ICAEW BIP · Chapter 10
The external environment, technology, data and ethics MCQs with Answers
10 multiple-choice questions on The external environment, technology, data and ethics for ICAEW BIP Business Insight and Performance. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
Hartfield Ltd sells to US customers at a price of $90 per unit, invoiced in dollars. It budgeted to sell 20,000 units at an exchange rate of $1.50 = £1. Sterling then strengthens to $1.60 = £1, and the dollar price and sales volume do not change. What is the effect on Hartfield's sterling revenue compared with the budget?
- A) An increase of £75,000
- B) A decrease of £120,000
- C) A decrease of £180,000
- D) A decrease of £75,000
Show answer & explanation
Answer: D) A decrease of £75,000
Dollar revenue = 20,000 x $90 = $1,800,000. Budgeted sterling revenue = $1,800,000 / 1.50 = £1,200,000. Revenue at the new rate = $1,800,000 / 1.60 = £1,125,000. Sterling revenue falls by £75,000. A stronger domestic currency means each dollar earned converts into fewer pounds, which hurts exporters that price in foreign currency.
Question 2
The central bank raises interest rates. Which of the following is the most likely effect on businesses?
- A) Consumers increase their spending on goods bought on credit
- B) The cost of servicing variable-rate business loans falls
- C) Businesses with variable-rate borrowing face higher finance costs, and demand for goods bought on credit tends to fall
- D) The domestic currency tends to weaken as investors move funds abroad
Show answer & explanation
Answer: C) Businesses with variable-rate borrowing face higher finance costs, and demand for goods bought on credit tends to fall
Higher interest rates increase the cost of borrowing, so finance costs rise for businesses with variable-rate debt, and consumers tend to cut spending on credit-financed purchases such as cars and household goods. Higher rates also tend to attract overseas funds, which strengthens rather than weakens the domestic currency.
Question 3
Mira is a management accountant at Brookfield Ltd. A former colleague who now works for a competitor asks her to share Brookfield's detailed product cost data 'informally, for benchmarking'. Brookfield has not authorised the disclosure and there is no legal or professional duty to disclose. Which fundamental principle of the ICAEW Code of Ethics would Mira most directly breach if she shared the data?
- A) Professional competence and due care
- B) Objectivity
- C) Confidentiality
- D) Professional behaviour
Show answer & explanation
Answer: C) Confidentiality
Confidentiality requires a professional accountant to respect the confidentiality of information acquired through professional and business relationships, and not to disclose it to third parties without proper and specific authority unless there is a legal or professional right or duty to disclose. None of those exceptions applies here, so disclosure to a competitor would breach confidentiality.
Question 4
What is the main purpose of competition regulation, such as the powers given to a national competition authority?
- A) To prevent anti-competitive behaviour, such as cartels and abuse of a dominant market position, that would harm consumers
- B) To protect domestic producers from cheaper imports
- C) To guarantee minimum profits for firms in regulated industries
- D) To set the selling prices of all goods and services
Show answer & explanation
Answer: A) To prevent anti-competitive behaviour, such as cartels and abuse of a dominant market position, that would harm consumers
Competition regulation aims to keep markets competitive, for example by investigating mergers, prohibiting price-fixing cartels and stopping dominant firms from abusing their market power. This protects consumers through lower prices, choice and innovation. Protecting domestic producers from imports is protectionism (such as tariffs), not competition policy.
Question 5
Calder Ltd buys a component from an overseas supplier at £40 per unit. The government introduces an import tariff of 15% of the component's value. Calder uses 12,000 components a year and cannot pass the extra cost on to customers or find another supplier. By how much will Calder's annual profit fall?
- A) £62,609
- B) £72,000
- C) £480,000
- D) £552,000
Show answer & explanation
Answer: B) £72,000
Tariff per component = £40 x 15% = £6. Annual cost increase = 12,000 x £6 = £72,000, so profit falls by £72,000. £552,000 is the new total cost of the components (£480,000 x 1.15), not the change, and £62,609 wrongly treats the tariff as already included in the £480,000.
Question 6
A company's marketing team designs its own questionnaire and sends it to customers to measure their satisfaction with a new product. What type of data does this produce?
- A) Secondary data
- B) Metadata
- C) Big data
- D) Primary data
Show answer & explanation
Answer: D) Primary data
Primary data is collected first-hand by the user for a specific purpose, such as a company's own survey. Secondary data was collected by someone else, or for another purpose, such as published industry statistics. Metadata is data that describes other data, and big data refers to very large, fast-changing and varied data sets.
Question 7
A company wants to survey 200 of its 8,000 customers. It lists the customers alphabetically, chooses a random starting point between 1 and 40, and then selects every 40th customer on the list. Which sampling method is this?
- A) Quota sampling
- B) Stratified random sampling
- C) Cluster sampling
- D) Systematic sampling
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Answer: D) Systematic sampling
Systematic sampling selects items at a fixed interval (here 8,000 / 200 = every 40th) from a random start. Stratified sampling divides the population into groups and samples randomly within each one, cluster sampling selects whole groups, and quota sampling is non-random, with interviewers filling set quotas. Systematic sampling can be biased if the list has a pattern that matches the interval.
Question 8
Which of the following finance tasks is best suited to robotic process automation (RPA)?
- A) Matching high volumes of supplier invoices to purchase orders and goods received notes using fixed rules
- B) Negotiating the terms of a new bank loan facility
- C) Deciding whether the company should enter a new overseas market
- D) Judging the amount of a provision for a disputed legal claim
Show answer & explanation
Answer: A) Matching high volumes of supplier invoices to purchase orders and goods received notes using fixed rules
RPA uses software 'bots' to perform high-volume, repetitive, rules-based tasks on structured data, such as three-way matching of invoices. This is faster, cheaper and less error-prone than manual processing and frees accountants for higher-value work. Negotiation, strategic decisions and judgements on uncertain matters need human judgement and are not suitable for RPA.
Question 9
A management accountant is asked to report on customer satisfaction. The only data available come from customers who chose to complete an online survey after contacting the complaints helpline. Applying professional scepticism, which issue should the accountant highlight?
- A) None, because data collected directly from customers is always reliable
- B) The sample is affected by selection bias, so the results may not represent the views of customers as a whole
- C) The data cannot be used, because customer data may never be analysed
- D) The results can be relied on as long as more than 100 customers responded
Show answer & explanation
Answer: B) The sample is affected by selection bias, so the results may not represent the views of customers as a whole
Only customers who contacted the complaints line and chose to respond are included, so the sample suffers from selection (self-selection) bias and is likely to overstate dissatisfaction. Professional scepticism means questioning whether data is complete and representative before using it, and disclosing its limitations. A larger biased sample is still biased.
Question 10
The managing director of a company asks the management accountant to reduce the forecast costs in a cash flow forecast that will be given to the bank to support a loan application, although the accountant believes the original forecast is realistic. Which fundamental principle of the ICAEW Code of Ethics is most directly threatened?
- A) Confidentiality
- B) Professional competence and due care
- C) Integrity
- D) Professional behaviour
Show answer & explanation
Answer: C) Integrity
Integrity requires a professional accountant to be straightforward and honest and not to be knowingly associated with information that is false or misleading. Reducing costs the accountant believes are realistic would make the forecast misleading. The pressure from the managing director is an intimidation threat to this principle.