THE INSTITUTE OF CHARTERED

ACCOUNTANTS OF NIGERIA

PATHFINDER
NOVEMBER 2023 DIET
FOUNDATION LEVEL EXAMINATIONS
Question Papers

Suggested Solutions

Examiners‟ Reports

and

Marking Guides
 FOREWARD

This issue of the PATHFINDER is published principally, in response to a growing

demand for an aid to:

(i) Candidates preparing to write future examinations of the Institute of

Chartered Accountants of Nigeria (ICAN);

(ii) Unsuccessful candidates in the identification of those areas in which they

lost marks and need to improve their knowledge and presentation;

(iii) Lecturers and students interested in acquisition of knowledge in the

relevant subject contained herein; and

(iv) The professional; in improving pre-examinations and screening

processes, and thus the professional performance of candidates.

The answers provided in this publication do not exhaust all possible alternative
approaches to solving these questions. Efforts had been made to use the
methods, which will save much of the scarce examination time. Also, in order to
facilitate teaching, questions may be edited so that some principles or their
application may be more clearly demonstrated.

It is hoped that the suggested answers will prove to be of tremendous

assistance to students and those who assist them in their preparations for the
Institute‟s Examinations.

NOTES

Although these suggested solutions have been published under the

Institute‟s name, they do not represent the views of the Council of the
Institute. The suggested solutions are entirely the responsibility of their
authors and the Institute will not enter into any correspondence on them.

1
 TABLE OF CONTENTS

PAGE

FOREWARD 1

TABLE OF CONTENTS 2

FINANCIAL ACCOUNTING 3 - 32

MANAGEMENT INFORMATION 33 – 54

BUSINESS, MANAGEMENT & FINANCE 55 – 79

BUSINESS LAW 80 - 102

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 ICAN/232/F/A2 Examination No..................

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIA

FOUNDATION LEVEL EXAMINATION – NOVEMBER 2023

FINANCIAL ACCOUNTING
EXAMINATION INSTRUCTIONS
PLEASE READ THESE INSTRUCTIONS BEFORE THE COMMENCEMENT OF THE PAPER

1. Check your pockets, purse, mathematical set, etc. to ensure that you do not
have prohibited items such as telephone handset, electronic storage
device, programmable devices, wristwatches or any form of written
material on you in the examination hall. You will be stopped from
continuing with the examination and liable to further disciplinary actions
including cancellation of examination result if caught.
2. Write your EXAMINATION NUMBER in the space provided above.

3. Do NOT write anything on your question paper EXCEPT your examination

number.
4. Do NOT write anything on your docket.

5. Read all instructions in each section of the question paper carefully before
answering the questions.

6. Do NOT answer more than the number of questions required in each

section, otherwise, you will be penalised.

7. All solutions should be written in BLUE or BLACK INK. Any solution

written in PENCIL or RED INK will not be marked.

TUESDAY, NOVEMBER 14, 2023

DO NOT TURN OVER UNTIL YOU ARE TOLD TO DO SO

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 THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIA
FOUNDATION LEVEL EXAMINATION – NOVEMBER 2023
FINANCIAL ACCOUNTING
Time Allowed: 31/4 hours (including 15 minutes reading time)

SECTION A: MULTIPLE-CHOICE QUESTIONS (20 MARKS)

INSTRUCTION: YOU ARE REQUIRED TO ATTEMPT ALL QUESTIONS IN THIS

SECTION

Write ONLY the alphabet (A, B, C, D or E) that corresponds to the correct

option in each of the following questions/statements:

1. What are the primary roles of accountants in business and the economy?

A. Providing legal advice to businesses and individuals

B. Managing human resources and employee recruitment
C. Conducting market research and analysing consumer behaviour
D. Preparing financial statements and conducting audits
E. Designing marketing campaigns and advertising strategies

2. What is the purpose of a chart of accounts in a business?

A. To organise financial transactions into identified categories of assets,

liabilities, income and expenses
B. To generate instructions and policies for recording information in the
financial statements
C. To design a unique code and headings for each personal ledger
account
D. To follow the rules of accounting set by the government
E. To ensure consistent posting of transactions

Use the information below to answer questions 3 and 4:

A company has receivables at year-end of ₦2,250,000. The company has a
policy of maintaining a general allowance of 5% on its receivables. The general
allowance brought forward from the previous period was ₦52,000.

3. What is the general allowance for doubtful debts in the statement of profit
or loss at the current year-end, based on the company's policy?

A. N52,000
B. N60,500
C. N105,000
D. N112,500
E. N173,500

4
4. What is the net account receivables after considering the general
allowance at the current year-end?

A. N2,076,500
B. N2,137,500
C. N2,145,000
D. N2,189,500
E. N2,198,000

5. Which of the following is NOT a disclosure requirement for property, plant

and equipment, as per IAS 16 - Property, Plant and Equipment?

A. The measurement bases used for determining the gross carry amount
of property, plant and equipment
B. The number of inspections carried out on items of property, plant and
equipment
C. The depreciation methods used for each major class of property,
plant and equipment
D. The impairment losses recognised during the period
E. The total cost of property, plant and equipment acquired through
business combinations

6. Which of the following events can lead to a change in a partnership

agreement?

A. Introduction of additional capital by a partner

B. Establishment of a new marketing strategy
C. Admission of a new partner to the firm
D. Hiring of additional manager by the Partnership
E. Implementation of a new financial management system

Use the Information below to answer questions 7 and 8:

On April 1, a company had an opening inventory of 250 units which cost

N75 each. During the month, it purchased 750 units at N90 each and
issued 500 units.

7. Using the First-In-First-Out (FIFO) method, what is the value of the closing
inventory after the company issued 500 units?

A. ₦37,000
B. ₦37,500
C. ₦38,750
D. ₦42,500
E. ₦45,000

5
8. Using the Weighted Average Cost method, what is the cost per unit of the
closing inventory after the company issued 500 units?

A. N82.50
B. N83.75
C. N85.00
D. N86.25
E. N87.50

9. Which of the following best describes the impact of technological

advancement on accounting operations?

A. Technology has made accounting more complex and less efficient,

leading to data analysis challenges
B. Technological advancements have had no significant effect on
accounting practices and financial organisations
C. The use of technologically advanced software has made accounting
more efficient, particularly in data analysis, financial organisation
and measuring economic activities
D. Accounting operations have become slower due to the integration of
technologically advanced software
E. Technology has made accounting easier, but it has not improved data
analysis of financial organisations

10. Which of the following statements correctly describes cash basis of

accounting?

A. Revenue is recognised in the period when it is earned, regardless of

when the cash is received
B. Expenses are recognised in the period when they are incurred,
regardless of when they are paid
C. Revenue is recognised in the period when the cash is received,
regardless of when it is earned
D. Expenses are recognised in the period when they are earned,
regardless of when they are incurred
E. Both revenue and expenses are recognised in the period when they
are occurred, regardless of cash transactions

11. The primary purpose of the general journal in accounting is to

A. Record transactions from books of prime entry

B. Record year-end adjustments only
C. Correct errors in personal ledgers
D. Provide a record and explanation of various adjustments
E. Serve as the primary book of entry for all financial transactions

6
12. In the notes to the financial statements, which of the following is NOT
required to be disclosed regarding property, plant and equipment under
IAS 16?

A. The fair value of the assets at the beginning and end of the period
B. The current market value of the assets at the end of the period
C. The gross carrying amounts and accumulated depreciation at the
beginning and end of the period
D. The expected useful lives of the assets and their residual values
E. The total amount of additions made to the property, plant and
equipment during the year

13. Which of the following best describes incomplete records in accounting?

A. Incomplete records occur when a company has lost important

financial documents and cannot reconstruct them
B. Incomplete records are accounting records that contain errors and
discrepancies, leading to inaccurate financial statements
C. Incomplete records are financial records where information is
missing due to a lack of double entry book-keeping system and up-
to-date accounting practices
D. Incomplete records occur when a company's financial statements do
not include all the required disclosures and notes
E. Incomplete records are financial statements that have not been
audited by an external auditor, leading to potential inaccuracies

14. How does the application of Data Analytics assist in uncovering hidden
information from a dataset?

A. By using encryption methods to protect sensitive data

B. By automating data entry processes to reduce human errors
C. By applying statistical methods and modeling to identify trends,
patterns, and insights
D. By generating visualisations for data representation and presentation
E. By providing cloud storage for secure data management

15. The accounting equation of Kola is ₦107,250 (Assets) = ₦55,500 (Equity)

+ ₦51,750 (Liabilities). Kola decides to take ₦6,000 in cash and
inventories with a value of ₦3,000 out of the business for his personal use.
What is the new value of the accounting equation for Kola after the
withdrawals?

A. ₦98,250 = ₦46,500 + ₦51,750

B. ₦98,250 = ₦55,500 + ₦42,750
C. ₦107, 250 = ₦58,500 + ₦54,750
D. ₦98,250 = ₦49,500 + ₦48,750
E. ₦98,250 = ₦52,500 + ₦45,750

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16. Which of the following statements correctly describe the treatment of bank
accounts and cash balances from the perspective of both the company and
the bank?

A. For the company, money in the bank is an asset, and for the bank,
deposits are liabilities
B. For the company, money in the bank is a liability, and for the bank,
deposits are assets
C. For the company, an overdraft balance is a liability, and for the bank,
overdrafts are income
D. For the company, an overdraft balance is an asset, and for the bank,
overdrafts are liabilities
E. For the company, money in the bank is an asset, and for the bank,
deposits are expenses

17. When a non-current asset is disposed of, what is the typical situation
regarding the asset account and the accumulated depreciation account in
the general ledger?

A. Both the asset account and the accumulated depreciation account

will be closed to zero
B. The asset account will have a closing balance, but the accumulated
depreciation account will be closed to zero
C. The asset account will be closed to zero, but the accumulated
depreciation account will have a closing balance
D. Both the asset account and the accumulated depreciation account
will have closing balances to carry forward
E. Neither the asset account nor the accumulated depreciation account
will have a zero closing balance

18. Which of the following statements accurately describes not-for-profit

organisations?

A. Not-for-profit organisations always strive to maximise their revenue

and minimize costs to generate a profit
B. Not-for-profit organisations are businesses that focus solely on
making a profit and do not have any other objectives
C. Not-for-profit organisations include clubs, societies, charities,
hospitals, and government bodies
D. Not-for-profit organisations operate at a level where their income
exceeds their costs, similar to a profit-making entity
E. Not-for-profit organisations do not generate any income and solely
rely on donations and grants

8
19. What is the cash paid for wages and salaries during the period, given the
following information?

Accrued wages and salaries at the beginning of the period: ₦6,500

Accrued wages and salaries at the end of the period: ₦12,500
Wages and salaries reported in the statement of profit or loss: ₦114,000

A. ₦108,000
B. ₦119,000
C. ₦120,000
D. ₦126,000
E. ₦133,000

20. How has technology-driven disruption affected the accounting profession

over time?
A. It shielded accounting from disruptions, leading to minimal changes
in the industry
B. The transition to computerised accounting eliminated the need for
accountants' involvement
C. Accountants adapted to a machine-driven environment through
gaining computer skills and software knowledge
D. Recent innovations in technology, such as blockchain, pose a threat to
certain roles of accountants
E. Blockchain technology has revolutionised accounting, completely
replacing traditional accounting practices

SECTION B: OPEN-ENDED QUESTIONS (80 MARKS)

INSTRUCTION: YOU ARE REQUIRED TO ANSWER ANY FOUR OUT OF SIX

QUESTIONS IN THIS SECTION

QUESTION 1

a. Explain the difference between the roles of a bookkeeper and an

accountant in the accounting process. (8 Marks)

b. Explain the various types of accounting and their respective roles in

providing relevant information to different users of financial information.
(12 Marks)
(Total 20 Marks)

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QUESTION 2

Briefly explain the following accounting concepts in the preparation of financial

statements.

i. Going concern
ii. Consistency
iii. Accrual
iv. Fair presentation
v. Substance over form
vi. Prudence
vii. Materiality (Total 20 Marks)

QUESTION 3

a. i. State THREE types of errors that can be revealed by the trial

balance (3 Marks)
ii. Explain TWO of the highlighted errors (2 Marks)

b. The trial balance of Niger Limited failed to agree. The total of the debit
column exceeded the total of the credit column by ₦863,000. On
investigation, the following errors were discovered:

1. Sales of ₦50,000 were not recorded in the sales account.

2. An expense of ₦25,000 was mistakenly debited as ₦250,000.
3. Purchases of ₦70,000 were omitted from the purchases account.
4. An error in calculating depreciation resulted in an understatement of
expenses by ₦12,000.
5. A credit sale of ₦35,000 was mistakenly recorded as a debit in sales
account.
6. An expense of ₦8,000 was not recorded in the expense account.
7. Liability of ₦100,000 were omitted from suppliers account.
8. An error in recording interest income resulted in an understatements of
income by ₦6,000.
9. Cash receipts of ₦45,000 were recorded as ₦450,000.
10. An error in inventory valuation resulted in an overstatement of
inventories by ₦10,000.
11. Dividends of ₦20,000 were received but not recorded in the cash book.
12. An error in tax calculation resulted in an underpayment of taxes by
₦35,000.
13. A payment of electricity bill of ₦12,000 was accidentally entered twice.
14. Loan repayments of ₦60,000 were omitted from the bank accounts.

10
 You are required to prepare:
i. The journal entries to correct the errors. (7 Marks)

ii. The suspense account to effect corrections as appropriate. (8 Marks)

(Total 20 Marks)

QUESTION 4

a. Provide a concise description of each cost element associated with

Property, Plant and Equipment (PPE) under IAS 16, and explain the
conditions under which these costs are capitalised. (8 Marks)

b. Caleb Limited has recently purchased a motor vehicle for its business
operations. The company incurred various costs in acquiring, preparing,
and operating the motor vehicle. The following information is available:

i.Purchase price of motor vehicle-N5,000,000

ii.Annual insurance premium-N120,000
iii.Transportation costs to the company's location-₦50,000
iv. Installation costs for specialised equipment-N150,000
v. License and registration fees-N80,000
vi. Fuel and maintenance expenses (for the first month of operation)-
₦70,000
vii. Legal fees for acquisition-N100,000

Required:
Calculate the initial measurement of the motor vehicle (6 Marks)

c. Igba Enterprises, a small business, has incomplete records for the month of
September 2023. Suspecting discrepancies, the proprietor has invited an
accountant to assist in investigating the books. The available information
includes the following details:
i Opening cash balance as at September 1, 2023-N100,000
ii Payments to suppliers-N1,350,000
iii Opening bank balance as at September 1, 2023-N750,000
iv Payment to employees-N525,000
v Closing cash balance as at September 30, 2023-N162,000
vi Receipts during September-N2,300,000

vii Closing bank balance as at September 30, 2023-N950,000

Required:
Using the information provided, calculate any missing figure and clearly show
all necessary calculations. (6 Marks)
(Total 20 Marks)

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 QUESTION 5

a. State and explain the relationships among the main components of

financial statements. (12 Marks)

b. Explain the distinction between accounting policies and accounting

estimates in accordance with IAS 8-Accounting Policies, Change in
Accounting Estimates and Errors. (8 Marks)
(Total 20 Marks)

QUESTION 6

ABO Partnership consists of three partners: Awka, Bwari and Owo. The
partnership agreement specifies that profits and losses are to be shared in the
following manner:

Awka 40%
Bwari 30%
Owo 30%

The following balances are extracted from the partnership's statement of

financial position as at September 30, 2023:

N
Cash 250,000
Account receivables 400,000
Inventories 200,000
Furniture and fittings (carrying amount) 250,000
Account payables 120,000
Loan notes 300,000

Additional information:

i. During the year, the partnership earned a profit of ₦600,000.

Interest on the loan notes is 10% per annum.

ii. Partners' current account balances at the beginning of the year were:
Awka: N150,000 (Credit Balance)
Bwari: N100,000 (Debit Balance)
Owo: N50,000 (Credit Balance)

iii. Partners' salaries are as follows:

Awka: N120,000
Bwari: N90,000
Owo: N90,000

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iv. Transfers made during the year from current accounts to capital
accounts:
Awka: N68,000
Bwari: N26,000
Owo: N26,000

Assume the initial capital accounts are established according to the agreed
profit-sharing ratios.

Required:
a. Show how the profits of ABO Partnership for the year ended September 30,
2023 is shared to the partners. (6 Marks)

b. Calculate the partners‟ initial capital. (5 Marks)

c. Prepare partners‟ current accounts for ABO Partnership as of September

30, 2023. (6 Marks)

d. Prepare partners‟ capital accounts for ABO Partnership as of September 30,

2023. (3 Marks)
(Total 20 Marks)

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SECTION A

MCQ - SOLUTIONS

1. D
2. A
3. B
4. B
5. B
6. C
7. E
8. D
9. C
10. C
11. D
12. B
13. C
14. C
15. A
16. A
17. A
18. C
19. A
20. D

Workings

N
3. Current year allowance (5%x 2,250,000 = 112,500
Less Previous year allowance (52,000)
Allowance charges for the year 60,500

4. Account receivables = 2,250,000

Charges for the year = (112,500)
Net account receivables for the year = 2,137,500

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 7. The value of closing inventories using First-in-First-Out (FIFO)method

Date Details Purchases Issues Balance

Units Price Amount Units Price Amount Units Price Amount
N N N N N N
Apr1 Balb/f 250 75:00 18,750
Purchases 750 90:00 67,500 1,000 86,250
Issues 250 75:00 18,750
250 90:00 22,500
500 41,250
Closing
Balance 500 90:00 45,000

8. The weighted average cost method = (250 x 75)+(750 x 90)

250 + 750
= 18,750 + 67,500)
1,000
= N86:25

15. N107,250 – 9000 = 55,000

9000+51,750 N98,250 =
N46,500 + N51,750

19. Accrued wages and salaries at the beginning of the period = N6,500
Add: Wages and salaries reported in the SOP/L = N114,000
N120,500

Less: Accrued wages and salaries at the end of the period = (N12,500)
Cash paid for wages and salaries during the period = N108,000

Examiner’s report

The questions test basic knowledge of accounting principles including their

applications to simple computations.

Candidates‟ performance was above average with few deficiencies in the application
of principles to solve questions that involved calculations.

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 SOLUTION 1
a. Bookkeepers and accountants perform different roles within the realm of
financial management, and they have distinct sets of responsibilities. Here
are the key differences between the two roles:

Bookkeeper
i. Recording transactions: Bookkeepers are primarily responsible for recording
the day-to-day financial transactions of a business, including purchases,
sales, receipts, and payments. They use accounting software to maintain
accurate and up-to-date financial records.

ii. Categorising transactions: Bookkeepers classify and categorise financial

transactions into the appropriate accounts, such as assets, liabilities, equity,
revenue, and expenses, to ensure that the financial records are organised
and accurate.

iii. Reconciling accounts: Bookkeepers reconcile bank statements, accounts

payable, and accounts receivable to ensure that the financial records
accurately reflect the company's financial position.

iv. Generating financial reports: Bookkeepers may prepare basic financial

reports, such as statement of income and statement of financial position ,
based on the data they have recorded.
Accountant:
i. Financial analysis: Accountants are responsible for analysing financial data,
interpreting it, and providing insights to help businesses make informed
decisions. They go beyond recording transactions to provide strategic
financial guidance.

ii. Tax planning and compliance: Accountants are often involved in tax
planning, ensuring that businesses comply with tax laws, and preparing and
filing tax returns. They provide guidance on tax strategies and help minimise
tax liabilities.

iii. Financial statement preparation: Accountants prepare and analyse complex

financial statements, including statement of cash flows, statement
comprehensive income, and notes to the financial statements, which provide
a comprehensive view of a company's financial performance.

iv. Auditing: Some accountants perform auditing services, examining financial

records to ensure accuracy and compliance with laws and regulations. They
may also provide recommendations for improving internal controls and
financial processes.

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b. The various types of accounting and their respective roles in providing
relevant information to different users of financial information includes:

i. Financial Accounting: This involves the process of recording, classifying,

preparation, interpretation of financial statements so that both internal
and external users can make informed decisions.
ii. Cost Accounting: Cost Accounting is the procedure for accumulating cost
data to provide information for planning, control and decision making by
management.
iii. Performance management: Performance Management is a continuous process
where managers and employees combine efforts in planning, monitoring
and reviewing the effectiveness of the workforce towards the
achievement of the overall objectives of the entity.
iv. Government accounting: Government Accounting is a part of public sector
accounting that records revenue and expenditure of government
ministries, departments and agencies (MDAs). The government uses this
information for appropriate decision making, planning, control and
appraisal of government activities, and in compliance with the laws
regulating government finances.
v. Tax accounting: The accounting profits generated in the financial
statements provide the basis for determining the taxable profits of an
entity. The taxable profits are different from the accounting profits
because certain expenses and income are allowable for accounting
purpose but disallowed for tax purpose. A good understanding of the
knowledge of these taxable and non-taxable incomes and expenses
would help an entity in its tax management.
vi. Financial management: Financial Management is the process by which
the resources of an organisation are efficiently and effectively procured,
utilised and accounted for by the owners of the business in such a way to
maximise the wealth of the owners.
vii. Forensic accounting: Forensic Accounting refers to the application of
accounting skills to investigate and probe frauds , deliberate
misrepresentations (falsifications and misappropriations) or
embezzlements of an entity‟s resources with a view to recovering such
funds, usually through legal proceedings.
viii. Social and environmental accounting: Social and Environmental
Accounting is the branch of accounting that deals with accounting for
and reporting of the social and environmental impact of an entity‟s
activities upon the stakeholders (investors, management, employees,
customers, suppliers, local community where the entity operates, etc).

17
Examiner’s report
The question examines candidates‟ knowledge of differences between the roles
of a bookkeeper and an accountant, and also requires them to discuss the roles
of different types of accounting.

Many candidates attempted the question and their performance was poor in
part (1a) but average in part (1b).

Their major pitfalls in the question are:

 Most candidates interchanged the roles of a bookkeeper and an
accountant. Few others could not identify more than two differences
between the two roles; and
 In part 1b, many candidates identified elements and components of
financial statements. Those who could identify the types of accounting
could not provide acceptable explanations, especially for public sector
accounting, forensic accounting and cost accounting.

Candidates are advised to acquaint themselves with the various types of

accounting and what accountants do in industry and private practice.

Marking guide
Marks Marks
a. Differences between the roles of bookkeeper and
accountants
Explaining four (4) roles of bookkeepers 4
Explaining four (4) roles of accountants 4 8

b. Explanation types and roles of accounting

Stating 6 types of accounting 3
Explaining the roles of each type identified 9 12
Total 20

SOLUTION 2
i. Going concern
The Conceptual Framework for Financial Reporting notes that financial
statements are normally prepared assuming the entity is a going concern
and will continue in operation for the foreseeable future.

IAS1 requires management to make an assessment of an entity's ability to

continue as a going concern. If management has significant concerns
about the entity's ability to continue as a going concern, the uncertainties
must be disclosed. If management concludes that the entity is not a going
concern, the financial statements should not be prepared on a going
concern basis, in which case IAS 1 requires a series of disclosures.

18
 ii. Consistency
The presentation and classification of items in the financial
statements shall be retained from one period to the next unless a
change is justified in the following circumstances:
 A change in policy would be more appropriate having regard
to the criteria for the selection and application of accounting
policies, IAS- 8; and
 IFRS requires a change in presentation.

iii. Accrual
This can be called either accrual or matching concept. The accrual concept
states that income should be recognised when they are earned and not
when they are received in cash. Expenses should also be recorded when
they are incurred and not when paid.

The application of this concept gives rise to prepayments and accrued

expenses (accrual). An accrued expense occurs when it has been incurred
but has not been paid. Prepaid expenses occur when payment has been
made for services but benefits have not been derived from them.

They give rise to liabilities and assets, respectively. Prepaid expenses and
outstanding receivables are assets while income received in advance and
outstanding payables are liabilities of the business.

iv. Fair presentation

Fair presentation requires the faithful representation of the effects of
transactions, other events, and conditions in accordance with the
definitions and recognition criteria for assets, liabilities, income and
expenses set out in the framework.

The financial statements must "present fairly" the financial position,

financial performance and cash flows of an entity. Fair presentation
requires the faithful representation of the effects of transactions, other
events, and conditions in accordance with the definitions and recognition
criteria for assets, liabilities, income and expenses set out in the
framework. The application of IFRSs, with additional disclosure when
necessary, is presumed to result in financial statements that achieve a fair
presentation.

v. Substance over form

Substance over form in accounting refers to a concept that states
that transactions recorded in the financial statements and
accompanying disclosures of a company must reflect their economic
substance rather than their legal form.

19
 Whoever prepares the financial statements of a company needs to use
their judgment to derive the business sense from the transactions and
events in order to present them in a manner that best reflects their true
essence.

vi. Prudence
The prudence concept refers to a crucial principle used in accounting to
ensure that income and assets are not over stated in financial statements.
Alternatively known as the conservatism principle, it also makes sure that
liabilities are not understated and provisions are made for income and
losses. As a general indication prudence rules exist to prevent a business
recognising an asset in its financial statements at amount greater than its
recoverable value in such instances the asset is reduced to recovery value.

vii. Materiality
Information is material if omitting, misstating or obscuring it could
reasonably be expected to influence decisions that the primary users of
general purpose financial statements make on the basis of those financial
statements, which provide financial information about a specific reporting
entity.

Each material class of similar items must be presented separately in the

financial statements. Dissimilar items may be aggregated only if they are
individually immaterial. However, information should not be obscured by
aggregating or by providing immaterial information, materiality
considerations apply to the all parts of the financial statements, and even
when a standard requires a specific disclosure, materiality considerations do
apply.

Examiner’s report
The question tests candidates‟ knowledge of some basic accounting concepts in
the preparation of financial statements.

Majority of the candidates attempted the question and their performance was
average.

The commonest pitfall of the candidates was that they could only define the
concepts but failed to explain their significance or application, especially fair
presentation, substance over form, prudence and materiality.

Candidates are advised to study accounting concepts and review pathfinder

solutions to questions of this nature for better performance in examinations.

20
Marking guide
Marks Marks
i. Going concern
Definition 1
Explaining the significance 2 3
ii. Consistency
Definition 1
Explaining the significance 2 3
iii. Accrual
Definition 1
Explaining the significance 1 2
iv. Fair presentation
Definition 1
Explaining the significance 2 3
v. Substance over form
Definition 1
Explaining the significance 2 3
vi. Prudence
Definition 1
Explaining the significance 2 3
vii. Materiality
Definition 1
Explaining the significance 2 3
Total 20

SOLUTION 3

a. i. The types of errors that can be revealed by the trial balance are as
follows:
 Partial reversal of entry
 Single entry
 Transposition error
 Casting error
 Omission of an item on the trial balance
 Reversal of item on the trial balance
 Debit item in the ledger recorded as credit item in the trial
balance
 Mis- statement error on the trial balance

ii. Explaining the types of errors:

 Partial reversal of entry
This is an error that is made where there is a violation of the double
entry principle by either debiting an account and debiting another

21
 account, instead of crediting the other account and vice versa for
example, a cash sales of N50,000, which was credited to sales account
and also credited to cash account, instead of being debited to cash
account, will constitute an error of partial reversal of entry.

 Single entry
This also involves a violation of the double entry principle by recording
the debit entry relating to a transaction but ignoring the corresponding
credit entry and vice versa for example, a cash sales of N50,000 which
was credited to sales account but without any corresponding debit
entry, will involve a single entry error.

 Transposition error
This is the case where a transaction was properly recorded on the basis
of double entry in the ledger but the amount involved on the transaction
was mis- stated on an account for example, Purchases of N89,700 by
cheque was debited correctly to purchases account but credited to bank
account as N98,700.

 Casting error
This is the case where there is casting error on an account in the ledger,
which was also used to compute the balance on the account. In this
case, the balance derived from that account will either be over stated or
under stated. Where this balance is reflected on the trial balance, then,
the trial balance derived from that account will either be over stated or
under stated. For example, The sales account was over cast by N50,000,
this will cause a difference on the trial balance.

 Omission of an item on the trial balance

This is the case where an account and its corresponding balance was
completely omitted from the trial balance. For example, the rent account
balance of N200,000 was completely omitted on the trial balance.

 Debit item in the ledger recorded as credit item in the trial balance
This is the case of where an item that should have been debited on the
trial balance was credited in error and vice versa. For example, the
discount allowed account balance of N1,500 was posted on the wrong
side of the trial balance.

 Mis-statement error on the trial balance

This is the case where the balance of an account shown on the trial
balance was either over stated or under stated. E.g the balance of the
rent account N200,000, was recorded on the trial balance as N20,000.

22
b. Niger Limited
i) Journal entries
Debit Credit
(N) (N)
1. Suspense account 50,000
Sales 50,000
Being omission of sales entry
2. Suspence account 225,000
Expense account 225,000
Being incorrect posting of expense
3. Purchases 70,000
Suspense account 70,000
Being omission of purchase entry
4. Depreciation 12,000
Suspense account 12,000
Being depreciation understatement
correction
5. Suspense account 70,000
Sales 70,000
Being correction of credit sales (35,000 x 2)
6. Expense account 8,000
Suspense account 8,000
Being omission of expense entry
7. Suspense account 100,000
Liabilities 100,000
Being omission of liabilities
8. Suspense account 6,000
Interest income account 6,000
Being correction of understated interest
income
9. Suspense account 405,000
Cash book 405,000
Being correction of cash receipt entry
10. Suspense account 10,000
Inventory 10,000
Being correction of inventory valuation
error
11. Suspense 20,000
Bank account 20,000
Being recording dividend payment
12. Suspense 35,000
Tax payable 35,000
Being correction of tax calculation error

23
 13. Suspense account 12,000
Electricity 12,000
Being correction of duplicate entry
14. Suspense 60,000
Bank account 60,000
Being omission of loan repayment

ii. Niger Limited

Suspense account
Description N’ 000 Description N’
000
Sales 50,000 Bal b/f 863,000
Expenses Purchases 70,000
25,000
Sales Expenses 8,000
70,000
Interest income 6,000 Dividends 20,000
Liability 100,000 Depreciation 12,000
Cash 405,000
Inventory 10,000
Cash 20,000
Bank 35,000
Electricity 12,000
973,000 973,000

Examiner’s report
The question examines candidates‟ knowledge of the errors that affect the trial
balance and their ability to correct errors using journals and suspense account.

Most candidates attempted the question and their performance was above
average, with candidates scoring more marks in question (3a).

The common pitfalls of the candidates include:

 Inability to differentiate between errors that affect the trial balance and
those that do not; and
 Inability to demonstrate the principle of double entry to prepare the
journal and the suspense account.

Candidates are advised to acquaint themselves with the application of the

principle of double entry and make effective use of ICAN Pathfinder and Study
Text on this subject, which are comprehensive and explicit.

24
Marking guide

Marks Marks
a) Types of errors
i. Stating three types of errors 3
ii. Explain two of the errors identified 2 5
b) i. Journal entries:
Showing the correct double entries for the 14 errors 7
ii. Preparation of suspense account:
Naira signs on debit and credit sides ½
15 correct entries in the suspense account 7½ 15
Total 20

SOLUTION 4

a. Describing elements of cost of property, plant and equipment (PPE)

Under IAS 16, costs related to Property, Plant, and Equipment (PPE) are
capitalised under specific circumstances. Here is a concise description of
each cost element associated with PPE and the conditions under which
these costs are capitalised.
i. Purchase price: The purchase price of an asset, including any import
duties and non-refundable purchase taxes, is capitalised as part of the
cost of PPE.
ii. Directly attributable costs: These are costs directly attributable to
bringing the asset to the location and condition necessary for it to be
capable of operating in the manner intended by management.
Directly attributable costs include expenses such as site preparation,
initial delivery and handling, and installation.
iii. Borrowing costs: If a company borrows funds specifically to finance the
construction or acquisition of an asset, the interest incurred during the
construction period can be capitalised. However, this is subject to certain
criteria, such as the completion of substantial activities necessary to
prepare the asset for its intended use.
iv. Costs of dismantling and removing the asset: The cost of dismantling and
removing the asset and restoring the site on which it is located is
capitalised, if it is incurred as a consequence of acquiring or using the
asset. This cost is recognised as part of the cost of the asset and is
accounted for over the asset's useful life.
v. Subsequent costs: Costs incurred after the initial recognition of the asset
can be capitalised if they result in increased future economic benefits
and can be measured reliably. For example, costs related to significant
upgrades or enhancements that extend the asset's useful life or improve
its performance can be added to the asset's cost.

25
 It is important to note that costs are capitalised when they meet the
recognition criteria, which include the probability that future economic
benefits associated with the asset will flow to the entity and the cost of the
asset can be measured reliably. If these criteria are not met, the costs are
expensed in the period in which they are incurred. Proper adherence to
these guidelines ensures accurate valuation and presentation of PPE in the
financial statements, providing stakeholders with reliable information about
the company's long-term assets.

b. Calculating initial cost of motor vehicle of Caleb Ltd

N
Purchase price 5,000,000
Transportation costs 50,000
Installation costs 150,000
License and registration fees 80,000
Legal fees for acquisition 100,000
Total initial measurement 5,380,000

Igba Enterprises
Schedule of cash for the Month of September 2023
N N
Opening cash balance as of September 1 100,000
Opening bank balance as of September 1 750,00
Receipts during September 2,300,000
3,150,000
Payment to suppliers 1,350,000
Payment to employees 525,000 1,875,000
1,275,000
Closing cash balance as of 31 September 2023 162,000
Closing bank balance as of 31 September 950,000 1,112,000
Missing cash 163,000

Examiner’s report
Parts (a) and (b) of the question tests candidates‟ knowledge of the elements of
cost of property, plant and equipment within the context of IAS 16, while part
(c) requires candidates to determine missing cash by preparing schedule of
cash for a particular month.

Majority of the candidates attempted all parts of the question and their
performance was average. Performance rate for 4b and 4c was impressive while
performance in part (4a) was poor.

Most candidates who failed the question either discussed factors that affect
depreciation or could only identify the purchase price as elements of cost of
PPE, in part (4a).

26
Candidates are advised to study all the relevant aspect of IAS 16 that is within
the syllabus at this level.

Marking guide
Marks Marks
a. Listing four (4) elements of cost of PPE 2
Describing the elements of cost of PPE 6 8
b. Calculating initial cost of PPE 6
c. Preparation of cash schedule to determine missing figure 6
Total 20

SOLUTION 5
a. The main components of financial statements include the statement of
profit or loss and other comprehensive income, statement of financial
position, statement of cash flows, and statement of changes in equity. These
financial statements are interconnected and provide valuable insights into
a company's financial health and performance. Here are the relationships
among these components:

i. Statement of profit or loss and other comprehensive income:

 Relationship with the statement of financial position: This
summarises a company's revenues, expenses, gains, and losses over a
specific period, usually a fiscal year or quarter. The net income or net
loss reported on the statement of profit or loss and other comprehensive
income directly impacts the equity section of the statement of financial
position. Positive net income increases shareholders' equity, while a net
loss decreases it.

ii. Statement of financial position:

 Relationship with the statement of profit or loss and other
comprehensive income: The statement of financial position provides a
snapshot of a company's financial position at a specific point in time,
including its assets, liabilities and equity. The ending balances of
assets, liabilities, and equity reported on the statement of financial
position are derived from the cumulative effects of past statements of
profit or loss and other comprehensive income.

 Relationship with the statement of cash flows: The ending cash and
cash equivalents reported on the statement of financial position match
the cash balance reported on the statement of cash flows. Changes in
other statement of financial position items, such as accounts receivable
and accounts payable, are reconciled with the statement of cash flows
from operating activities section.

27
iii. Statement of cash flows:
 Relationship with the statement of financial position: The statement of
cash flows explains how changes in the statement of financial position
items affect a company's cash position. It reconciles the beginning and
ending cash balances on the statement of financial position.

 Relationship with the statement of profit or loss and other comprehensive

income: The statement of cash flows' operating activities section starts
with net income from the statement of profit or loss and then adjusts for
non-cash items and changes in working capital to arrive at the net cash
provided by or used in operating activities.

iv. Statement of changes in equity:

 Relationship with the statement of financial position: The statement of
changes in equity shows how equity items (shares, retained earnings,
additional paid-in capital, etc) change over time. It reconciles the
beginning and ending balances of equity items with changes that
occurred during the period.

 Relationship with the statement of profit or loss and other comprehensive

income: The net income or net loss from the income statement is a
significant driver of changes in retained earnings, which is a key
component of equity. Dividends paid to shareholders also affect retained
earnings.

In summary, financial statements are interrelated in that they provide a

comprehensive view of a company's financial performance, position and
cash flows. Changes in one statement have direct or indirect impacts on the
others and together they offer a comprehensive picture of a company's
financial health and activities. These statements are essential tools for
investors, creditors and management to assess a company's performance
and make informed decisions.

b. In financial reporting, accounting policies and accounting estimates are

fundamental concepts, yet they serve different purposes and functions.

i. Accounting policies:
Definition: Accounting policies are the specific principles, bases,
conventions, rules, and practices applied by an entity in preparing and
presenting financial statements.

Explanation: Accounting policies provide the framework for recording and

reporting transactions and events in financial statements. These policies
dictate how transactions are recognised, measured, presented, and
disclosed. They are generally adopted to ensure consistency and
comparability across different periods and entities within an industry.

28
 Example: A company might adopt the FIFO (First-In-First-Out) method for
inventory valuation. This means that the oldest inventory items are
considered sold first when calculating the cost of goods sold.

Impact: Accounting policies significantly influence the reported financial

position and performance of a company. Different policies can lead to
variations in reported revenue, expenses, assets and liabilities, affecting
financial ratios and analysis.

ii. Accounting estimates:

Definition: Accounting estimates are approximations of monetary amounts
made in the absence of precise means of measurement. They involve
judgments based on the most recent, reliable and relevant information
available.

Explanation: Accounting estimates are used when it's impossible to obtain

exact measurements, such as in estimating the useful life of an asset, the
collectability of receivables, or the fair value of investments. These
estimates are based on historical data, current economic conditions, and
future expectations.

Example: Estimating the allowance for doubtful debts based on the past
experience of bad debts. This involves predicting the likelihood of customers
defaulting on payments.

Impact: Accounting estimates can significantly affect the financial

statements. Changes in these estimates can impact net income, assets,
liabilities and equity. For instance, changes in depreciation estimates can
alter the carrying amount of assets, affecting both the statements of
financial position and the statement of comprehensive income.

Examiner’s report
Part (a) of the question examines candidates‟ knowledge of the relationship
between the components of financial statements while part (b) examines their
knowledge of accounting policies and changes in accounting estimates.

Many candidates attempted the question and their performance was below
average.

Candidates‟ common pitfalls include the following:

 Some candidates discussed elements of financial statements, instead of

components;
 Candidates who could highlight the components failed to discuss how the
components are interrelated; and
 Candidates could only define accounting policies and changes in
accounting estimates but they failed to cite examples and explain their
impact on the financial statements.

Candidates are advised to study all aspects of the syllabus.

29
Marking guide
Marks Marks
a. Relationship among components of financial
statements
Stating 6 relationship 3
Explaining the relationship 9 12
b. Accounting policies:
Definition, explanation, examples and impact of
accounting policies 4
Definition, explanation, examples and impact of
accounting estimates 4 8
Total 20

SOLUTION 6
a. ABO Partnership
Share of profit for the year to September 30, 2023
₦ ₦
Reported in the question 600,000
Less interest on loan notes (10% of ₦300,000) 30,000
Profit for the period 570,000
Partners‟ salaries
Awka 120,000
Bwari 90,000
Owo 90,000 300,000
Profits available for distribution to the partners 270,000
Awka 40% x 270,000 108,000
Bwari 30% x 270,000 81,000
Owo 30% x 270,000 81,000 270,000

b. ABO Partnership
Calculation of the partners’ initial capital accounts
₦ ₦
Cash 250,000
400,000
Accounts receivables 200,000
250,000
Inventories 1,100,000

Furniture and fittings (carry amount) (120,000)

Total assets (300,000) (420,000)
Liabilities: 680,000
Accounts payable
Loan notes 150,000
Total assets (100,000)

30
 Initial current account balances: 50,000 (100,000)
Awka 580,000
Bwari 232,000
Owo 174,000
Initial capital account: 174,000 580,000
Awka (40% x ₦580,000)
Bwari (30% x ₦580,000)
Owo (30% x ₦580,000)

b. ABO Partnership
Partners’ current accounts

Awka Bwari Owo

₦ ₦ ₦
Balances b/d 150,000 (100,000) 50,000
Salaries 120,000 90,000 90,000
Share of profit 108,000 81,000 81,000
378,000 71,000 221,000
Transfer to capital accounts 68,000 26,000 26,000
Balances c/f 310,000 45,000 195,000

c. ABO Partnership
Partners’ capital accounts
Awka Bwari Owo
₦ ₦ ₦
Balances b/d 232,000 174,000 174,000
Transfer from current 68,000 26,000 26,000
accounts 300,000 200,000 200,000
Balance c/f
Balance b/d 300,000 200,000 200,000

Examiner’s report
Candidates were required to apply the knowledge of accounting equation to
derive the initial capital of the partners and then prepare the partners‟ capital
and current accounts.

Many candidates attempted the question and their performance was average.

Few candidates could not prepare partners‟ current and capital accounts while
few others could not derive the initial capital of the partners from incomplete
records.

Candidates are advised to cover in-depth all aspects of the syllabus.

31
Marking guide

Marks
Partnership accounts:
a. Determination of share of profit 6
b. Calculation of initial capital 5
c. Preparation of partners‟ current account 6
d. Preparation of partners‟ capital account 3
Total 20

32
ICAN/232/F/A3 Examination No....................
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIA

FOUNDATION LEVEL EXAMINATION – NOVEMBER 2023

MANAGEMENT INFORMATION
EXAMINATION INSTRUCTIONS
PLEASE READ THESE INSTRUCTIONS BEFORE THE COMMENCEMENT OF THE PAPER

1. Check your pockets, purse, mathematical set, etc. to ensure that you do
not have prohibited items such as telephone handset, electronic storage
device, programmable devices, wristwatches or any form of written
material on you in the examination hall. You will be stopped from
continuing with the examination and liable to further disciplinary actions
including cancellation of examination result if caught.

2. Write your EXAMINATION NUMBER in the space provided above.

3. Do NOT write anything on your question paper EXCEPT your examination

number.

4. Do NOT write anything on your docket.

5. Read all instructions in each section of the question paper carefully

before answering the questions.

6. Do NOT answer more than the number of questions required in each

section, otherwise, you will be penalised.

7. All solutions should be written in BLUE or BLACK INK. Any solution

written in PENCIL or RED INK will not be marked.

TUESDAY, NOVEMBER 14, 2023

DO NOT TURN OVER UNTIL YOU ARE TOLD TO DO SO

33
 THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIA
FOUNDATION LEVEL EXAMINATION – NOVEMBER 2023

MANAGEMENT INFORMATION

Time Allowed: 31/4 hours (including 15 minutes reading time)

SECTION A: MULTIPLE-CHOICE QUESTIONS (20 MARKS)

INSTRUCTION: YOU ARE REQUIRED TO ATTEMPT ALL QUESTIONS IN THIS

SECTION
Write ONLY the alphabet (A, B, C, D or E) that corresponds to the correct
option in each of the following questions/statements.

1. Which of the following is NOT a characteristic of „Last-In-First-Out‟ (LIFO)

materials pricing method?
A. Results in many batches being only partly charged to production
where a subsequent batch is received
B. It is an actual cost system
C. It is acceptable by the tax authorities
D. Administratively clumsy
E. Makes cost comparison between jobs difficult

2. A document which includes the detailed cost centre and cost unit is
known as

A. Tender
B. Cost sheet
C. Work order
D. Bill of quantities
E. Goods requisition note

3. When the actual overhead is less than the absorbed, there is

A. Equal absorption
B. Major absorption
C. Under absorption
D. No absorption
E. Over absorption

4. Which of the following is NOT an inventory valuation method?

A. Last-In-First-Out
B. Weighted average
C. Periodic average price
D. First-In-First-Out
E. Economic order quantity

34
5. What is the break-even point where sales figure is N15,000,000 and
margin of safety is 30%?

A. N2,000,000
B. ₦3,000,000
C. ₦6,500,000
D. ₦10,500,000
E. ₦12,000,000

6. Which of the following may be a limiting factor in production?

A. Labour rate
B. Machine maintenance schedule
C. Materials
D. Technology change
E. Warehouse location

7. Which of the following journal entries is correct for the issuance of direct
materials to production?
DR CR
A. Materials Work inprogress
B. Work in progress Materials
C. Work in progress Accounts payable
D. Materials Accounts payable
E. Materials Accounts Receivable

8. The reorder quantity is 2,000 while demand for one year in units is
20,000. What is the number of deliveries per annum?

A. 6
B. 8
C. 10
D. 14
E. 16

9. Activities such as customer service and distribution, material handling

and set-ups, are part of

A. Standard costing
B. Marginal costing
C. Contract costing
D. Activity based costing
E. Job costing

35
10. ONE of the methods of separating fixed costs from semi-variable costs is
A. Low high method
B. Variable method
C. High low method
D. Constant method
E. Semi variable method

11. An automated file that stores definitions of data elements and data
characteristics such as usage and physical representation is called

A. Database
B. Database management system
C. Data dictionary
D. Data definition
E. Data manipulation language

12. Which of the following is NOT one of the operations of warehouse

management system?

A. Inventory management
B. Shipping
C. Labour management
D. Ordering management
E. Auditing

13. A collection of attributes that describes an entity is called

A. File
B. Data item
C. Record
D. Database
E. Character

14. The following are the characteristics of Big data, EXCEPT

A. Large volume
B. Varied type
C. High speed of generation
D. Variability
E. Low storage

15. The type of database organisation in which data are represented in rows
and columns is called

A. Network database
B. Relational database
C. Tree database
D. Hierarchical database
E. Hybrid database

36
16. Which of the following is NOT an example of database management
system (DBMS)?

A. Microsoft access
B. MYSQL server
C. Oracle
D. Microsoft write
E. Microsoft SQL server

17. The following are the major stages in data processing, EXCEPT

A. Collection of data
B. Input
C. Sorting of data
D. Processing of data
E. Output of information

18. A database system is used to perform the following functions, EXCEPT

A. Prevent a single data to be used by several applications
B. Avoid data duplication
C. Ensure consistency in an organisation‟s use of data
D. Make data independent of the programs using it
E. Ensure systematic method of storage and retrieval of data

19. Which of the following is MOST likely to protect an organisation‟s

database system from hackers?

A. Card-key locks
B. Virus detection
C. Encryption of data
D. Firewalls
E. Hard to determine passwords

20. Which of the following can be used to detect incorrect data entry into a
database?

A. Audit trail review

B. Response time test
C. Validity check
D. Storage validation
E. Keyboard test

37
SECTION B: OPEN-ENDED QUESTIONS (80 MARKS)
INSTRUCTION: YOU ARE REQUIRED TO ATTEMPT ANY FOUR OUT OF THE
SIX QUESTIONS IN THIS SECTION
QUESTION 1

The stores data of ABC Limited for the month of July is as follows:
Date Receipts Purchase Issues
Units Price per unit Units
01/07 250 N3.00
07/07 250 N3.20
10/07 200
19/07 250
21/07 350 N3.30
28/07 200

Required:

Prepare the store ledger account in tabular form using the weighted Average
Price Method showing daily balances as memorandum on the table.
Show workings. (20 Marks)

QUESTION 2

a. The TWO main labour remuneration methods are:

i. Time rate system
ii. Piece rate system

List FIVE advantages of each of them (5 Marks)

b. There are six workers in a production department of a manufacturing

company; Ayo, Bola, Cosmas, Dapo, Eniola and Alasa.
The following information are extracted from the company‟s records for the
month: Standard production per month 1,250 units.

Production by each employee: Ayo 1,000 units; Bola 1,250 units; Cosmas
1,375; Dapo 900; Eniola 1,125, Alasa 1,200.

Piecework rate is N100.00 per unit of actual production

Additional bonus is N200.00 for each 1% of actual production above 80%

actual production over standard.

There‟s also production allowance of N5,000 per month

Required:
Compute the total remuneration for the workers for the month. (15 Marks)
(Total 20 Marks)

38
 QUESTION 3
The figures given below are four years historical sales data of a company.

Required:
Calculate the moving averages, trends and seasonal variations.

Year Quarter Historical sales data

1 1 3,000
2 2,800
3 2,400
4 2,800

2 1 3,200
2 3,000
3 2,600
4 3,000

3 1 3,600
2 3,400
3 3,000
4 3,200

4 1 3,800
2 3,600
3 3,400
4 3,600
(20 Marks)

QUESTION 4
a. One of the key assets within an organisation is the information system and
associated contents.
You are required to list and explain briefly THREE major objectives of the
security of the information system and its contents. (4 Marks)

b. List THREE threats to computerised information systems. (3 Marks)

c. i. Define disaster recovery planning. (2 Marks)
ii. Enumerate FIVE major aims of disaster recovery planning. (5 Marks)
d. i. Define information privacy. (2 Marks)
ii. Explain basic uses of social media and give TWO of its benefits to
organisations. (4 Marks)
(Total 20 Marks)

39
 QUESTION 5

a. Database and database management system are TWO terms that are very
paramount in the management of data.

You are required to:

i. Define Database Management System. (2 Marks)
ii. List FOUR characteristics of a database. (4 Marks)
iii. Enumerate FOUR facilities provided by Database management
system.
b. i. What is a data warehouse? (2 Marks)
ii. Enumerate FOUR features of data warehouse. (4 Marks)

c. Enumerate TWO advantages and TWO disadvantages of purchasing a

database. (4 Marks)
(Total 20 Marks)

QUESTION 6

a. Over the years, machine learning has become one of the mainstays of
Information Technology.

You are required to:

i. Define Machine Learning. (2 Marks)
ii. Enumerate SIX applications of machine learning. (3 Marks)
iii. List FOUR categories/types of machine learning. (2 Marks)

b. Physical behavior of systems can be transformed into a mathematical model

leading to efficient algorithm for simulation purpose.
You are required to:
i. Define simulation. (2 Marks)
ii. Enumerate FIVE advantages and THREE disadvantages of simulation.
(8 Marks)
iii. Distinguish between continuous simulation and discrete simulation.
(3 Marks)
(Total 20 Marks)

40
SECTION A

MCQ - SOLUTIONS

1. C
2. B
3. E
4. E
5. D
6. B
7. B
8. C
9. D
10. C
11. C
12. D
13. C
14. E
15. B
16. D
17. C
18. A
19. C
20. C

Examiner’s report
There are 20 questions in this section, covering a significant portion of the
syllabus.

The questions were attempted by 100% of the candidates and performance was
average as about 50% of the candidates scored 50% and above of the marks
obtainable

The major reason for this average performance was the failure of candidates to
cover all sections of the syllabus during preparations.

Candidates are advised to study the ICAN Study Text and other materials in
detail, paying attention to all topics covered by the syllabus.

41
 SECTION B

SOLUTION 1

ABC Ltd
Stores Ledger Account

Receipt QTY Price Total Issue Material Issue details Balance (memo)
Date ₦ ₦ Date Requisiti ₦ ₦
on
01/07 250 3.00 750 250 @ 3.00 =750
07/07 250 3.20 800 500 @ 3.10- =1,550
10/07 200 200 @3.10= 620 300 @ 3.10 = 930
19/10 250 250 @3.10 =775 50 @ 3.10 155
400 @ 3.275 1310
OR
400 @ 3.28= 1312
28/07 200 200 @ 3.275 655
OR
200@3.275 =655 200 @ 3.275 = 655
OR OR
200@3.28 = 656 200 @ 3.28= 656

NOTE: ₦3.275 was approximated to ₦3.28 above.

WORINGS: Valuation of stock balance

i. From 07/07 to 19/10

Receipt 01/07 250 units at ₦3.00 = ₦750
Receipt 07/07 250 units at ₦3.20 = ₦800
Total 500 = ₦1,550

Average price = ₦1,550/500 = ₦3.10

ii. From 20/07 to 28/07

Balance 19/10 50 units at 3.10 = 155
Receipt 21/07 350 units at 3.30 = 1,155
Total 400 1,310

Average price = ₦1,310/400 = ₦3.275

42
 Examiner’s report

The question tests candidates‟ understanding of stores ledger accounting.

About 90% of the candidates attempted the question, but performance was only
average as about 50% of the candidates that attempted the question scored 50%
and above of the marks allocated.

The major pitfall was incorrect application of principles of weighted average.

Candidates should understand that application of principles forms the nucleus

of most topics of a quantitative nature and should be accorded the required
attention.

Marking guide
Marks Marks
Stores ledger account:
3 figures under Receipts total - 1 mark each 3 Marks
₦750, ₦800 &₦1,155
3 figures under issue details - 1 mark each 3 Marks
₦620, ₦775 & 655
6 figures under balance (memo) - 1 mark each 6 Marks
Workings
i. ₦750, ₦800 and ₦1, 1 mark each 3 Marks
Average price - ₦3.10 1 mark
ii. ₦155, ₦800 and ₦1310 1mark each 3 Marks
Average price - ₦3.275 1 mark
Total 20 Marks

SOLUTION 2

a. i. Advantages of time rate system:

 It is simple to operate.
 Produces quality of work.
 It‟s economical to operate.
 It gives workers sense of security.
 It‟s acceptable by labour union.
 It causes unity in labour.

ii. Advantages of piece rate system:

 It gives incentives to efficient workers.
 Simple and easy to understand.
 It gives equitable wages.
 It results in increased production.
 It results in less supervision.

43
  Simplifies costing of remuneration.
 It‟s less costly to operate.

Computation of Total Workers‟ Remuneration

Name Stand Act. Achie % Bonus Piece- Spec. Total

Prodtn Prodn -ved over work pay Allce
(units) Units % 80%
N N N N
Ayo 1,250 1000 80% 0 0 100,000 5,000 105,000
1,250
Bola 1,250 100% 20% 4,000 125,000 5,000 134,000
1,250
Cosmos 1,375 110% 30% 6,000 137,500 5,000 148,500
1,250
Dapo 900 72% 0 0 90,000 5,000 95,000
1,250
Eniola 1,125 90% 10% 2,000 112,500 5,000 119,500
1,250
Alasa 1,200 96% 16% 3,200 120.000 5.000 128,200

Examiner’s report
The question tests candidates‟ understanding of labour costing.

About 60% of the candidates attempted the question, but performance was poor
in the part (a) of the question, while part (b) was well understood by the
candidates.

About 40% of the candidates that attempted the question scored 50% and above
of the marks allocated.

The major pitfall was incorrect application of principles regarding computation

of bonuses.

Candidates are advised to study the ICAN Study Text in detail, paying adequate
attention to detailed application of principles where necessary.

Marking guide
Marks
a. i. ½ for any five points ½ x 5 = 2½
ii. ½ for any five points ½ x 5 = 2½
b. % over 80% ½x6=3
Bonus ½x6=3
Piece-work pay ½x6=3
Special allowance ½x6=3
Total 20

44
SOLUTION 3

Year Quarter Historical Moving Trend Seasonal

sales data Average Variation
1 1 3,000
2 2,800
2,750
3 2,400 2,775 -375
2,800
4 2800 2825 -25
2,850
2 1 3200 2875 +375
2,900
2 3,000 2,925 +75
2,950
3 2,600 3,000 -400
3,050
4 3,000 3,100 -100
3,150
3 1 3,600 3,200 +400
3,250
2 3,400 3,275 +125
3,300
3 3,000 3,325 -325
3,350
4 3,200 3,375 -175
3,400
4 1 3,800 3,450 +350
3,500
2 3,600 3,550 +50
3,600
3 3,400
4 3,600

Examiner’s report

This question tests candidates‟ understanding of moving averages, trends, and

seasonal variations.

The question was not popular as about 10% of the candidates attempted it. This
topic has not been examined in a long while, hence most candidates did not
expect it.

Expectedly, performance was poor. About 20% of the candidates that attempted
the question scored 50% and above of the marks allocated. The major pitfall was
lack of understanding of the topic.

45
Candidates are reminded that this topic is an integral part of the syllabus and
can be examined at any time.

Marking guide
Marks Marks
Moving average: ½
Heading
Each figure under moving 6½
average= ½ x 13
Trend: Heading ½
Each figure under trend = ½ x 12= 6
Seasonal Variations: Heading ½
Each figure under seasonal
variation= ½ x 12 6
Total 20

SOLUTION 4

a. Key objectives of security of information system

i. Confidentiality: This requires that the information in a computer

system be accessible for reading, printing, displaying and other
forms of disclosure by authorized parties only.
ii. Integrity: This requires that computer assets can be modified
including writing, changing, changing status, deleting and
creating by authorized parties only. OR
Making sure that the data in an organisation‟s possession is
accurate, reliable and secured against unauthorised changes,
tampering, destruction or loss.
iii. Availability: This requires that computer system resources are
available to authorised parties when they are needed. OR
Making private information available for anyone who is authorized
to access it; such as when a customer request to view his or her
profile.

b. Threats to computerised information systems

i. Hardware and software failure

ii. User errors/Human errors
iii. Physical disaster such as fire or flood
iv. Theft of data, service and equipment
v. Unauthorised use of data
vi. Telecommunications disruptions
vii. Malware attacks e.g. virus

46
 viii. Social engineering attacks
ix. Information extortion
x. Theft of intellectual property
xi. Malicious use
xii. Unauthorised access (hackers and crackers)
xiii. Identity theft

c. i. Disaster recovery planning is the act of setting out processes and

procedures to be followed in order to protect and recover the information
systems in case disaster occur.
OR
A formal document created by the organisation that contains detailed
instructions on how to respond to unplanned incidents such as natural
disasters, cyber-attacks and other disruptive events.

ii. Major aims of disaster recovery planning

1. Identifying the breach or disaster that has taken place.

2. Preventing further losses by shutting down systems and
operations.
3. Minimising the impacts of the disaster on the organisation
stakeholders (customer or supplier) whose data may have been
compromised.
4. Restoring and re-securing the information systems.
5. Minimising downtime and re-establishing business operations as
soon as possible.
6. Taking appropriate action to minimise the reputational damage to
the company following a breach to their IT systems and restoring
confidence in the company.
7. Minimising interruptions to normal operations.
8. Limiting the extent of disruption and damage.
9. Minimising the economic impact of the interruption.
10. Establishing alternative means of operation in advance.
11. Training personnel with emergency procedures.

d. i. Information privacy: This is the act of keeping the information one likes
to keep to oneself from getting into the hands of companies‟ hackers,
government organisations and other groups.
OR
The protection of personal data from those who should NOT have access
to it and the ability of individuals to determine those who can access
their personal information.

47
ii. Uses of social media

1. Communication: Social media tools such as blogs and websites are

used to create articles and blogs for interactions, communications,
information and empowering the audiences.
2. Collaboration: With the use of social media tools, collaboration in
various aspects of human life among users can be done.
3. Opinions and reviews: This is useful for good communication and
conversation.
4. Brand Monitoring: All the consumer brands and the companies that
deal with the public make use of the brand monitoring tools in
order to see what exactly is being talked about their brands and
businesses.
5. Entertainment: The world of gaming is now dependent on social
media platforms. Games like Farmville and Mafia wars are the
prime time games that are played on social media sites.
6. Media Sharing: One of the most popular and well-known sites that
can be used for sharing media is YOUTUBE and with over 500
million followers, this website is already on the map due to the
amazing things that it offers to its users.
7. Paid Advertisement: Users of social media such as Facebook,
Twitter/X, Snapchat etc. are also very effective in running paid
adverts on different social media portals

Benefits of social media

1. Building relationship.
2. Getting connected to new people/Customers.
3. Reaching large audiences.
4. Direct connection with the audience.
5. Joining social media is free.
6. Having access to paid advertising services.
7. Driving traffic to one‟s websites.
8. Creating viral contents.
9. Uncovering valuable insights.
10. Building brands by interacting with others and sharing interesting
facts about oneself.
11. Staying up to date.

48
 Examiner’s report

This question tests candidates‟ understanding of the concept of information

systems.

About 80% of the candidates attempted the question. Performance was average
in the parts (a) and (b) of the question, but very poor in Parts (c) and (d).

Only about 5% of the candidates that attempted the question in Part C and D
scored 50% and above in parts (c) and (d)of the marks allocated.

Candidates‟ major pitfall was poor knowledge of the topic.

Candidates are advised to pay greater attention to this section of the syllabus
while preparing for future examinations.

Marking guide
Marks Marks
a. 1
12 ticks for correct objectives 1½ 1
42
b. 1
tick for correct threat ½ 1
22
2
c. i 2 ticks for correct definition 2 2
ii 1 tick for correct aim 1 5
d. i 2 ticks for correct definition 2 2
ii 1 tick for each list and explanation 1 4
Total 20

SOLUTION 5

a. i. Database Management System (DBMS) is a set of software programs

responsible for the construction, storage, retrieval, expansion,
maintenance and control of data and information in a database.
OR
Software that serves as an interface between end-users and a database
allowing the users to create, read, update and delete data in the database.

ii. Characteristics of database

 Provision of a common set of data files for all users of the system.
 Data in a database can be accessed for use by many different users
and programs.
 Data in a database has to be organised and in a standard format.
 A computerised database is accessed and controlled by a special
software known as Data Base Management System. (DBMS).
 Database may be held on the same computer file or on distributed
between several computers in a network.
 Insulation between programs and data and data abstraction.
 Self-describing nature of a database system.

49
 iii. Facilities provided by DBMS

 Ability to add new records, amend or delete existing data on the

database.
 Ability to retrieve data for processing or information to help with
decision making.
 Ability to update the database without the need to modify any
application programs.
 Ability to present data on the database in different combinations
and in different forms.
 Ability to control access to parts of the database through the use of
passwords.
 Ability to provide for data integrity, independence and integration.
 Monitoring the performance of applications and their data.
 Planning for storage and capacity growth requirements.
 Establishing a powerful backup and disaster recovery solutions.
 Archiving, partitioning, replicating and masking data.
 Establishing and maintaining security rules and user access rights.
 Providing dictionary of definitions and descriptions of available
data.

b. i. A data warehouse is a large database containing operational data from

different IT systems with reporting and query tools for analysis of data
and presentation of information in report format.
OR

Storage of both current and historical relational information from a

variety of systems and sources, most often used for reporting data
analysis and business intelligence.
OR
It is a centralised storage system that allows for the storage, analysis and
interpretation of data in order to facilitate better decision-making.

ii. Features of data warehouse

 Data in data warehouse is subject–oriented (organised subject by

subject rather than by application or function)
 Data in data warehouse is non-volatile i.e. once data has been
entered into the warehouse, it cannot be updated or altered.
 Holds data from legacy system to enable analysis of operational data
for the past years for use in trend analyses and forecasting.
 A data warehouse is used to extract archived operational data and
integrate itinto the organisation thereby removing inconsistencies
between data in different systems.
 Integrating data from varied sources into a consistent format.
 Data stored in data warehouse must be time variant either explicitly
or implicitly.

50
c. Advantages of purchasing a database

 Quick way to acquire large amount of data.

 It can aid the growth of the company, as there will be access to
thousands of potential customers.
 To reduce the amount of time spent on managing data.
 To analyse data in a variety of ways.
 To promote a disciplined approach to data management.
 To turn different information into valuable resource.
 To improve the quality and consistency of information.

Disadvantages of purchasing a database

 Competitors may also be able to purchase the data.

 Information can be old/outdated.
 Confirming the validity/accuracy of the data may be difficult.
 The usefulness of database will depend on how well the specification
for the database were identified, set out and sent to Data Company.
 Frequent update/upgrade may be difficult and costly.
 Increase in costs in terms of hardware, software, data storage, etc.

Examiner’s report

This question tests candidates‟ understanding of the concepts of database

management system and data warehouse.

About 30% of the candidates attempted the question and performance was
below average in the part (a) of the question, while that of part (b) and (c) were
very poor.

About 5% of the candidates that attempted the question in Part (c) scored 50%
and above of the marks allocated. The major pitfall among the candidates was
inadequate preparation.

Candidates are advised to study the ICAN Study Text in detail, paying adequate
attention to all topics covered by the syllabus.

Marking guide
Marks Marks
a i. 2 ticks for correct definition 2 2
ii. tick for each characteristic 1 4
iii. 1 tick for each correct facility 1 4
b i. 2 ticks for correct definition 2 2
ii. 1 tick for each correct feature 1 4
c. 1 tick for each correct point 1 4
Total 20

51
 SOLUTION 6

a. i. System to learn from data rather than through explicit programming by

using a variety of algorithms that iteratively learn from data to improve,
describe data and predict outcomes.
OR
It is a subfield of AI which is the capability of a machine to imitate
intelligent human behaviour.
OR

It is a subfield of AI that focuses on the design of systems that can learn

from and make decisions and predictions based on data.

ii. Application areas of machine learning

- Spam filtering
- Credit card fraud detection
- Digit recognition on cheques, zip codes, etc.
- Detecting faces in images
- Recommendation system
- Search engines
- Handwriting recognition
- Scene classification
- Voice assistants
- Fraud detection
- Social Media
- Catching malware
- Self-driving cars
- Speech recognition
- Predict traffic pattern
- Image recognition

iii. Categories/ types of machine learning

- Supervised learning
- Unsupervised learning
- Reinforcement learning
- Deep learning
- Deep reinforcement learning
- Semi-supervised learning

b. i. Simulation is a technique for studying real-world dynamic system by

imitating their behaviour using a mathematical model of the system,
implemented on a computer.
OR

Simulation is a model that mimics the operation of an existing or

proposed system, providing evidence of decision making by being able to
test different scenarios or process changes.

52
ii. Advantages of simulation
1. It can arbitrarily model complexity.
2. It circumvents analytically intractable models.
3. It facilitates “what if” and sensitivity analyses.
4. It can lead to system improvement.
5. Greater understanding of simulation can be used to verify
analytical solutions.
6. If can identify bottlenecks in the flow of entities (material, people,
etc.) or information.
7. It uses multiple performance metrics for analysing system
configurations.
8. It obtains a better understanding of the system by developing a
mathematical model of a system of interest and observing the
systems operation in detail over a long period of time.
9. It helps to gain insight into which variables are most important to
system performance.
10. Critical situation can be investigated without risk.
11. Can be safer and cheaper than the real world system.
12. Able to test product/system works before building them.
13. Can be used to find unexpected problems.
14. It can avoid danger and loss of life.

Disadvantages of simulation

1. Simulation provides only individual, not general solution.

2. It can only solve one parameter at a time.
3. It takes large amount of development time and/or computer time.
4. It is very costly to use than analytical model.
5. It consumes a lot of resources.
6. It takes a lot of computer memory and it is time consuming.
7. It is difficult to develop, so experts are required.
8. It is hard to interpret its results.
9. Mistakes may be made in the programming or rules of simulation.

iii. Continuous simulation: refers to simulation approaches where a system is

modelled with the help of variables that change continuously according
to a set of differential equations e.g. thermal or hydraulic systems.

Discrete simulations: are event-driven where the variables needed to

describe the system change at discrete time points e.g. service industry
application such as queues in grocery stores and manufacturing
applications involving material flow analyses.

OR

Discrete simulation is a stochastic modelling approach widely used to

address dynamic and complex systems e.g. Healthcare system.

53
Examiner’s report

This question tests candidates‟ understanding of the concept of machine

learning and simulation.

About 20% of the candidates attempted the question and performance was
below average. While candidates performed fairly in the part (a) of the
question, performance in part (b) was very poor.

Only about 5% of the candidates that attempted the question scored 50% and
above of the marks allocated in part (b).

Candidates demonstrated lack of deep knowledge of the topics. They are

therefore advised to ensure better coverage of these topics when preparing for
future examinations.

Marking guide
Mark Mark
a i. 2 ticks for correct definition 2 2
ii. ½ tick for correct application ½ 3
iii. ½ tick for correct category ½ 2
b i. 2 ticks for correct definition 2 2
ii. 1 tick for correct point 1 8
iii. 1½ ticks for correct distinction 1½ 3
Total 20

54
ICAN/232/F/A1 Examination No....................
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIA

FOUNDATION LEVEL EXAMINATION – NOVEMBER 2023

BUSINESS, MANAGEMENT & FINANCE

EXAMINATION INSTRUCTIONS
PLEASE READ THESE INSTRUCTIONS BEFORE THE COMMENCEMENT OF THE PAPER

1. Check your pockets, purse, mathematical set, etc. to ensure that you do not
have prohibited items such as telephone handset, electronic storage device,
programmable devices, wristwatches or any form of written material on you
in the examination hall. You will be stopped from continuing with the
examination and liable to further disciplinary actions including cancellation
of examination result if caught.

2. Write your EXAMINATION NUMBER in the space provided above.

3. Do NOT write anything on your question paper EXCEPT your examination

number.

4. Do NOT write anything on your docket.

5. Read all instructions in each section of the question paper carefully before
answering the questions.

6. Do NOT answer more than the number of questions required in each section,
otherwise, you will be penalised.

7. All solutions should be written in BLUE or BLACK INK. Any solution written
in PENCIL or RED INK will not be marked.

WEDNESDAY, NOVEMBER 15, 2023

DO NOT TURN OVER UNTIL YOU ARE TOLD TO DO SO

55
 THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIA
FOUNDATION LEVEL EXAMINATION – NOVEMBER 2023

BUSINESS, MANAGEMENT & FINANCE

Time Allowed: 31/4 hours (including 15 minutes reading time)

SECTION A: MULTIPLE-CHOICE QUESTIONS (20 MARKS)

INSTRUCTION: YOU ARE REQUIRED TO ATTEMPT ALL QUESTIONS IN THIS

SECTION
Write ONLY the alphabet (A, B, C, D or E) that corresponds to the correct
option in each of the following questions/statements.

1. Which of the following management theorists made a study of Japanese

companies and compared them with companies in the US?

A. William Ouchi
B. Henry Mintzberg
C. Douglas McGregor
D. Elton Mayo
E. Peter Drucker

2. Which of the following is represented by the acronym “HTML”?

A. Hyper Test Mark Language

B. Hyper Text Mark Land
C. Hypo Text Markup Languages
D. Hypo Text Mark Language
E. Hyper Text Markup Language

3. Which of the following is associated with junior managers and supervisors

in an organisation?
A. Functional responsibilities
B. Efficiency control, quality control, control of waste, avoiding
unnecessary spending
C. Co-ordination of activities of subordinates
D. Co-ordination with other work groups and functions
E. Monitoring and control

56
4. Which of the following is an advantage of a decentralised decision-making
process?

A. Facilitates effective co-ordination of activities

B. Promotes the usage of initiative instead of getting instructions about
what to do
C. Managers at head office are able to apply a „corporate view‟ to the
entire business
D. Fewer managers might be needed
E. Uses specialised management support teams for the entire
organisation possible

5. Calculate the present value, discounted at 12 percent, of receiving

N300,000 at the end of year 6.

A. 151,989.34
B. 162,999.34
C. 173,989.34
D. 184,989.34
E. 195,989.34

6. Which of the following features is INCORRECT in respect of payback period

investment appraisal method?

A. It can be used to eliminate projects that will take too long to pay
back
B. Often used by companies that have liquidity problems
C. Ignores the total cash returns from the project
D. Analyses accounting profits
E. Simple to calculate

7. Which of the following is TRUE of a finance lease?

A. The leased asset is reported in the statement of financial position

of the lessor as a non-current asset
B. The lessor is responsible for insurance running and maintenance
costs for the asset
C. The purchase cost of the leased asset is paid by the lessor
D. The lessee cannot claim the tax depreciation allowances
E. The lessee is the legal owner of the asset

57
 8. Which of the following is NOT a feature of Net Present Value (NPV) method
of investment appraisal.

A. It considers liquidity as means of evaluating capital project

B. It makes use of cost of capital or discount rate
C. It takes into consideration time-value-of-money
D. It takes account of the timing of the cash flows
E. It evaluates all cash flows from the project

9. Which of the following is NOT an example of a Non-government

organisation?

A. Delight and Partners

B. Lagos Digital Village
C. Murtala Mohammed Foundation
D. Nigeria Health Care Project
E. Women in Management and Business

10. Which of the following is NOT a disadvantage of a joint venture?

A. Flexibility can be restricted

B. Degree of partners‟ involvement may not be equal
C. Clash of cultures and management styles may impair the success of the
venture
D. It has unclear and unrealistic objectives
E. Eradicates the risk of discrimination

11. Which of the following best describes a divisional organisation structure?

A. A structural organisation
B. A centralised organisation
C. A decentralised organisation
D. A transitional organisation
E. A regional organisation

12. A body that has responsibility or oversight of more than one country is

A. Strategic apex body

B. Supranational body
C. National government
D. Transnational body
E. Strategic body

58
13. Which of the following is concerned with internal reporting to decision-
makers?
A. Financial management
B. Financial accounting
C. Strategic management performance
D. Management accounting
E. Finance

14. Which of the following best describes the concept that an accountant
must NOT allow his professional or business judgement to be affected by
conflict of interest?
A. Due care
B. Objectivity
C. Professional competence
D. Confidentiality
E. Integrity

15. The process by which a professional accountant reports suspicions of

illegal or improper behaviour to a person in authority is

A. Due care
B. Surveillance
C. Strategic alert
D. Professionalism
E. Whistleblowing

16. Which of the following management principles best describes employees

awareness of where they stand in the organisation's hierarchy?

A. Unity of command
B. Unity of direction
C. Scalar chain
D. Order
E. Equity

17. The reason one has for acting or behaving in a particular way is

A. Stimulus
B. Ego
C. Motivation
D. Maturity
E. Emotional intelligence

59
18. Which of the following is NOT an example of intrinsic rewards?

A. Sense of achievement in doing the work

B. Sense of recognition for doing the work
C. Enjoying the status that the job provides
D. Award of a company car
E. Pride in doing the work

19. A project team in an organisation is often made up of individuals from

different

A. Ethnic groups
B. Functional areas
C. Matrix structures
D. Social backgrounds
E. Organisations

20. A message could fail to prompt the intended response in any of the
following situations, EXCEPT

A. The recipient of the message was not paying proper attention

B. The recipient does not have the knowledge to understand the
message
C. The recipient has a personal likeness of the sender
D. The recipient is in conflict with the sender
E. The recipient gets the message but then forgets it

SECTION B: OPEN-ENDED QUESTIONS (80 MARKS)

INSTRUCTION: YOU ARE REQUIRED TO ATTEMPT ANY FOUR OUT OF THE
SIX QUESTIONS IN THIS SECTION

QUESTION 1

According to Cole and Kelly “An organisation is a group of people with common
purpose who work together to achieve shared goals”.

a. Define the term group cohesion and explain briefly FIVE characteristics
of an effective team. (10 Marks)

b. Explain briefly the following concepts:

i. Formal organisation

60
 ii. Organisational structure
iii. Flat organisation
iv. Outsourcing
v. Shared services (10 Marks)
(Total 20 Marks)

QUESTION 2

Managers must be well informed that environmental factors are determinants

for organisations‟ survival and success, as these factors have a bearing on the
strategy and other decisions of the organisation.

a. Explain briefly the FOUR features of bureaucracy and state FOUR reasons
for the growth of bureaucracy as summarised by Rosemary Stewart.
(10 Marks)

b. Explain briefly the following concepts:

i. Game theory
ii. Self-regulation theory
iii. Motivation
iv. Self-efficacy
v. Scalar chain (10 Marks)
(Total 20 Marks)

QUESTION 3

Modern organisations now focus on managing their employees rather than

knowing how to do their work well.

a. Explain briefly the assumptions that guide reinforcement theory and

THREE ways reinforcement theory could be used in the business
environment. (10 Marks)
b. List the TEN principles of management as suggested by Lyndall Urwick
and briefly explain FIVE of them. (10 Marks)
(Total 20 Marks)

QUESTION 4

Management and organisations have acknowledged that business analyses and

communication models are strategic tools for reducing risks.

a. Explain briefly the concept “Strategic position analysis” and state FOUR
main features of entrepreneurial organisation. (10 Marks)

b. Define the term “communication style” and explain briefly THREE

components of communication style. (10 Marks)
(Total 20 Marks)

61
 QUESTION 5

a. Managers think about non-financial issues as well as financial issues when

making outsourcing decisions.
i. Explain SIX non-financial considerations that will be relevant to a
make-or-buy decision. (6 Marks)
ii. Describe with the aid of an example in each case, two non-financial
benefits from outsourcing work to an external supplier. (4 Marks)

b. Sustainable development has been defined as the „development that meets

the needs of the present without compromising the ability of future
generations to meet their own needs.‟ A problem with accounting for
sustainable development is to identify what „sustainable development‟
actually means.

Identify FOUR practical difficulties with this definition. (10 Marks)

(Total 20 Marks)

QUESTION 6

a. Briefly explain the concept “Economic stagnation”. (2 Marks)

b. State the THREE policy approaches used by governments to meet
macroeconomic objectives. (3 Marks)

c. List and explain briefly FOUR operations research techniques. (8 Marks)

d. Safeguards are actions or other measures that may eliminate threats or
reduce them to an acceptable level.
Explain SEVEN safeguards created by the Profession in this regards.
(7 Marks)
(Total 20 Marks)

62
SECTION A

MCQ - SOLUTIONS

1. A

2. E

3. B

4. B

5. A

6. D

7. C

8. A

9. A

10. E

11. C

12. B

13. D

14. B

15. E

16. D

17. A

18. D

19. B

20. C

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Examiner’s report
Section A of the paper comprises twenty mandatory multiple-choice questions.
The questions test candidates‟ knowledge of the various aspects of the syllabus.
This section is compulsory and was attempted by all the candidates and their
performance was above average.

Candidates should be encouraged to cover all aspects of the syllabus and the
study text. ICAN study text and Pathfinder for better performance in future
examinations of the institute.

Marking guide
MCQs 1-20 1 mark each for any correct option stated
up to a maximum of 20 marks 20 Marks

SECTION B

SOLUTION 1
a. i. Group cohesion refers to the degree of unity and cooperation
within a group. It involves the emotional bond, trust and shared
goals among members, which contribute to the togetherness of the
group. It describes the strength of the bond uniting the group and
often leads to increased productivity and satisfaction of members
of the group. When cohesion is strong, the group will remain
strong, stable and continue to exist. Conversely, when cohesion is
weak the group may ultimately disband.

ii. The characteristics of an effective team are:

i. Success: An effective team is one that is successful at
achieving its goals or objectives.
ii. Focus: An effective team is aware of its goals and objectives
and keeps these in mind all the time. They use their time and
resources well.
iii. Collective decision-making. An effective team reaches
decisions through discussion and agreement.
iv. Good communication. In an effective team, the team members
communicate with one another well and keep one another
well-informed. They are also truthful in communicating with
each other.
v. Collaboration. In an effective team, the members will
cooperate and collaborate. Each team member will do
whatever is necessary to get the job done, even if this means
doing work that is unfamiliar and outside their normal
experience.
vi. Positive conflict. Positive conflict occurs when there is
disagreement, but the team members are willing to discuss
their differences fully and reach a suitable agreement about
64
 what the solution should be. Some conflicts are inevitable in
teams; the way that the conflicts are resolved is important.
vii. Mutual support. In an effective team, each team member is
aware of the contributions provided by other team members.
viii. Team spirit. In an effective team, team members identify
themselves with the team and feel a part of the team. Team
spirit and team loyalty are strong.

b. i. Formal organisation
A formal organisation is a structured group where there are stated
rules and regulations, with defined hierarchy, duties and obligations
that are expected to be carried out by each individual. It is the
organisation structure that has been created and maintained by its
leaders. This is often shown as an organisational chart, with job
descriptions.

ii. Organisation structure

Organisational structure is the system that defines how certain
activities are directed in order to achieve the goals of an organisation.
Common organisational structure includes entrepreneurial structure,
functional structure, divisional structure, matrix structure, and
boundaryless structure. Organisational structure is the framework
within which the activities of people within the organisation are
coordinated and managed.

iii. Flat organisation

A flat organisation can be described as one in which there is a
minimal number of levels in its hierarchy, with a few layers between
top management and employees. It can also be described as one in
which the scalar chain is short and there is only a small number of
management levels.

iv. Outsourcing
Outsourcing is the practice of contracting work out to a third-party
supplier.
Outsourcing involves contracting tasks, processes, or services to
external third parties rather than handling them internally.

Companies do this to take advantage of specialist external expertise

to free up management time to concentrate on core activities. For
example, a national food retail company might outsource its delivery
work to a specialist transport company.

v. Shared services
Shared services involve the consolidation of support function in an
organisation into a centralised unit, the unit then provides such
service to different departments within the organisation, rather than

65
 replicating such service across the organisation. It can also be
described as the provision of a service by one part of an organisation
or group where that service had previously been found in more than
one part of the organisation or group. Thus, the funding and
resourcing of the service is shared and the providing department
effectively becomes an internal service provider.

Examiner’s report
Part (a) of the question requires the candidates to define the team group
cohesion and the characteristics while part (b) requires candidates to explain
the following concepts: formal organisation; organisation structure; flat
organisation; outsourcing; and shared services

Most of the candidates attempted the question but performance was below
average.

Most of the candidates could not give a good definition of group cohesion and
the characteristics of an effective team correctly. Also, candidates could not give
very good explanations of the concepts examined.

Candidates should be encouraged to be familiar with the contents of the study

text using ICAN study text and Pathfinder as a guide.

Marking guide
Marks Marks
a. i. Award a maximum of 2½ marks for stating
the correct definition 2½
ii. Award a maximum of 1½ Marks each for any 5
characteristics of the effective team correctly stated
(1½ x 5) 7½ 10
b. Award a maximum of 2 marks each for the correct
explanation of the concepts (2 x 5) 10
20

SOLUTION 2
a. i. Features of bureaucracy as suggested by Rosemary Stewart:
i. Specialisation. There is a specialisation of work, but this applies to
the job, not the individual who does the job. This means that there
is continuity. When one person leaves the job the job continue and
another person fills the same position.

ii. Hierarchy of authority. There is a distinction between

„management‟ and „workers. Within management, there is a
hierarchy with clearly defined levels of authority and „ranks‟ of
managers.

66
 iii. A system of rules. The rules of a bureaucracy provide impersonal
and efficient rules and procedures. Individuals within a
bureaucracy must know what the rules are to do their job
successfully.

iv. Impersonal. In a bureaucracy, the exercise of authority and the

system of privileges and rewards are based on a clear set of rules.

ii Reasons for the growth of bureaucracy according to Rosemary Stewart

i. The growing size of organisations
The growing size of organisations such as large organisations need
some bureaucratic structure to function efficiently.

ii. Greater complexity of work

The greater complexity of work makes it necessary to have
specialisation of tasks within an organisation which is made possible
through the bureaucratic approach.

iii. Scientific management

This approach supports a rational way (scientific approach) of
organising work and having formal procedures for getting work done.

iv. The demand for equality of treatment

Bureaucracies provide impartiality and should ensure equal treatment
for all.

b. i. Game theory
This is an operation research (OR) technique used to solve problems
involving conflict. It involves studying mathematical models of conflict
and cooperation to help make strategic decisions. Rules are specified
which represent the various choices of action available and help
determine what the potential and likely outcomes of various courses of
action will be.

ii. Self-regulation theory

The self-regulation theory is a system of conscious personal management
that involves the process of guiding one's own thoughts, behaviors, and
feelings to reach goals. The theory can be applied to impulse control, the
management of short-term desires, and the illusion of control. Self-
regulation involves a certain amount of knowledge to exert self-control.

iii. Motivation
Motivation describes the reason(s) one has for acting or behaving in a
particular way. This in turn impacts the general desire or willingness of
someone to do something. It refers to what drives an individual to act in
a particular manner. It has to do with the needs, desires, and drives,

67
 that direct a person‟s behaviour toward specific goals. If an individual is
motivated by his or her work, enjoys doing it and gets a feeling of
satisfaction or self-actualisation from doing the work, then the individual
is likely to be more productive.

iv. Self-efficacy
This is the measure of the belief in one‟s own ability to succeed in
situations in order to complete tasks and reach goals.

v. Scalar chain
The scalar chain describes the number of different reporting levels
through which communications and decisions are passed in an
organisation. In a bureaucratic organisation, a scalar chain refers to the
number of levels in the management hierarchy, between the most senior
managers at the top of the organisation and ordinary employees at the
bottom. The scalar chain can either be tall or flat. It is tall if the scalar
chain is long and there is a large number of levels in the management
hierarchy and flat if the scalar chain is short and there is only a small
number of management levels.

Examiner’s report
Part (a) of the question tests the candidates‟ knowledge of the concept of
„bureaucracy‟ while part (b) examines candidates‟ aptitudes to explain the
following concepts: game theory, self-regulation theory, motivation, self-
efficacy and scalar chain.

Most of the candidates attempted the question and their performance was poor.

Most of them could not explain the features of bureaucracy and reasons for its
growth. Furthermore, candidates seem to have little or no knowledge of all the
five concepts they were asked to explain.

For a better performance in future examinations, candidates are strongly

advised to cover the entire syllabus in the course of their preparations for this
subject. ICAN study text and pathfinder can be used as a guide.

Marking guide
2. Marks Marks
a. i Award a maximum of 1½ marks each for any 4
. points correctly explained (1½ x 4) 6
Award a maximum of 1 mark each for 4 points
ii. correctly stated (1x 4) 4 10

b. Award a maximum of 2 marks each for the correct

explanation of the concepts (2 x 5) 10
Total 20

68
 SOLUTION 3
a. i. Reinforcement theory states that people seek out and remember
information that provides cognitive support for their pre-existing
attitudes and beliefs.

The main assumptions that guide reinforcement theory are that people:
Generally, do not like to be wrong;
Feel uncomfortable when their beliefs are challenged; and
Seek out and remember information to help „prove their point‟.

ii. Use of reinforcement theory in the business environment include:

i. Setting clear and reasonable expectations – Limiting rewards to
impossible or extremely difficult tasks can lead to anger and a sense of
helplessness resulting in worse performance. Therefore, expectations
should be clear and achievable.

ii. Identifying strong motivators – The best way to do this is to adopt a

participative approach and mutually agree with employees on what an
appropriate reward would be. For example, a parachute jump
experience would not be a suitable reward for someone scared of
heights.

iii. Encouraging desirable behaviours – Behaviour such as strong

teamwork, quality production and punctuality should be reinforced in
order to turn them into strong work habits over time. An effective
technique is to target rewarding one behaviour at a time in order to
eradicate negative behaviours in that sphere before moving on to the
next negative behaviour to manage.

iv. Motivation of Staff – staff should be motivated to give their best in the
workplace. It can be in the form of productivity bonuses to staff that
perform well or giving of incentives such as gifts at the end of the year.

v. Managers should avoid bringing unnecessary stress into the

organisation so that staff can give their best.

vi. Staff training – Staff should be sent for related courses that can enhance
their productivity. Staff training motivates workers and makes them
happier.

b. i. The TEN principles of management suggested by Lyndall Urwick are:

Objective
Specialisation
Co-ordination
Authority
Responsibility

69
 Definition
Correspondence
Span of control
Balance
Continuity

ii. i. Objective - Every organisation and every part of the organisation

must be an expression of the purpose of the undertaking
concerned, or it is meaningless and therefore redundant.
ii. Specialisation - The activities of every member of any organised
group should be confined, as far as possible, to the performance of
a single function. Thus, implying one group, one function.
iii. Coordination - The purpose of organising per se, as distinguished
from the purpose of the undertaking, is to facilitate coordination
and thus unity of effort.
iv. Authority - In every organised group, the supreme, authority must
rest somewhere. There should be a clear line of authority for every
individual in the group.
v. Responsibility - The responsibility of the superior for the acts of the
subordinate is absolute.
vi. Definition - The content of each position, both the duties involved,
the authority and responsibility contemplated and the
relationships with other positions should be clearly defined in
writing and published to all concerned.
vii. Correspondence - In every position, the responsibility and the
authority should correspond.

viii. Span of control - No person should supervise more than five, or at

most, six direct subordinates whose work interlock or interrelate.
ix. Balance - It is essential that the various units of an organisation
should be kept in balance.
x. Continuity - Re-organisation is a continuous process: in every
undertaking specific provisions should be made for it.

Examiner’s report
Part (a) of the question examines candidates‟ knowledge of
reinforcement theory while part (b) requests candidates to list and
explain the principles of organisation.

Few candidates attempted the question and their performance was poor.

70
 Candidates had little or no clue of the assumptions that guide
reinforcement theory; hence they could not explain them, also, they
not properly explain the principles of organisation.

Candidates are advised to have a mastery of all the contents of the

syllabus and make use of ICAN Study Text and Pathfinder for future
examinations.

Marking guide
3. Marks Marks
a. i Award a maximum of 1 mark for explaining
what reinforcement theory means and a
maximum of 1 mark each for any of the three
assumptions 4
ii Award a maximum of 2 marks each for any 3
points correctly explained (2 x 3) 6 10
b. i Award a maximum of ½ mark each for any of
the 10 points listed (½ x 10) 5
ii Award a maximum of 1 mark each for any 5
principles correctly explained (1 x 5) 5 10
Total 20

SOLUTION 4
a. Strategic position analysis involves a study of the business environment
and how it is changing, to identify any threats or opportunities that
might be emerging, and how these might affect future strategy. It also
involves a study of the competition in the entity‟s markets and the
strengths or weaknesses that the entity has in relation to its competitors.
One of the purposes of strategic position analysis is to recognise the
competitive strengths („competitive advantage‟) that the entity enjoys
and should exploit.

The main features of an entrepreneurial organisation are:

i. The entrepreneur-leader takes all the main management decisions and
he does not delegate decision-making to other people. He is closely
involved in the day-to-day operations of the business.
ii. There is no formal management structure. Individuals report directly to
the entrepreneur-leader, who tells them what to do.
iii. The entrepreneur-leader therefore dominates the organisation.
iv. The business operations are likely to be simple because it is usually
difficult for a single person to manage a business whose operations are
complex. For example, the business might make and sell a small

71
 number of products or may provide just one type of service to
customers.

b. i. Definition of communication
The term „communication style connotes the broad ways in which people
tend to exchange information with others. Communication style can be
described as using the right words in the right order to achieve the message
objective. The main communication styles include passive; assertive; and
aggressive. Components of the style include tone – the overall effect that is
created; vocabulary and syntax – the phrases and words actually used plus
the type of sentence structure used; and interest and personality.

ii. Components of communication style

Tone: For effective communication, tone consciously aims at being warm and
friendly, nonetheless simultaneously firm and honest. It should express ideas
positively rather than negatively. – for examples, instead of saying “We are
out of stock” say “We will be getting new stock tomorrow” Tone reflects the
mood and defines the applicable format for example personal or impersonal.
For example, consider whether it is more appropriate to say “write the
report” or rather “Will you write the report, please” Personal or impersonal –
for example “you will receive a 3% pay rise” versus “it has been agreed by
the board that employees will receive a 3% pay rise”. Tone emphasises
appropriate techniques such as accenting spoken words or pausing before a
key point, underlining or emboldening written messages, or repeating key
words.

 Vocabulary and syntax: This is all about the phrases and words actually
used plus the type of sentence structure used. Appropriate vocabulary
will include words that are familiar and understandable, clear and
specific, factual and objective. For effective communication, words that
could be unfamiliar, vague, ambiguous, emotional and subjective should
be avoided. The use of single and simple words should be encouraged.
In short – KISS – „keep it simple, stupid‟. Use single words (the shorter
the better) rather than verbose descriptions. For example, say „large‟
instead of „not inconsiderable‟ Use simple rather than complex sentences,
ensuring paragraphs are not too large.
 Interest and personality: Whilst maintaining the fundamentals of
business communication (direct, succinct, recognise authority,
impartiality, efficiency and corporate identity), incorporating elements of
interest and personality can assist in conveying your message in an
interesting, impactful and persuasive manner. Some of the tactics you
could use include: Understatement, statistics, questions and metaphors.
 Humour: Be careful when employing humour within a message. On the
positive side it can increase attention and awareness and also gain
acceptance by bringing the „human touch‟ to an argument. On the
negative side it may distract attention from the main message, may not

72
 appeal to all cultures and moods and may also undermine credibility
(seriousness).

 Persuasion: When the objective of the business communication is to

persuade, then you will need to be particularly sensitive to the reactions
of the recipient and consider the following:

 Flexibility – you need to be constantly seeking and receiving

feedback in order to read the signals from the recipient. This is
particularly important in sales.
 Tact – be careful with how you frame disagreement, particularly
when dealing with customers who may default to the “customer is
always right” premise
 Listen – in spoken communication the trick is to listen as well as
speak, in written communication it is to read as well as write.

Examiner’s report
Part (a) tests candidates‟ knowledge on the concept of „strategic position
analysis‟ and features of an entrepreneurial organisation. Part (b) of the
question tests candidates‟ intellectual capacity concerning communication in
business.

Majority of the candidates attempted this question and the performance was
poor.

Most of the candidates mentioned the advantages of entrepreneurship

organisation instead of the features. Furthermore, they could not properly
explain communication style and the components.

Candidates are advised to have a mastery of all the contents of the syllabus and
make use of ICAN Study Text and Pathfinder for future examinations.

Marking guide
4. Marks Marks
a. i. Award a maximum of 4 marks for the correct
explanation of the concept 4
ii. Award a maximum of 1½ marks each for any 4
points correctly stated (1½ x 4) 6 10
b. i. Award a maximum of 2½ marks stating the
correct definition of the term 2½
ii. Award a maximum of 2 ½ Marks each for any 3
components correctly explained (2½ x 3) 7½ 10
Total 20

73
SOLUTION 5
a. i. Non-financial issues as well as financial issues when making
outsourcing decisions
 Loss of some degree of control over the work.
 The company relies on the external supplier to produce and supply
the outsourced items.
 The company takes the risk that the external supplier will
produce the outsourced items to a lower standard of quality, or
fail to meet delivery dates on schedule, so that production of the
end product may be held up by a lack of components.
 Loss of some flexibility.
 The decision to increase or reduce the supply of the outsourced
item at short notice may be frustrated by the external supplier.
 It has implications for employment within the entity, with the
consequence of making some employees redundant.
 Attract some cost implications that could also adversely affect the
relationship between management and other employees,
especially in the case of redundancy.
 It might be appropriate to think about the situation whereby the
entity changes its mind at some time in the future and decides
either,
 to bring the work back in-house or
 to give the work to a different external supplier;
 the external provider might not be co-operative in helping with
the removal of its work
ii) Non-financial benefits from outsourcing work to an external supplier
i. If the work that is outsourced is not specialised, or is outside the entity‟s
main area of expertise, outsourcing work will enable management to
focus their efforts on those aspects of operations that the entity does best.
For example, it could be argued that activities such as the management
of an entity‟s fleet of delivery vehicles, or the monthly payroll work,
should be outsourced because the entity itself has no special expertise in
these areas.

ii. The external supplier, on the other hand, may have the expertise, which
enables it to provide the outsourced products or services more efficiently
and effectively. For example, a company might outsource all its IT
support operations, because it cannot recruit and retain IT specialists. An
external service provider, on the other hand, will employ the relevant IT
specialists.

74
b. Identification of the practical difficulties with sustainability definition
i. What are the needs of the present? There is a helplessness to
identify the needs of the present. Presumably, these are more than
simply survival needs, because current levels of consumption are,
in many parts of the world, well above survival level.
ii. What are the needs of future generations? There is a great
incapability to identify the needs of future generations and a
failure to state if these are just survival needs. If they are
identified as survival needs, then there is presumably an
assumption that economic wealth will decline.
iii. It raises the question of over what time period should the needs of
future generations be measured. Thus, the incapacity to identify
the time period in the needs of future generations be measured. In
theory, future needs should be measured in the long-term future.
However, companies and governments plan for the future over
much shorter time frames.
iv. There is the problem of knowing the needs of the people being
referred to in the definition. Does it mean that the needs of all
people in all societies, or that sustainability is being measured in
terms of individual countries or regions of the world?
v. Since companies plan for the future and report their performance
within fairly short time frames, reporting for sustainable
development by companies is likely to focus on relatively short-
term measures of sustainability.

Examiner’s report
Part (a) of the question tests candidates‟ knowledge on the non-financial
considerations that will be relevant to making or buying decisions while
part (b) examines candidates‟ knowledge of social and environmental
issues affecting investment decisions with special emphasis on
sustainability development.

Most of the candidates attempted the question and the performance was
poor.

Commonest pitfalls were, candidates did not have a clear understanding

of the requirements of the question and could not define and identify the
practical difficulties of sustainable development.

Candidates are advised to have a mastery of all the contents of the

syllabus and make use of ICAN Study Text and Pathfinder for future
examinations.

75
 Marking guide
5. Marks Marks
a. i. Award a maximum of 1 Mark each for any 6 points
correctly identified (1 x 6) 6
ii. Award 1 Mark each for any 2 benefits correctly
identified (1 x 2) 2 8
Award 1 Mark each for any 2 examples provided (1 x 2) 2
b. Award a maximum of 2½ Mark each for any 4
difficulties correctly explained (2 ½ x 4) 10 12
Total 20

SOLUTION 6
a. Economic stagnation describes a situation when the national income of
an economy is either- declining, flat, or growing slowly. Economic
stagnation occurs when national income is not increasing, but economic
activity is at a much lower level than it could be. Economic growth
should be possible but is not happening.

Under-utilisation of economic resources such as land and capital

equipment is one of the features of economic stagnation as investors are
discouraged from investing large amounts of money because a
satisfactory return on their investments is not guaranteed.

Economic stagnation pushes up the rate of unemployment. Economic

stagnation in a country may result in individuals from such countries
migrating to other countries where economic wealth is greater.

b. The three policy approaches used by governments to meet

macroeconomic objectives are:
i. Monetary policies – changes in interest rates, the supply of money
and credit, and also changes in the value of the exchange rate;
ii. Fiscal policies – changes in government taxation, government
spending and borrowing;
iii. Supply-side policies designed to make markets work more efficiently.
c. i. Network analysis: This is a project management technique. It
involves identifying the different components of a project, how
long each component will take to be completed, the earliest and
latest start and finish times for each component and the order in
which components can be completed. One of the main objectives
of network analysis is to identify the critical path, that is, the
series of components that sequentially represent the shortest
potential duration of the project.

76
 ii. Game theory: This is an Operations Research (OR) technique used
to solve problems involving conflict. It involves studying
mathematical models of conflict and cooperation to help make
strategic decisions. Rules are specified which represent the various
choices of action available and help determine what the potential
and likely outcomes of various courses of action will be. The zero-
sum games and many-person (or non-zero-sum) are some of the
different game theory styles.

iii. Queuing theory: This theory describes the process using

mathematical methods for analysing and predicting the delays
and congestion of waiting and queuing. The objective is to identify
ways to improve the process to make it quicker. It includes
improving traffic flow, processing shipping orders more efficiently,
reducing the average time per call in a service department or call
centre and improving flow through shops, factories, and hospitals.

iv. Simulation: This is one of the most widely used operational

research techniques, which first became popular in the 1940s
when “Monte Carlo” simulation was used to simulate atomic bomb
raids. It is an imitation technique that involves building a model
that represents a real system and then conducting experiments on
the model. This allows researchers to understand the behaviour
and evaluate different strategies for operating the system.
Researchers can adjust input parameters to test different
hypotheses and predict future behavior, prior to making informed
strategic decisions.

v. Mathematical logic: This is integral to most of the other OR

techniques. It is used to reflect the relationships between the
various components, variables and parameters within some things
that are being modelled. The logic is constructed so as to include
an objective function with which different solutions can be
evaluated and constraints that restrict feasible values tested.

vi. Mathematical optimisation: This is a technique used in

management science, mathematics and computer science to select
the optimal solution from a set of available alternatives. The
solution is derived by either maximising profit or minimising cost
in a objective function by systematically selecting input values
from within a feasible range.

vii. Mathematical modelling: A model is a simplified representation of

a real-life system. Mathematical modelling is a way of describing
a system using mathematical concepts and language. The use of
mathematical modelling allows the researcher to better
understand the contents and the effects of different components
and make predictions about behaviour.

77
 viii. Decision tree: A decision tree is a graphical method of displaying
the various parts of the decision–making process including the
courses of action, risks involved and likely outcomes. A decision
tree can also be defined as a diagrammatical representation of the
various alternatives involved in problems requiring sequential
decisions so that all the possible alternatives can be properly
evaluated.

ix. Linear programming: Linear programming is a business decision

technique that seeks to maximise an objective or goal, for
example, maximisation of profit, or minimisation of an objective or
goal, for example, cost. It is an aspect of mathematical
programming. It is called “linear‟ because all the decision
variables involved are raised to power one. It is called
programming because it involves scheduling (mapping out) the
activities.

x. Transportation model: This model is used in making decisions that

involve the shipment of certain resources or outputs from one
location to another.

xi. Markov chain analysis: This model was named after a Russian
mathematician Andrei Andreyevich Markov, who first applied this
technique to predict the movements of gas particles that were
trapped in a container. The modelling tool involves a process of
the operation of chance and so it is used to forecast a system's
state in the future. It is a method used to predict the value of a
variable whose projected value is influenced only by its current
state, and not by any past activity. This implies that this tool
predicts a random variable based solely on the current
circumstances surrounding the variable. It is often used for
predicting behaviours and decisions within large groups of
people.

d. Safeguards created by the profession:

i. Educational, training, and experience requirements for entry into
the profession.
ii. Continuing professional development requirements.
iii. Corporate governance regulations.
iv. Professional standards.
v. Professional or regulatory monitoring and disciplinary procedures.
vi. Effective and well-publicised complaint systems operated by the
employing organisation, the profession or a regulator, which enable
colleagues, employers and members of the public to draw attention
to unprofessional or unethical behaviour.
vii. An explicitly stated duty to report breaches of ethical requirements
placed on members of a profession.

78
Examiner’s report
Parts (a) and (b) test candidates‟ knowledge on the concept of economic
stagnation and state the policy approaches used by governments to meet
macroeconomic objectives. Parts (c) and (d) focus on operations research
techniques and ethical threats.

Majority of the candidates attempted the question and performance was above
average.

The candidates had difficulty in providing a proper explanation of what

economic stagnation means also, some of the candidates confused operations
research techniques with types of research.

Candidates are advised to have a mastery of all the contents of the syllabus and
make use of ICAN Study Text and Pathfinder for future examinations.

Marking guide
6. Marks Marks
a. Award a maximum of 2 marks for the correct
explanation of the concept 2
b. Award 1 mark each for any 3 policies stated
(1x 3) 3 5
c. i. Award ½ Mark each for any 4 techniques
listed (½ x 4) 2
ii. Award 1½ Marks each for any 4 techniques
explained (1½ x 4) 6 8
d. Award 1 Mark each for any 7 safeguards
listed (1 x 7) 7 7
Total 20

79
ICAN/232/F/A4 Examination No....................

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIA

FOUNDATION LEVEL EXAMINATION – NOVEMBER 2023

BUSINESS LAW
EXAMINATION INSTRUCTIONS
PLEASE READ THESE INSTRUCTIONS BEFORE THE COMMENCEMENT OF THE PAPER

1. Check your pockets, purse, mathematical set, etc. to ensure that you do
not have prohibited items such as telephone handset, electronic storage
device, programmable devices, wristwatches or any form of written
material on you in the examination hall. You will be stopped from
continuing with the examination and liable to further disciplinary actions
including cancellation of examination result if caught.

2. Write your EXAMINATION NUMBER in the space provided above.

3. Do NOT write anything on your question paper EXCEPT your examination

number.

4. Do NOT write anything on your docket.

5. Read all instructions in each section of the question paper carefully

before answering the questions.

6. Do NOT answer more than the number of questions required in each

section, otherwise, you will be penalised.

7. All solutions should be written in BLUE or BLACK INK. Any solution

written in PENCIL or RED INK will not be marked.

THURSDAY, NOVEMBER 16, 2023

DO NOT TURN OVER UNTIL YOU ARE TOLD TO DO SO

80
 THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIA

FOUNDATION LEVEL EXAMINATION – NOVEMBER 2023

BUSINESS LAW
Time Allowed: 31/4 hours (including 15 minutes reading time)

SECTION A: MULTIPLE-CHOICE QUESTIONS (20 MARKS)

INSTRUCTION: YOU ARE REQUIRED TO ATTEMPT ALL QUESTIONS IN THIS

SECTION
Write ONLY the alphabet (A, B, C, D or E) that corresponds to the correct
option in each of the following questions/statements.

1. Which of the following is a NOT a duty of a receiver in a company?

A Taking possession of company property

B Managing company business
C Discharging all outgoings
D Protecting company properties
E Realising securities for the benefit of shareholders

2. Which of the following is NOT a superior court?

A Customary Court of Appeal

B Sharia Court of Appeal
C Customary Court
D State High Court
E Federal High Court

3. Which of the following is NOT an aim of the Money Laundering

(Prohibition) Act?

A Limiting the amount of cash payment and receipt

B Regulating over the counter transactions
C Prescribing foreign currencies that are acceptable in Nigeria
D Providing for proper identification of bank customers
E Empowering the NDLEA to place surveillance on certain bank
accounts

4. Which of the following is an offence under the Cyber Security Act of

2015?
A Glitches
B Election rigging
C Cyberchosis
D Market rigging

81
 E Distribution to the public of racist and xenophobic materials,
which attracts a fine of not less than N10 million

5. What is the minimum number of partners in a Limited Liability

Partnership?
A 1
B 2
C 3
D 4
E 5

6. A means by which a company may hedge against business risk is called

A Limitation of Liability
B Limitless liability
C Moderated liability
D Arbitraging
E Modulating

7. Administrative Committee of the Corporate Affairs Commission is chaired

by the

A Minister of State for Investment

B Business Name Registrar
C Registrar General of the Corporate Affairs Commission
D Administrative Secretary of the Corporate Affairs Commission
E Secretary to the Corporate Affairs Commission

8. Pre-incorporation contracts are

A Binding on the company

B Not binding on the company at all
C Binding on the company after ratification
D Binding on the Board of Directors
E Binding on the third party involved

9. As an alternative to liquidation, where a company is in financial

difficulty the secured creditors have a right to appoint a

A Director to manage the assets

B Banker to manage the assets
C Chairman to manage the assets
D Receiver/manager to manage the assets
E Stockbroker to manage the assets

82
10. In employment law, the probationary period is to test an employee‟s

A Skill and suitability

B Preliminary offer
C Background
D Emotions
E Obedience

11. Which of the following is NOT an element of contract?

A Acceptance
B Capital gains
C Consideration
D Offer
E Intention to create legal relation

12. In Agency, an agent who concludes a contract on behalf of a principal is

entitled to be paid a

A Salary
B Wage
C Gratuity
D Commission
E Pension

13. The liability that is imposed on a person by the acts of another person
that is under his control is called
A Vicious liability
B Bilateral liability
C Vicarious liability
D Various liability
E Dual liability

14. A sale of goods transaction is completed on transfer of

A Appurtenances
B Possession and title in the property
C Possession
D Property
E Title

15. Consideration in a hire purchase contract consists of

A Instalments
B Purchase price
C Rentals
D Reversionary price
E Deposit and balance

83
16. Generally, an insurance contract is one of
A Indenture
B Restoration
C Profit making
D Indemnity
E Security

17. When every right of action on a bill of exchange has been extinguished,
the bill is said to be
A Nullified
B Negotiated
C Discharged
D Activated
E Vanquished

18. Which of the following companies may hold a virtual general

meeting?

A. Commercial company
B. Mortgage company
C. Private company
D. Bank holding company
E. Hybrid company

19. Trust is a relationship in which a person is appointed to hold property for

the benefit of another called

A Inquisitor
B Administrator General
C Executor
D Administrator
E Beneficiary

20. In alternative dispute resolution, one of the procedures by which parties

to a dispute seeks amicable resolution of the dispute is

A Intermeddling
B Congruency
C Conciliation
D Intervention
E Intercession

84
SECTION B: OPEN-ENDED QUESTIONS (80 MARKS)

INSTRUCTION: YOU ARE REQUIRED TO ATTEMPT ANY FOUR OUT OF

THE SIX QUESTIONS IN THIS SECTION
QUESTION 1

a. Nigeria has a legal system that is complex and diverse in origin.

Required:
i. State THREE sources of Nigerian law. (3 Marks)
ii. State THREE equitable remedies available to a claimant. (3 Marks)

b. Ulokoagah, Etseosomi and Ulekhia who are farmers in Ilogboda, Edo

State agreed to carry on business of buying palm oil fruits for milling,
selling the product, and sharing whatever profits they make from the
business. The three of them contributed N5,000 each as working capital.
Etseosomi thereafter bought palm oil fruits with his own money, which
he milled and sold at a profit. Ulokoagah and Ulekhia are demanding a
share of Etseosomi‟s profits, which the latter has rejected. The farmers
have come to you for advice.

Required:
State the legal position and advise the farmers. (6 Marks)

c. The Companies and Allied Matters Act (CAMA) established the Corporate
Affairs Commission and gave it specific functions.

Required:
State FOUR functions of Corporate Affairs Commission. (8 Marks)
(Total 20 Marks)

QUESTION 2

a. Akampa is an accountant in the employment of Kampe Limited. At the

end of last week, he found out that N50,000 was missing from the
proceeds of sales in his custody. Casting his mind back, he remembered
that he had expended the money in paying his son‟s school fees. He
therefore destroyed the receipt book representing the money so as to
balance his account. What Akampa did has come to your knowledge.

Required:
Explain briefly the offence that Akampa has committed. (3 Marks)

b. Omokaro, a distributor entered into contract with Unique Pami Company

Limited not to sell their products above N25,000 per carton. Umiena
bought Unique Pami products from Omokaro below N25,000 and agreed
with him not to sell the products above N25,000 per carton. In breach of
the agreement, Umiena is selling Unique Pami products above the

85
 N25,000 price, and Unique Pami Company is threatening to sue Umiena
for the breach of contract.

Required:

State the applicable law and advise the parties. (5 Marks)

c. There are different types of companies with varying attributes.

Required:
i. State FOUR attributes of a public company. (4 Marks)
ii. State FOUR attributes of a small company. (4 Marks)

d. As business became more complex, the concept of agency was developed

to facilitate transactions.

Required:

i. Explain del credere agent. (2 Marks)

ii. State TWO duties of a principal to an agent. (2 Marks)
(Total 20 Marks)

QUESTION 3
a. Tort is a civil wrong, the remedies for which generally include an action
for damages.

Required:
Explain briefly TWO of the following in the law of torts:

i. Negligence
ii. Remoteness of damage
iii. Causation (5 Marks)

b. Sale of goods contract involves the seller transferring ownership of goods

to the buyer for a price.

Required:
i. Explain property and possession in sale of goods contract.
(2 Marks)
ii. State THREE rights of a buyer in sale of goods contract. (3 Marks)

c. A hire purchase is a contract in which the owner of goods gives another

person called hirer possession of the goods.

86
 Required:
State FIVE elements of a hire purchase agreement. (5 Marks)

d. Business today is facilitated by financial instruments.

Required:
Explain briefly TWO of the following:

i. Bearer Cheque
ii. Order Cheque
iii. Holder
iv. Open Cheque (5 Marks)
(Total 20 Marks)

QUESTION 4

a. Contract of employment is the voluntary relationship between two parties

for work and remuneration.

Required:
i. State TWO grounds for dismissal of an employee. (2 Marks)
ii. State FOUR duties of an employee. (4 Marks)

b. Abokhasomi was told that he has kidney problem and lung infection,
neither of which he disclosed to the insurer in the proposal form for
health policy. Abokhasomi in the proposal form filled that no health
issue, he is aware of, and the policy was issued after paying the
premium. Three months later, he became sick and test revealed lung
infection, and he wants the insurer to pay for the treatment, which was
declined by the insurer on ground of non-disclosure.

Required:

State the applicable law and advise the parties. (5 Marks)

c. The Banks and Other Financial Institutions Act (BOFIA) defined the role of
Banks in Nigeria.

Required:
State FIVE Specialised Banks in Nigeria. (5 Marks)

d. Winding up is a formal way of terminating the life of a company.

Required:

State FOUR categories of persons that may petition the court to wind up a
company. (4 Marks)
(Total 20 Marks)

87
QUESTION 5

a. The Companies and Allied Matters Act (CAMA) specifies persons that may
occupy the office of a company secretary.

Required:
State FOUR qualifications of a person that may be appointed as the
secretary of a public company. (6 Marks)

b. The essence of Criminal Law is to control human behaviour in the society.

Required:
Explain briefly the offence of Forgery. (3 Marks)
c. Oluwe family borrowed money to enable him (Oluwe) travel to Canada in
2014 to study Medicine. After graduation, he stayed back in Canada to
work. He now wants to transfer bulk money equivalent of US$15,000 to his
family from Canada. One of the family members, Oghiei, has come to you
to ask what he should do, considering the Money Laundering (Prevention
and Prohibition) Act 2022.
Required:
State the legal position and advise Oghiei. (6 Marks)

d. Corporate insolvency occurs when a company is unable to meet its

financial obligations.

Required:
i. State TWO insolvency practitioners. (2 Marks)
ii. State THREE qualifications that an insolvency practitioner must
possess. (3 Marks)
(Total 20 Marks)

QUESTION 6

a. Umoru created a private trust of which he appointed Godwin and Tohib

as trustees. Tohib wants to delegate his function as a trustee to his
trusted friend, Mr. Murphy, a very conscientious person because of his
busy schedule of work. Godwin has declined the appointment.
Required:
State the law and advise the parties. (5 Marks)

b. The Companies and Allied Matters Act (CAMA) provides for the
appointment of company auditors.
Required:
State FIVE persons disqualified from being company auditor. (5 Marks)

88
c. The deployment of Technology has greatly improved commerce.
Required:
Explain TWO types of the following e-commerce contract:
i. Click-through
ii. Shrink-wrap
iii. Browse-wrap (5 Marks)

d. When a person dies intestate, the court may appoint persons to manage
his estate.
Required:
State FIVE duties of personal representatives of a person who died
without a will. (5 Marks)
(Total 20 Marks)

89
SECTION A

MCQ - SOLUTIONS

1. B
2. C
3. C
4. E
5. B
6. A
7. C
8. C
9. D
10. A
11. B
12. D
13. C
14. B
15. A
16. D
17. C
18. C
19. E
20. C

Examiner’s report
The questions achieved the spread stipulated by the syllabus.
All the candidates attempted the questions and their performance was very
good.

90
SECTION B
SOLUTION 1
a. i. The sources of Nigerian Law are:
 The Received English Law;
 Nigeria Legislation;
 Customary Law;
 Judicial Precedents or Case Law;
 International Law or Treaties; and
 The Constitution.

ii. Equitable remedies include:

 Injunction;
 Specific performance;
 Rescission;
 Rectification; and
 Quantum meruit.

b. The three farmers agreed to carry out business of buying oil palm fruits for
milling, selling the product, and sharing whatever profits as partners. This
is because a partnership is an agreement between two or more persons for
business, profit making, and profit sharing.

Etseosomi in buying palm oil fruits with his money is deemed to have
acted on behalf of the other two partners. This is because in general
partnership, the act of one partner done in course of the business binds
other partners. Therefore, the other two partners, Ulokoaga and Ulekhia
are deemed to be entitled to share in the profits of Etseosomi‟s additional
investment in the partnership.

Except otherwise agreed, all the partners are deemed to have agreed to
share the profits and losses of the business equally. Etseosomi‟s refusal to
share profits with other two partners is a breach of the partnership
agreement, which is actionable in court.

c. Section 8 of the Companies and Allied Matters Act (CAMA), 2020 provides
for the functions of Corporate Affairs Commission (CAC) as follows:

i. Administering the CAMA, including the registration, regulation and

supervision of:
 the formation, incorporation, management, striking off and
winding up of companies,
 business names, management and removal of names from the
register, and the formation, incorporation, management and
dissolution of incorporated trustees;
ii. Establishing and maintaining company‟s registry and office in each
State of the Federation, suitably and adequately equipped to perform

91
 its functions under this Act or any other law;

iii. Arranging or conducting an investigation into the affairs of any

company, incorporated trustees, or business names where the
interest of the shareholders, members, partners, or public so
demands;

iv. Ensuring compliance by companies, business names and

incorporated trustees with the provisions of this Act and such other
regulations as may be made by the (CAC);

v. Performing such other functions as may be specified in this Act or

any other law; and

vi. Undertaking such other activities as are necessary or expedient to

give full effect to the provisions of this Act.

Examiner’s report
The question tests candidates‟ understanding of the sources of Nigeria Law;
equitable remedies; sharing of profits as an element of partnership; and the
functions of the Corporate Affairs Commission.
About 75% of the candidates attempted the question, and their performance
was average.
The major pitfall was candidates‟ inadequate understanding of equitable
remedies and the elements of partnership.
Candidates are advised to study the areas of deficiency more in the ICAN Study
Text in future.

Marking guide
Marks Marks
a. i. Sources of law in Nigeria
(1 mark for each source of law up to a
maximum of 3 sources) 3
ii. Equitable remedies
(1 mark for each equitable remedy up to a
maximum of 3 remedies) 3 6
b. Definition of partnership
(2 marks for correct definition of partnership) 2
State that partners bind each other 2
Profit sharing is equally 2 6
c. Functions of Corporate Affairs Commission
(2 marks for stating each function of CAC up to a
maximum of 4 points). 8
Total 20

92
SOLUTION 2

a. Akampa has committed the offence of fraudulent false accounting under

section 438 of the criminal code. This is because being an account officer
in the employment of Kampe Limited, he has destroyed a document
belonging to his employer or received by him on account of his employer.

b. The principle tested here is privity in the relationship between parties to a

contract. A person who is not a party to contract cannot benefit or suffer
from it.
In this case, there is no privity of contract between Unique Pami Company
Limited and Umiena. The contractual relationship is between Omokaro and
Umiena not to sell a carton of Unique Pami Products above N25,000.

Unique Pami Company Limited is a stranger to Umiena. There is no

enforceable contractual relationship between them. If the company sues
Umiena for breach of contract, the action is not likely to succeed in court
on ground of privity of contract.

c. i. A public company has the following attributes:

 Minimum issued share capital requirement of at least N2,000,000 (S.
27(2) (a), CAMA);
 A minimum membership of 2 and an unlimited maximum
membership;
 A name ending with “Public Limited Company or “Plc.”;
 The capacity to invite the members of the public to subscribe for its
shares; and
 It must hold a statutory meeting within six months of its incorporation;
 It must advertise the notice of its Annual General Meeting in two national
newspapers; and
 One-third of its directors must be independent or non-executive directors.

ii. A small company has the following attributes under section 394 of the
CAMA:
 It is a private company;
 Its turnover is not more than N120,000,000 or such sum of money as
the CAC may fix from time to time;
 Its net assets value is not more than N60,000,000 or such sum as the
CAC may fix from time to time;
 None of its members is an alien;
 None of its members is a government, government corporation or
agency or its nominee; and
 Where the company has share capital, the directors must hold at least
51% of its equity share capital between themselves.

c. i. A del credere agent is an agent who in return for a higher rate of

commission promises to indemnify the principal against the liability of a

93
 third party with whom he contracts in respect of goods if the third party
fails to deliver under the contract.

ii. The duties of the principal in agency are:

 Duty to pay the agent‟s commission;
 Duty to indemnify the agent for all lawful acts carried out by the
agent on his behalf;
 Duty to ratify the actions of the agent; and
 Duty to assume responsibility and liability for the authorised acts of
the agent.

Examiner’s report
The question tests candidates‟ understanding of fraudulent false accounting in
criminal law; privity in the law of contract; attributes of a public company and a
small company as well as types of agency and the duties of the principal.
Attempt rate was about 65% and performance was above average.
The major pitfall was candidates‟ insufficient understanding of all aspects of the
question.
Candidates should study all aspects of this question in ICAN‟s Study Text in their
future preparation.

Marking guide
Marks Marks
a. Fraudulent false accounting
(Explaining that Akampa is guilty of fraudulent
false accounting) 3
b. Privity of contract
i. Principle tested is privity of contact 1
ii. No privity between Unique and Umena 2
iii. No enforceable contract 2 5
c. Attributes of public company and small company
i. (1 mark for each attribute of a public
company up to a maximum of 4 attributes) 4
ii. (1 mark for each attribute of a small company
up to a maximum of 4 attributes) 4
d. Explanation of del credere agency and duties of a
principal
i. (Correct explanation of del credere agent) 2
ii. (1 mark for each duty of agent up to a
maximum of 2 duties) 2 4
Total 20

94
 SOLUTION 3
a. i. Negligence in tort means carelessness, or an act or action where a person
did not take necessary care to avoid the consequences of his action. In
other words, it is a breach of legal duty by a person to take care, which
results in an injury to another person. For an action to be declared
negligent, there must be legal duty to take care, a breach of that legal
duty, and a consequential injury.

ii. Remoteness of damage means that there is a limit to the extent of a

person‟s liability for consequences of his negligence. The rule is that a
person will be liable only for those consequences of his negligence that are
not remote in law. Consequences are considered too remote if a reasonable
person could not have reasonably foreseen them.

iii. Causation in fact in tort means that the defendant is only liable for the
damage that is the direct consequence of his tort. There must be a link
between the breach of duty and the damage complained about. In tort
action, the defendant will only be liable for injury if it can be categorically
stated that if not the breach of duty, the damage would not have occurred.

b. i. Property in goods means ownership of or title to the goods. On the other

hand, possession is the physical control or custody of goods. The transfer
of property in goods is not dependent on the transfer of possession. It is
possible for one person to be in possession while another has ownership or
title.

ii. The rights of a buyer in sales of goods are:

 Right of action for damages for non delivery;
 Right of specific performance;
 Right in tort for detinue;
 Right of repudiation or neglect of the goods; and
 Right of action for breach of warranty.

c. Elements of a hire purchase agreement are as follows:

i. A hire purchase agreement must be in writing;
ii. The price must be stated in writing;
iii. The amount of instalment must be stated in the agreement;
iv. The agreement must be signed by the parties;
v. Information on the hire purchase must be furnished by the parties in
the agreement;
vi. Any agreement that entitles the owner to enter the premises and
repossess the goods from the hirer is void; and
vii. The right of hirer to determine the agreement before final instalment
and return the goods be in the agreement.

d. i. Bearer cheque is cheque drawn and made payable to the bearer, or

endorsed in blank. A cheque payable to an unnamed person is a bearer

95
 cheque. A bearer cheque is transferable by mere delivery without any
endorsement.

ii. Order cheque is a cheque made payable to a named person or to his

nominee. An order cheque requires endorsement before it is transferred or
payment on it is made.

iii. A holder is the payee or the endorsee of a bill who is in possession of it or

the bearer thereof. A person holding a forged bill or stolen bill is not a
holder but a wrongful possessor.

iv. Open Cheque is a cheque that neither bears across its face two transverse
lines nor words such as “and company” or “not negotiable” are written on.

Examiner’s report
The question tests candidates‟ knowledge of negligence, remoteness of damage,
and causation in tort law; property, possession, and buyer‟s rights in sale of
goods; elements of a hire purchase agreement; and types of cheque.
About 70% of the candidates attempted the question, and their performance
was above average.
The major pitfall was candidates‟ lack of understanding of property and
possession in the law of torts, and the aspects of torts examined.
Candidates would gain an insight to their areas of deficiency through a diligent
study of the ICAN Study Text.

Marking guide
Marks Marks
a. Brief explanation of the following in torts law
i. Negligence
ii. Remoteness of damages
iii. Causation
(2½ marks for each principle explained up to
a maximum of two principles) 5
b. i. Explanation of property and possession in
sale of goods contract 2
ii. Right of a buyer in sale of goods contract
(1 mark for each right stated up to a
maximum of 3 rights). 3 5
c. Elements of a hire purchase contract
(1 mark for each element of hire purchase stated
up to a maximum of 5 elements) 5
d. Types of cheque
i. Bearer cheque 2½
ii. Order cheque 2½

96
 iii. Holder 2½
iv. Open cheque 2½
(2½ marks for each cheque explained up to a
maximum of 2 types) 5
Total 20

SOLUTION 4
a. i. An employee may be dismissed for any of the following reasons:
a. Act or conduct likely to bring the employer into disrepute;
b. When the servant‟s practices or conduct expose the master to loss of
public confidence;
c. Gross immorality;
d. Absenteeism without leave or permission, amounting to an
abandonment
of duties; or
e. Gross misconduct, which may include insubordination, habitual
drunkenness, gross negligence, wilful disobedience of lawful
orders and soon.

ii. The duties of an employee are as follows:

 Duty to obey the employer‟s lawful orders within the contract of
employment;
 Duty to exercise professed skill and diligence;
 Duty to do that for which he is employed or other closely related
things;
 Duty to render personal service and not to delegate his duty without
the employer‟s consent;
 Duty to keep secret his employer‟s confidential information and trade
secret; and
 Duty to serve the employer faithfully and not to have conflicting
interest with that of his employer.

b. In Insurance contract, the insured is presumed to have knowledge of all

relevant material facts, and he is required to disclose by law all such facts
in good faith; what is material depends on the particular risk, in this case
of health policy.
The fact that Abokhasomi knew of his kidney trouble and lung infection
and failed to disclose in the proposal form he filled amounts to non-
disclosure. The insured is not to choose which facts are materials.

The disclosure would have influenced the decision of the insurer, whether
to accept or reject the insured or the premium to be paid. Non-disclosure
of his lung infection is a breach of good faith. Therefore, Abokhasomi is
not likely to succeed in an action against the insurer.

c. By virtue of the Bank and Other Financial Institutions Act (BOFIA),

specialised banks in Nigeria are:

97
 i. Bank of Industry;
ii. Nigerian Agricultural and Cooperative Bank;
iii. Nigeria Export-Import Bank;
iv. The Urban Development Bank;
v. Federal Mortgage Bank of Nigeria;
vi. People‟s Bank of Nigeria;
vii. Microfinance Bank; and
viii. Development Bank of Nigeria

d. The following may petition the court for winding up of a company:

i. The company or a director, following a special resolution;
ii. A creditor, including a contingent or prospective creditor of the
company;
iii. A contributory, in the case of a company limited by guarantee;
iv. A trustee in bankruptcy to, or a personal representative of, a creditor or
contributory;
v. The Corporate Affairs Commission if, considering the report of an
inspector, it appears expedient in the interest of the public that the
company be wound up; or
vi. A receiver, if authorized by the instrument of appointment;

Examiner’s report
The question tests candidates‟ understanding of specialised banks; grounds for
an employee‟s dismissal and duties of an employee; non-disclosure of material
facts in insurance contract; and persons who may petition the court for company
winding up.
About 70% of the candidates attempted the question, and their performance
was above average.
It was obvious that many candidates did not prepare for disclosure in
insurance, and categories of person that may petition the court for winding up
of a company.
Candidates are advised to cover the syllabus adequately in their future
preparation.

98
Marking guide
Marks Marks
a. i. State TWO reasons for dismissal 2
ii. State FOUR duties of employee 4 6
b. i. Insured presumed to know and disclose
material facts 1
ii. Non disclosure by Abokhasomi 2
iii. Non disclosure equals breach 2 5
c. Specialised banks in Nigeria
(1 mark for each bank up to maximum of five
banks) 5
d. Categories of persons that may petition for
winding up
(1 mark for each category up to 4 categories) 4
Total 20

SOLUTION 5

a. A secretary of a public company must have any of the following professional

qualifications:
i. Membership of the Institute of Chartered Secretaries and
Administrators of Nigeria (ICSAN); or
ii. A legal practitioner within the meaning of the Legal Practitioners Act,
Cap L11, LFN, 2004; or
iii. Membership of any professional body of accountants established
from time to time by an Act of the National Assembly; or
iv. Any person who has held the office of the secretary of a public
company for at least three years of the five years immediately
preceding his appointment in a public company; or
v. A body corporate or firm consisting of the professionals in (a), (b), or
(c).

b. Forgery is the alteration of a document or knowingly making a false

document in writing with intent that it may in any way be used, or acted
upon as genuine, to the prejudice of any person who may believe that it is
genuine and be induced to do or refuse to do an act.

c. According to the Money Laundering (Prevention and Prohibition) Act,

2022, a transfer of funds to or from a foreign country by a person or body
corporate which exceeds $10,000 or its equivalent must be reported to the
Special Control Unit Against Money Laundering (SCUML) of the EFCC, CBN
and Securities and Exchange Commission (SEC) within one day of the
transaction.

The US$15,000 cash transfer by Oluwe falls in the category that must be
reported.

99
 Oghiei should advise Oluwe to make a declaration of the transfer to the
SCUML, CBN and SEC within one day of the transfer.

d. i. Insolvency practitioners are:

 Liquidator;
 Provisional liquidator or Official Receiver;
 Administrator;
 Receiver manager; and
 Nominee.

ii. The following are the qualifications for insolvency practice and
practitioners:
 A degree in Law;
 A degree in Accounting;
 A minimum of 5 years post qualification experience in matters of
insolvency;
 Anthorised by virtue of certification by Insolvency Practitioners
Association; and
 Authorisation by CAC.

Examiner’s report
The question tests candidates‟ understanding of the qualifications of a company
secretary; forgery as an offence and limit to international cash transfer under
criminal law; and insolvency practitioners and their qualifications.
Attempt rate was about 65%, and performance rate was above average.
Candidates‟ major pitfall was their inadequate understanding of insolvency.
Candidates are advised to study insolvency more intensely in their future
preparation.

Marking guide
Marks Marks
a. Duties of Company Secretary
(1½ marks for each duty up to a maximum of 4
duties) 6
b. Explain Forgery briefly 3
z

c. i. US$10,000 as maximum transfer 2

ii. US$15,000 exceed the authorised 2
iii. US$15,000 transfer requires reporting 2 6
Types of insolvency practitioners in relation
d. i.
to company
(1 mark for each practitioner stated up to a
maximum of 2 types)
2

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 ii. Qualifications that insolvency practitioner
must possess
(1 mark for each qualification stated up to a
maximum of 3 qualifications) 3 5
Total 20

SOLUTION 6
a. The office of a trustee imposes legal duties that the trustee is obligated to
carry out. No one could be compelled to accept the office of a trustee.

A person appointed as a trustee may reject or decline the appointment and

thereby disclaim the trust. Godwin could disclaim the appointment in
writing or refuse to act.

Tohib cannot delegate his duty or power to Murphy because confidence is

reposed personally in him by the settlor. He is required to carry out trustee
functions personally and cannot delegate the duties to Murphy.

b. Persons disqualified from being company auditor under the CAMA are:
i. An officer or servant of the company;
ii. A body corporate, except all the partners are qualified to be
appointed as auditors of a company;
iii. A person disqualified from appointment as auditor of any other body
corporate;
iv. A debtor in sum that exceeds N500,000 to the company or related
company in share interest;
v. A shareholder or spouse of a shareholder of a company whose
employee is an officer of the company;
vi. A person who is responsible for keeping the register of holders of the
company‟s debentures; and
vii. An employee of the company for more than one year who maintains
any of the company‟s financial records.

c. E-Commerce contracts are:

i. Click-through contracts which generally require a person to scroll
through the terms and conditions of the agreement and indicate his
acceptance to be bound by the enforceable contract by clicking on
the button or ticking a box at the end of the agreement;

ii. Shrink-wrap agreement which refers to purchase agreements that are

attached to shipped products usually bound by shrink wrap that
contain its terms and conditions. Shrink wrap agreement may include
terms such as licenses, right to fuse fees payments forum, warranties
and limit liability; and

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 iii. Browse-wrap agreements are contracts in which the terms of use are
listed on a web site page. In such contracts, manufacturers presume
to bind the user to the web site or downloading software from that
site.

d. Duties of personal representatives of a person who dies without a will are:

i. Gathering and realisation of assets;
ii. Payments of debts and liabilities;
iii. Keeping proper accounts and records;
iv. Duty not to profit from the administration of estate;
v. Distribution of the remainder of the assets to persons entitled;
vi. Duty to defend actions on the estate;
vii. Duty to pay estate tax; and
viii. Duty to sue in relation to the estate.

Examiner’s report
The question tests candidates‟ understanding of delegation of trustees‟ duties;
persons disqualified from being company auditors; types of e-contract; and the
duties of personal representatives of a deceased intestate.
Attempt rate was about 50%, and performance was below average.
The major pitfall was candidates‟ poor understanding of all aspects of the
question.
Candidates are advised to study the areas tested more diligently in the ICAN
Study Text in their future e preparation.

Marking guide
Marks Marks
a. i. Office of trustee is voluntary with duties 1
ii. Appointed person may decline office 2
iii. Tobi as trustee cannot delegate authority 2 5
b. Persons disqualified from being company auditor
(1 mark for each disqualified person up to a
maximum of five persons) 5
c. Explanation of any TWO of the following
e-commerce contract
i. Click-through 2½
ii. Shrink-wrap 2½
iii. Browse-wrap 2½
(2½ marks for each point up to a maximum of 2 points) 5
Duties of personal representative of a person who
d.
died without a will
(1 mark for each duty up to a maximum of 5 duties)
5
Total 20

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