticise Mr Ho’s decision to choose Plan B. (9 marks)

　　Professional marks will be awarded in part (d) for the structure, logical flow, persuasiveness and tone of the article. (4 marks)

　　(50 marks)
 

　　(a) Social footprint and potential social implications.

　　Social footprint

　　The term ‘footprint’ is used to refer to the impact or effect that an entity (such as an organisation) can have on a given set of concerns or stakeholder interests. A ‘social footprint’ is the impact on people, society and the wellbeing of communities.

　　Impacts can be positive (such as the provision of jobs and community benefits) or negative, such as when a plant closure increases unemployment or when people become sick from emissions from a plant or the use of a product. Professor Kroll’s findings have both positive and negative impacts upon society and communities in the case of P&J.

　　Potential implications

　　The discovery by Professor Kroll will lead, whether by a tightening of controls or by a reduction in P&J’s activities, to lower exposures to X32 in Aytown and Betown, and hence there will, over time, be less X32-related disease. There will, in consequence, be fewer people suffering, and, accordingly, less misery for the affected families and friends of sufferers. A lower mortality from X32-related disease will benefit communities and families as well as those individuals directly affected.

　　However, as they are continuing to manufacture the product, if Professor Kroll’s findings prove correct, larger numbers of people using the product will ultimately be affected worldwide.

　　Loss of jobs in the various stages of the  P&J supply chain. The forecast losses, even in the best case scenario, would be likely to involve the loss of jobs and employment levels at P&J plants and its suppliers. The worst case scenario, in which the company itself would be lost, would involve the loss of the 45,000 P&J jobs plus many more among suppliers and in the communities supported by the P&J plants (such as in local businesses in Aytown and Betown).

　　Loss of, or serious damage to, communities in which the operations are located. This includes the economic and social benefits in the developing countries and a very high level of social loss in Aytown and Betown (in Emmland), where both towns are highly dependent on a single employer. It is likely that Aytown, effectively a ‘company town’ with 45% of the jobs at P&J, will be very badly affected and the good causes in Betown, such as the nursery and adult education classes, will no longer be able to be supported. The loss of a major employer from a town can lead to a loss of community cohesion, net outward migration and a loss of, or deterioration in, community facilities.

　　There will be a loss of economic value for shareholders, and a reduction in the standards of living for those depending upon the company’s value for income or capital growth. This might result in a reduction in pension benefits or endowment values, where P&J shares are a part of the value of such funds. Individuals holding P&J shares may lose a substantial proportion of their personal wealth. [Tutorial note: Allow other relevant impacts such as loss of taxes to fund states services, increases in state funding to support unemployed/sick workers, etc.]
 

　　(b) Risk diversification.

　　Diversification of risk means adjusting the balance of activities so that the company is less exposed to the risky activities and has a wider range of activities over which to spread risk and return. Risks can be diversified by discontinuing risky activities or reducing exposure by, for example, disposing of assets or selling shares associated with the risk exposure.

　　Problems with diversification of risks In the case of P&J, the case highlights a number of issues that make P&J particularly vulnerable and which would place constraints on its ability to diversify the X32 legal risk.

　　A key risk is that the company’s portfolio of activities is heavily skewed towards X32 with 60% of its business in X32 when Kroll’s findings were published. This is a very unbalanced portfolio and makes the company structurally vulnerable to any health threat that X32 poses. It means that a majority of its assets and expertise will be dedicated to a single material and anything that might be a risk relating to sales of that material would be a risk to the whole company.

　　The case says that the plant cannot be adapted to produce other materials. A mine, for example, cannot suddenly be‘adapted’ to produce a safer alternative. The case also says that processing plants are dedicated exclusively to X32 and cannot be modified to process other materials. This means that they either continue to process X32 or they must be completely refitted to work on alternative materials.

　　As a result of that, P&J is unlikely to be able to dispose of X32 assets profitably now that Kroll’s findings are known about and the reasons for the health concerns have been identified. The reaction of society to X32 was highlighted by Hannah Yin as a key factor in determining the likelihood of the risk and this might make it difficult to sell the assets on to others.

　　Finally, the obvious way to diversify the risk is to expand the remaining 40% of the portfolio to become more prominent.

　　However, the company has little by way of retained earnings and is already highly geared with little prospect of further borrowing. This is likely to limit its options for developing new products as a means of diversification. Share issues would be a possible way of re-financing, but with such a high exposure to X32 losses, this would be problematic.[Tutorial note: Some candidates may attempt to interpret the data in the case numerically. Allow marks if relevant points are made.]
 

　　(c) Criticisms of Hannah Yin’s behaviour related to fundamental principles.

　　There are five fundamental principles that apply to all professionals including professional accountants. They are integrity,objectivity, professional competence and due care, confidentiality and professional behaviour. In this case, the fundamental principles that Hannah Yin has breached are integrity, objectivity and professional behaviour.

　　Criticise Hannah Yin Hannah betrayed the trust of shareholders, making a disclosure in her name precisely because she knew she would be believed. This shows a lack of integrity and is also very unprofessional behaviour. Her status as a professional and her performance over recent years had built up a stock of trust in her. It was her responsibility to maintain and cultivate this trust

　　and to continue to give shareholders good reason to trust her as a professional accountant. To make biased and partial disclosures precisely because she was trusted is cynical and a betrayal of her duty as a company director and as a professional. As a professional with integrity, Hannah Yin should have the highest levels of probity in all personal and professional dealings. Professionals should be straightforward and honest in all relationships, and never take part in anything that might undermine, or appear to undermine, the trust which society has placed in them.

　　Furthermore, she accepted inducements to comply with Mr Ho’s wishes. A significant increase in share options made her disproportionately concerned with the short-term maintenance of the company share price, and this helped to cloud her judgement and reduced her objectivity as a professional. She may have reasoned that it would have been against her own economic self interest to disclose the worst case scenario because it would reduce the value of her share options in the short

　　term. Hannah Yin should not have allowed bias, conflicts of interest or undue influence to cloud her judgements on professional decisions. This means, for example, that she must not allow the possibility of particular personal gains to over-ride the imperative to always uphold the public interest and represent the best interests of shareholders.

　　Finally, she knowingly and intentionally misled shareholders by only reporting the most optimistic risk forecasts. This is a clear breach of the integrity and professional behaviour required of a person in her position. The principles of transparency and fairness require companies to be truthful and complete in their disclosures to shareholders, especially when price-sensitive information (such as the health risks of X32) is involved. Professionals such as Hannah Yin should comply fully with all relevant laws and regulations, whilst at the same time avoiding anything that might discredit the profession or bring it into disrepute. This involves complying with the spirit as well as the letter of whichever regulations apply.
 

　　(d) Article for Investors in Companies.

　　(i) Strategic and operational risk and explain why findings are strategic.Trouble at P&J

　　These must be difficult times to be a director at P&J, Emmland’s largest producer of X32. What does a board do when it is faced with having caused a large number of terrible health problems for employees and users of X32, whilst at the same time having no strategic alternative but to carry on and try to manage what are sure to be enormous long-term liabilities?

　　Strategic and operational risks The company is facing a highly strategic risk since the publication of Professor Kroll’s findings. Whereas operational threats are those affecting a part of a company, perhaps a risk to a raw material or the loss of a product market, a strategic risk is one that has the possibility, if realised, to affect the company as a whole and its future strategic success.

　　We have seen similar risks before to important industries where, for example, entire industries have disappeared from some developed countries because of changes in international labour market costs and political changes. These are examples of strategic risks materialising, and the effects can be disastrous for those affected. Strategic risk to P&J

　　P&J shareholders will appreciate knowing that Kroll’s report has the effect of being a strategic risk for P&J for at least three reasons. To begin with, his findings potentially affect the whole company rather than just parts of it, such is the extent of P&J’s exposure to this commodity through vertical integration. Presumably this strategy had previously been thought a good idea, with the company directly owning all three stages in the supply chain, from mining, to processing,

　　to the manufacturing operations in Emmland. All stages are threatened by Kroll’s findings. Plus, if product sales eventually slow down and stop, its sources of cash flow will also disappear.

　　Second, this is bound to affect P&J’s strategic positioning and the way that it is viewed by investors, suppliers,employees and a range of other stakeholders. It has a weaker offering to potential skilled employees than before Kroll’s findings were published, it will be harder to raise capital and also to sell its products. Its reputation as a sound company will be reduced as a result, and these things matter in a highly developed country such as Emmland.

　　Third, and perhaps most importantly, this could eventually be a threat to the company itself. This depends upon how large the liabilities eventually become and how well the company handles the issue in the coming years, but this is a real possibility if the worst-case projections turn out to be accurate. Its heavy reliance on X32 over many years has left it with a 60% dependence on X32, which was fine when the material was in high demand, but it leaves the company very vulnerable when and if that market falls away.

　　Given these risks facing P&J, this is not a share that will be attractive to investors for the foreseeable future.

　　(ii) Board responsibilities for IC and criticise Mr Ho.

　　Responsibilities for internal controls

　　Readers will also be alarmed to hear of the decision by CEO Laszlo Ho to impose a limited tightening of X32 process controls that only involved doing so where the company was visible to the Emmland public, a compromise he called ‘Plan B’. The board’s responsibilities for internal control are detailed in the COSO guidance on this subject and are very clear. Mr Ho’s, and the P&J board’s, responsibilities for effective internal controls include, in this case, control over X32

　　fibres in the working environments of each stage in the whole X32 supply chain.

　　The responsibilities include establishing a control environment capable of supporting the internal control arrangements necessary. This includes a suitable ‘tone from the top’ and a high level commitment to effective controls. It also involves conducting risk assessments to establish which risks need to be controlled by the internal control processes (health risks,perhaps?). The introduction of relevant control activities is especially important when a hazardous material like X32 is being considered. This, of course, applies to all of the company’s employees and not just those based in Emmland. It is also the board’s responsibility to provide information and maintain relevant communications with those affected by the control measures, and to ensure that important measures are fully implemented and understood. Finally, the COSO guidelines specify that all controls should be monitored for the degree of compliance and for their effectiveness. This should be a continuous, ongoing process, capable of immediately highlighting any weaknesses or breaches in the implemented controls.

　　[Tutorial note: Other models can be employed other than COSO.]

　　Criticisms of Mr Ho’s ‘Plan B’

　　In the case of P&J, Mr Ho has taken a deliberate and premeditated decision to ignore the health needs of some of the company’s employees on the basis of cost. X32 has been clearly shown to be a health risk and Mr Ho is knowingly allowing employees to be exposed to the material in the course of their normal jobs. The people in the mines and processing facilities will still be exposed to X32, and will presumably continue to get ill and die in the full knowledge of the company management. This is a failure of the fiduciary duty that the P&J board owes to its employees.

　　Mr Ho is implementing an upgrade to internal control, not on the basis of need but on the basis of how visible the changes will be to investors, most of whom will be based in the developed world. So residents of Aytown and Betown can look forward to a tightening of controls to limit their X32 exposure whilst those in countries with no health and safety legislation cannot. This could be seen as a cynical move to manage the company’s image in Emmland. They are taking advantage of the relative weakness of their developing countries’ host governments and being selective in whom they extend the necessary X32 process controls to.

　　Recent events have raised a number of very serious issues for P&J. It is difficult to know what the future will hold for the company, with such a substantial external threat and with management so determined to act unethically in managing that threat. I do not predict an easy time ahead for P&J shareholders.
 

　　高顿网校小编寄语：自信是成功的先决条件。