Summer Special Sale - Limited Time 60% Discount Offer - Ends in 0d 00h 00m 00s - Coupon code: 575363r9

Welcome To DumpsPedia

P3 Sample Questions Answers

Questions 4

Which of the following are the Committee of Sponsoring Organisations (COSO) key principles of enterprise risk management?

Select ALL that apply.

Options:

A.

Consideration of the main risk only which is financial risk

B.

The creation of a risk aware culture

C.

Risk management is the responsibility of the risk committee

D.

Consideration of risk management in the context of business strategy

E.

A comprehensive and holistic approach to risk management

Buy Now
Questions 5

Return on capital employed (ROCE) can be a useful measure of divisional performance.  For which of the following types of company is ROCE likely to be most appropriate?

Options:

A.

Companies in which there is extensive investment in intellectual property and intangible assets, such as brands and trade marks.

B.

Companies in which there is extensive investment in physical assets, such as plant and machinery, with divisions which undertake broadly similar activities.

C.

Companies which have been created by extensive acquisition and merger activity and include divisions engaged in a variety of activities.

D.

Companies in the not-for-profit sector.

Buy Now
Questions 6

A firewall in a computer suite is designed to

Options:

A.

prevent the overloading of the network by unauthorised traffic

B.

prevent a disaster from occurring by limiting the spread of any fire

C.

prevent viruses from infecting the network

D.

prevent unauthorised traffic into defined areas of the network

Buy Now
Questions 7

You have been assigned the role of lead internal auditor. Your task is to carry out the annual assessment of the production line maintenance department.

When planning for this audit, which of the following must be completed?

Options:

A.

Prepare the report.

B.

Establish whether the controls are adequate or not.

C.

Decide how the controls will be tested.

D.

Learn all about the systems and controls in the department.

E.

Carefully consider any control weaknesses that are reported.

F.

Review previous audit findings for the department.

Buy Now
Questions 8

An oil company has entered into a joint venture with a competing oil company to develop a new oil field. The joint venture arrangement is intended to mitigate the risks associated with developing the oil field.

The following disclosure appears in the oil company's risk report:

"Many of our large projects and operations are conducted through joint ventures. These arrangements involve complex risk allocation and indemnification arrangements and we have less control over these activities than we would have if we had full ownership and control. Our partners may have economic or business interests that are opposed to ours, and may exercise the right to block key decisions or actions. We believe the joint arrangement is in our best interest."

Which of the following statements are correct?

Options:

A.

The risk report means that the shareholders know exactly how bad the risk is.

B.

The risk report says nothing useful about the risk.

C.

Now the shareholders know the directors are aware of the risk.

D.

If the risk report had not reported the risk the shareholders might not have been aware of the risk.

E.

The shareholders now have more useful information.

Buy Now
Questions 9

A has an opportunity to invest $90,000 in a project that is expected to generate annual cash inflows of $60,000 for each of the next three years. The project's beta coefficient implies a discount rate of 12% for this project, based on a risk-free rate of return of 3%.

A is prepared to forego the expected cash flows from this project in return for a guaranteed payment of $50,000 at the end of year 1, $42,000 at the end of year 2 and $30,000 at the end of year 3.

What is the certainty equivalent value of this opportunity to A?

Options:

A.

$9,493

B.

$25,606

C.

$54,120

D.

$115,606

Buy Now
Questions 10

The management of U is reviewing internal controls throughout the company. It has noted the following:-

   1. In the trade receivables section, journal adjustments are made by the clerks, without any reference to their supervisor. Journal adjustments may relate to sales returns, discounts allowed, or transfers between accounts.

   2. In the purchasing department, the purchasing manager selects and approves all suppliers, as they are the only person with sufficient experience to do so. They use a very limited number of suppliers because they can rely on these suppliers to provide goods of the quality required at a competitive price. They do not keep any documents in relation to negotiations with other potential suppliers or other quotes obtained.

In relation to the above, which of the following statements are valid?

Options:

A.

The fact that the purchasing manager uses a very small number of suppliers is, in itself, a sign of poor internal controls.

B.

It is acceptable for clerks in the trade receivables section to make journal adjustments without authorisation provided the amounts involved are not material to U's financial statements.

C.

It is acceptable for clerks in the trade receivable section to make journal adjustments without authorisation, provided they have no access to cash receipts.

D.

The fact that the purchasing manager does not keep documentation relating to negotiations with suppliers, or potential suppliers, is evidence that they are involved in fraudulent activity.

E.

Clerks making journal adjustments without reference to their supervisor is evidence of inadequate separation of duties.

F.

The way the role of purchasing manager is carried out in U increases the chance that the company will fall victim to fraudulent activity.

Buy Now
Questions 11

The safety guard on a piece of equipment was broken. The factory manager suspended an operator who refused to operate the equipment until it was repaired. The factory manager paid another operator a bonus for operating the damaged equipment until the safety guard could be repaired.

What does this incident say about the control environment within that factory?

Options:

A.

Management is not particularly concerned with managing risks.

B.

Employees will perceive that management does not care about health and safety risks.

C.

This factory's safety record is likely to be poor.

D.

Employees are motivated to maintain productivity.

E.

Management has a proportionate and considered attitude towards risk.

Buy Now
Questions 12

B is a quoted construction company. Its Board consists of qualified and experienced engineers Which TWO of the following statements are correct?

Options:

A.

Creating a nominations committee from B's Board will resolve any issues

B.

B's Board cannot be blamed for recruiting like-minded individuals

C.

The quality of Board decisions may decrease.

D.

There is a greater risk of B's Board making strategic errors.

E.

The greater consistency arising from the composition of B's Board will be beneficial

Buy Now
Questions 13

Which TWO of the following are NOT methods used for risk identification?

Options:

A.

Carrying out interviews on key members of staff

B.

Designing a process to deal with complaints

C.

Employing external advisors with specialist knowledge

D.

Accounting for waste in a manufacturing process

E.

Brainstorming ideas with colleagues from different disciplines within the business

Buy Now
Questions 14

WTW is a global company which produces high-tech equipment such as smart televisions and mobile phones The CFO has just resigned, having been offered a post at a competitor The CFO was well regarded and WTWs share price has fallen in response to the announcement

At a board meeting the production director commented that the share price fall is the fault of the nomination committee

Which THREE of the following statements are correct?

Options:

A.

The nomination committee should prepare a description of the role and capabilities required for the CFO's replacement

B.

If the nomination committee had been working effectively the CFO would not have resigned

C.

When planning the CFO's replacement the nominations committee should consider the diversity of the board

D.

The nomination committee should have considered succession planning for directors before the CFO resigned

E.

Most of the members of the nomination committee should be executive directors as they are responsible for ensuring the share price recovers quickly.

Buy Now
Questions 15

Which of the following will increase the value of a call option?

Options:

A.

An increase in the strike price.

B.

An increase in the time to expiry.

C.

A decrease in the volatility of the share.

D.

A decrease in the market value of the share.

Buy Now
Questions 16

Which of the following is an ethical dilemma?

Options:

A.

A company is considering giving poorly-paid staff a generous pay rise.

B.

A company is deciding whether to issue debt or equity.

C.

A company is deciding whether to make a substantial bonus payment to its directors by means of cash or shares.

D.

A company must decide whether to settle a claim from an employee who appears to have fabricated a workplace injury. The company want to avoid the cost of defending the claim.

Buy Now
Questions 17

HJK is a retailer, with more than 40 shops around the country. The directors suspect that a serious fraud has occurred at one of the branches and a team of internal auditors has been sent to investigate.

An analytical review investigation shows that sales revenue is in line with budget, but overtime payments to shop staff exceed budget by 20%.

How should the internal audit team proceed?

Options:

A.

Conduct additional detailed testing on overtime payments.

B.

Conduct additional detailed testing of all figures.

C.

Increase the evaluation of inherent risk.

D.

Increase the evaluation of control risk.

Buy Now
Questions 18

You have just been employed as a management accountant in a small business with an annual turnover of $0.5 million.

You have a wide range of duties because the business is small.

Which of the following is an ethical risk?

Options:

A.

Being asked to buy very small gifts for key clients.

B.

Being asked to work weekends, playing golf with clients.

C.

Being asked to work weekends, taking clients to night clubs making sure they have as much alcoholic drink as they want so that they will sign contracts.

D.

Being asked to work weekends working out tenders for new contracts.

Buy Now
Questions 19

TTO is seeking to recruit a new non-executive director TTO produces high quality women's clothing, which it sells to retailers Some clothing is sold under the retailer's own brand names, some is made on behalf of recognised clothing designers TTO is a well regarded company and its products are of a very high quality.

Several applications have been received, and the Board is seeking to make a shortlist by eliminating unsuitable candidates

Which THREE of the following would make a candidate unsuitable for appointment to the post?

Options:

A.

Having been employed by TTO as a senior sales manager until two years ago.

B.

Being the brother of the finance director

C.

Holding the view that business is over regulated and company directors too heavily constrained by legislation

D.

Not having experience in fashion retail

E.

Being an executive director of a company where TTO's CEO is a non-executive director.

Buy Now
Questions 20

The Head of IT Security has been asked to conduct a detailed forensic analysis of a suspected data breach that ted to customer credit card details being intercepted.

Which TWO of the following would be suitable objectives for such a forensic analysis?

Options:

A.

Recovering the stolen credit card details before they can be abused by criminals

B.

Developing an understanding of the vulnerabilities that led to the breach

C.

Identifying customers whose details have been stolen

D.

The collection of evidence that can be used to convict the perpetrators of the breach.

E.

Preventing the credit card companies from blaming the entity for fraudulent charges

Buy Now
Questions 21

H is a departmental manager in a private college. The main  measure of performance used to assess the Department Manager's effectiveness is meeting the college budgets. The budget for each year is based on the actual expenditure of the previous year adjusted for specific one-off items.

Which of the following would arise from using the meeting of this type of budget as a performance measurement?

Options:

A.

Cost overruns because managers might fail to meet their budgets.

B.

Managers taking on new projects that have too much risk attached to them.

C.

Managers engaging in unnecessary spending in order to avoid having their budgets reduced the following year.

D.

Management of various departments not cooperating sufficiently with each other because each is very concerned that to do so would incur extra costs against their budgets.

E.

Management refusing to provide some necessary service to students (for example, extra tutorials) because it would cause their budget not to be met.

F.

Management taking more than the optimal number of students into their department.

Buy Now
Questions 22

Which method of quantifying risk exposure can be used to calculate the maximum loss on a portfolio occurring within a period of time with a given probability?

Options:

A.

Value at Risk

B.

Regression analysis

C.

Simulation

D.

Expected value

Buy Now
Questions 23

SDF is a quoted company that has a large internal audit department.

Which of the following would impair the independence of SDF's internal audit?

Options:

A.

The head of internal audit reports directly to SDF's chief accountant.

B.

Junior internal audit staff are recruited directly from university. They spend two years with the company before moving into other departments within SDF.

C.

Internal audit staff receive a bonus whenever they discover a compliance error.

D.

It is left to the individual members of the internal audit department to report any conflicts of interest associated with a proposed investigation to which they have been assigned.

E.

Internal audit staff salaries are linked to a company-wide salary scheme.

Buy Now
Questions 24

Identify, from the list provided, which category of business risk most accurately describes the events detailed below.

Options:

Buy Now
Questions 25

CDE an online ticket sales agent, has unwittingly become an accomplice in cyber crime and is suffering attacks on its own business as a result CDE's website was poorly designed and cyber-attackers have managed to inject the site with malware, so that it collects all of CDE's customer log-in information and enables the cyber-attackers to retrieve it.

The cyber-attackers subsequently use this information to set up Botnet agents in the customers' devices which are then used in a Distributed Denial of Service (DDoS) attack whenever very popular tickets are being placed on sale such as international football matches.

The cyber-attackers secure access to a single portal on the site and buy multiple tickets for subsequent sale on the black market while the DDoS causes all other portals to be overloaded preventing real fans acquiring the tickets at face value.

Which TWO of the following apply in this scenario?

Options:

A.

CDE customers will turn to other ticket sources for their tickets

B.

CDE is likely to face significant fines for the breach.

C.

CDE is likely to lose the ticket franchise for international football events

D.

CDE will need to implement a new firewall to prevent this type of attack.

E.

CDE will remain just as profitable selling to the black market as to real fans

Buy Now
Questions 26

SQH manufactures mobile phones SQH's Board is currently undertaking a long-term planning exercise as part of the process of strategy development The Board is considering expanding the number of countries it currently exports products to.

Which THREE of the following could cause difficulty in forecasting accurately'?

Options:

A.

Currency changes in new and existing markets

B.

Competitors will have a better understanding of potential new markets

C.

Rapidly changing mobile phone technology.

D.

Pressures on management to achieve short-term results

E.

Long-term trends may be difficult to predict in this market

Buy Now
Questions 27

A UK manufacturing company has simultaneously:

   • purchased a put option to sell USD 1million at an exercise price of GBP1.00 = USD1.65

   • sold a call option that grants the option holder the right to buy USD 1million at a price of GBP1.00 = USD1.61 (this option has the same maturity date as the put).

Which of the following is a valid explanation for entering into these option positions?

Options:

A.

The company expects to receive USD 1million from a customer and wishes to offset the cost of the put option by the premium on the call option.

B.

The company expects to pay USD 1million to a supplier and wishes to offset the premium from the call option against the cost of the put option.

C.

The company expects to receive USD 1million from a customer and wishes to obtain an additional benefit if the USD strengthens beyond GBP 1.00 = USD 1.61.

D.

The company expects to pay USD 1million to a supplier and wishes to obtain additional protection against the USD strengthening beyond GBP 1.00 = USD 1.65.

Buy Now
Questions 28

A government department is conducting a value for money audit on a school.

The school's pupils sit leaving exams. Classify each of the audit tests as either economy and efficiency or effectiveness.

Options:

Buy Now
Questions 29

The managers of a company are agents for the shareholders tasked with increasing shareholders' wealth. Which of the following will usually increase shareholders' wealth?

Options:

A.

Investing in projects with the shortest payback period.

B.

Investing in projects with positive net present value.

C.

Investing in projects with the greatest level of risk.

D.

Not paying a dividend for several years in order to invest in new projects.

Buy Now
Questions 30

X Company M has lost 25% of its revenue in the last three months due to bad debts. One of the receivables written off was from a long standing customer and the other three were from new customers. The management accountant has warned the sales team that the company cannot survive any more substantial bad debts.

Which of the following internal controls should be put in place to try and prevent further bad debts?

Options:

A.

A credit check should be carried out on each new customer.

B.

Credit limits should be set for all customers. However, if the credit limit will cost a sale then sales staff can override this limit.

C.

Two sales staff must authorise new customers and sign a form stating that they have done so.

D.

An aged analysis of customer balances must be reviewed every month.

E.

As soon as a customer payment is overdue they should not be allowed to purchase more until their balance has been reduced.

Buy Now
Questions 31

VBN uses a balanced scorecard to monitor the performance of its divisions.

Classify each of the following decisions taken by a division's management team as either commercially sound or dysfunctional.

Options:

Buy Now
Questions 32

YHJ is considering an investment in a project that will cost $20 million. Annual fixed costs will be $12 million per year, excluding depreciation. Annual sales are forecast at 5 million units, with a contribution per unit of $8. After five years the equipment will be worn out and YHJ will have to spend $50 million on disposal costs. The discount rate is 10%.

Calculate the sensitivity of the net present value of this project to a 20% increase in the disposal costs.

Options:

A.

11%

B.

13%

C.

31%

D.

20%

Buy Now
Questions 33

B is a family run security company with a number of prestigious clients who rely on it to maintain online access to their CCTV and alarm systems and respond to any detected intrusions or malfunctions.

It designs and installs security systems for a number of UHNW (Ultra High Net Worth) individuals who may have several seasonal and city residences largely unoccupied for many months of the year.

B's reputation as 100% secure is crucial to its on-going success in this very specialised marketplace.

Select THREE factors which should be given prominence in B's fraud risk management strategy.

Options:

A.

B should carry out background security, health and financial checks on all employees, their immediate family members and associates on an annual basis.

B.

B should ask new employees to fill in a declaration that they are honest and have no criminal convictions for dishonesty. That can be filed as evidence that the company took this precaution.

C.

B should inform clients that they have a stringent anti-fraud policy.

D.

B should have an active whistle-blower policy whereby all staff are encouraged by positive reward to report any suspicions they may have about other employees.

E.

B should ensure that employees who design or install security systems are not involved with the operation of those systems once implemented.

F.

B Should revise and publish their fraud policy document to employees every three months, highlighting any new elements and industry developments.

Buy Now
Questions 34

Zia is an accountant and wishes to take out a Forward Rate Agreement (FRA) as a hedging instrument. The company treasurer has advised that a short-term interest rate (STIR) future would be better.

Which of the following is true of an STIR?

Options:

A.

A STIR can be tailored to the exact needs of the company.

B.

A STIR is flexible and the position can be closed quickly and easily.

C.

A STIR must be kept for the whole duration of the contract.

D.

If interest rates have gone down the price of the future will have fallen.

Buy Now
Questions 35

ABC is an online retail chain which operates on a 24/7 basis It has been updating its Cyber Security processes and has implemented a centralised monitoring process to track activity through its web access portal

Which of the following activities will increase the awareness of its cyber security risk most effectively?

Options:

A.

ABC should monitor and record every device type used for access

B.

ABC should monitor and record every out of hours access

C.

ABC should monitor and record all failed access attempts.

D.

ABC should monitor and record every keystroke of every user.

Buy Now
Questions 36

SDF has a variable rate loan of $100 million on which it is paying interest of LIBOR + 2%.

SDF entered into a swap with CV bank to convert this to a fixed rate 7% loan. CV bank charges an annual commission of 0.3% for making this arrangement.

Calculate the net payment from SDF to CV bank at the end of the first year if LIBOR was 3% throughout the year.

Give your answer in $ million, to one decimal place.

Options:

Buy Now
Questions 37

G plc has decided to move its production plant to overseas Country A. This would make the product cheaper to produce. The technology used to make the product is very advanced and some of the staff would have to move to Country A.

The Production Director has identified that there are some political risks in moving to Country A.

Match the methods of reducing the political risks associated with the move to Country A with the corresponding risks.

Options:

Buy Now
Questions 38

ABC has recently appointed a Chief Information Officer who has announced that he wants to start a major clean up starting with all desktop and laptop equipment.

Which THREE of the following measures should be adopted to help enhance security'?

Options:

A.

Make an employee of the month award for whoever spots the most bogus emails.

B.

Issue a corporate policy on email use

C.

Make security training available to anyone who wants it.

D.

Set up a hot line in the service desk for any security queries.

E.

Automate anti-virus update processes so they cannot be avoided

F.

instruct all staff not to click on any links in emails from anyone outside the company

Buy Now
Questions 39

HBN is a service company that offers cloud-based data storage and management on behalf of clients HBN pays an independent accountancy firm to review its cybersecurity arrangements, conduct penetration tests and report to HBN's Board on the results

Which TWO of the following are correct?

Options:

A.

Potential clients for HBN's services will expect to receive copies of these independent reports immediately after they are submitted.

B.

The independent accountancy firm will disclose all of the shortcomings that it identifies in its report, even if they embarrass HBN

C.

HBN could save time and reduce cost by having its own internal audit department conduct these investigations and report accordingly.

D.

It would prove simpler for HBN to permit clients to conduct their own cybersecurity reviews that would take account of the sensitivity of their data

E.

The independent accountancy firm will guarantee that there are no control weaknesses in HBN's systems, provided its results prove satisfactory

Buy Now
Questions 40

An electricity company owns and operates a nuclear power station located ten miles from a large city. A recent and very extensive engineering examination of the power station concludes with the estimate that the probability of a major nuclear disaster within the next 20 years is 0.2%.

Which of the following best explains the relevance of quantifying the risk in that way?

Options:

A.

There is no acceptable level of risk for a major nuclear accident and so the probability has little information value in itself.

B.

The probability is so low as to be ignored.

C.

The directors will be able to argue that they were not negligent in the event of a major disaster within the 20 year period.

D.

The calculation of a precise probability demonstrates that the engineers who conducted the inspection are experts in their field.

Buy Now
Questions 41

JKL makes large export sales to customers in country X, whose currency fluctuates significantly against JKL's home currency JKL also makes large purchases from suppliers in countrrOC All of these transactions are in country X's currency

JKL's treasurer does not actively hedge currency risks because there is a natural hedge in place due to the company making both sales and purchases in the same currency

JKL's board has instructed the treasurer to put active hedging measures in place because the risk report would otherwise have to disclose the fact that JKL has a currency risk which is not actively hedged

Which of the following statements are correct? Select ALL that apply.

Options:

A.

Risk reports can change behaviour

B.

Risk reporting is a bad thing

C.

The board may be concerned it will be criticised if it does not hedge

D.

The board does not want to be blamed for ignoring a risk.

E.

Risk reporting drives the whole risk management process

Buy Now
Questions 42

The management of U is reviewing internal controls throughout the company. It has noted the following:-

1. In the trade receivables section, journal adjustments are made by the clerks, without any reference to their supervisor. Journal adjustments may relate to sales returns, discounts allowed, or transfers between accounts.

2. In the purchasing department, the purchasing manager selects and approves all suppliers, as they are the only person with sufficient experience to do so. They use a very limited number of suppliers because they can rely on these suppliers to provide goods of the quality required at a competitive price. They do not keep any documents in relation to negotiations with other potential suppliers or other quotes obtained.

In relation to the above, which of the following statements are valid?

Options:

A.

The fact that the purchasing manager uses a very small number of suppliers is, in itself, a sign of poor internal controls.

B.

It is acceptable for clerks in the trade receivables section to make journal adjustments without authorisation provided the amounts involved are not material to U's financial statements.

C.

It is acceptable for clerks in the trade receivable section to make journal adjustments without authorisation, provided they have no access to cash receipts.

D.

The fact that the purchasing manager does not keep documentation relating to negotiations with suppliers, or potential suppliers, is evidence that they are involved in fraudulent activity.

E.

Clerks making journal adjustments without reference to their supervisor is evidence of inadequate separation of duties.

F.

The way the role of purchasing manager is carried out in U increases the chance that the company will fall victim to fraudulent activity.

Buy Now
Questions 43

Which THREE of the following form part of the role of Internal Audit?

Options:

A.

Working with operational management teams to help identify risks to the business.

B.

Working with operational management teams to devise new controls to help minimise risk to the business.

C.

Providing training to operational management on the identification of risk

D.

Implementing internal controls which address the key business risks identified by the risk management team

E.

Carrying out special investigations of risk.

F.

Monitoring the effectiveness of controls implemented by operational management

Buy Now
Questions 44

In terms of Cyber Security, which THREE of the following represent Personally Identifiable Information (Pll)?

Options:

A.

Old phone number

B.

First pet's name

C.

Position held in a charity.

D.

Sports club membership number

E.

Model of first car.

F.

Football team affiliation

Buy Now
Questions 45

They key objective of maximizing shareholders wealth would indicates that a capital investment project with a large positive BPV should be accepted.

Which THREE of the following statements are correct?

Options:

A.

It will always be in the director’s best interest to accept projects with high positive NPVs.

B.

The directors should balance the need for a positive NPV with the company’s longer term strategic requirements.

C.

In some circumstances project with a negative NPV should be accepted.

D.

Financial methods of evaluation are not the only factors to consider when appraising a project.

E.

NPV Is always the best method of appraising a capital investment project.

F.

If the positive NPV is large, the needs of other stakeholders needed considered.

Finance

Buy Now
Questions 46

S Doc is an out-of-hours service provided by a country's government. The service allows members of the public to call and speak to a nurse who can advise on medical situations which are not obviously emergencies. Depending on the situation the caller can be referred to the full emergency services, or be advised to go to Accident and Emergency at the nearest hospital. Alternatively, a callout from a general practitioner (GP) can be organised; the caller can be advised of where GP services are available; advice can be given over the phone; or a decision can be taken that no further action is required at least until normal services resume on the next working day.

There has been a suggestion that the nurses who take these calls could be replaced by suitably trained operatives who have available to them a specially designed expert system.

Which of the following are advantages of using an expert system instead of nurses?

Options:

A.

The operatives would be too careful and therefore would recommend unnecessary treatments or interventions.

B.

Some callers may present with complicated scenarios that a non-medically trained operative or expert system would be unable to recognise (for example, psychological issues).

C.

Using an expert system would make operatives less inclined to feel sorry for the caller and ensure that only relevant facts were considered in coming to a decision.

D.

The use of an expert system would ensure that only relevant questions were asked of the caller and that operatives did not miss something vital due to distraction or fatigue.

E.

The expert system will always follow the same path whereas the nurses may have more knowledge about some health issues and very little about others.

Buy Now
Questions 47

A Firewall is an element of a company's Information Technology infrastructure.

Which THREE of the following are characteristics of a Firewall?

Options:

A.

A Firewall determines the boundary of the "Trusted" components of the company's Information Technology infrastructure.

B.

A Firewall protects sensitive data against accidental or malicious damage.

C.

A Firewall protects the computer suite against physical attack.

D.

A Firewall protects against unauthorised network access.

E.

A Firewall protects against viruses.

F.

A Firewall can screen every message coming into or out of the company network looking for key words, or attachments.

Buy Now
Questions 48

N, a large company in the food production industry, has grown over the years by the acquisition of several smaller rivals. The company has ten branches located in its home country and has just opened a foreign branch for the first time. It has recently made some changes to the structure and implementation of its control system.

 Which TWO of these would be most likely to improve the overall control system?

Options:

A.

Establishing an Internal Audit department.

B.

Purchase invoices are now approved for payment at branches and a list of approved invoices are sent to head office for payment. The invoices, supporting documentation and suppliers' statements are retained at the branches.

C.

Excess funds are now invested, by the Finance Director, in short-term securities. The Finance Director initiates buy and sell transactions and she also receives and retains all correspondence relating to the investments.

D.

A policy has been initiated to complete a physical inventory of all non-current assets at least annually. This is then reconciled with the non-current asset register.

E.

N has just opened a bank account in the currency in which the newly opened branch is now operating.

Buy Now
Questions 49

The shares of a company have a beta factor of 1.15. Therefore, which of the following must be true?

Options:

A.

The shares have more unsystematic risk than the stock market average.

B.

The shares have more systematic risk than the stock market average.

C.

The shares have more total risk than the stock market average.

D.

The shares have less unsystematic risk than the stock market average.

Buy Now
Questions 50

T has its computer facilities in a building adjacent to its headquarters Severe structural problems have been discovered with this building and T has been advised that the only option is demolition and rebuild This leaves T with strategic decisions to make about its IT provision and it has decided to investigate the outsourcing of its services.

Which TWO of the following factors should T consider as most important at this stage?

Options:

A.

A supplier who can act as a partner in considering all its business needs

B.

A supplier who can act as its agent in choosing the cheapest options

C.

A supplier who provides a wide range of services

D.

A supplier with a long history of providing outsourcing services

E.

A supplier who has facilities conveniently located close to its headquarters

Buy Now
Questions 51

Division A of X plc produced the following results in the last financial year.

Net profit      $200,000   Gross capital employed   $1,000,000

For evaluation purposes all divisional assets are valued at original cost.

The division is considering a project that has a positive NPV, will increase annual net profit by $15,000, but will require average inventory levels to increase by $50,000 and non-current assets to increase by $50,000.

X plc imposes a 16% capital charge on its divisions. Given these circumstances, will the evaluation criteria of return on investment (ROI) and residual income (RI) motivate division A managers to accept the project?

Options:

A.

ROI Yes  RI Yes

B.

ROI Yes  RI No

C.

ROI No  RI Yes

D.

ROI No  RI No

Buy Now
Questions 52

M plc is an IT company that bids for large contracts to sell computer systems and also to service existing systems. M plc's senior management has always set budgets which are hard to achieve and have made no allowances for the recession.

The economy has improved and M plc's senior managers have made the budget even more optimistic. The budgeted sales target has been increased by 40%.

In the past, sales staff have not tried to achieve the budget sales because it was generally believed that the targets were impossible to reach.

M plc has recently appointed a new Sales Director who has decided that sales staff will be dismissed if they fail to meet sales targets for three successive months. He is also looking for higher sales margins than were achieved before.

What are the likely consequences of the new Sales Director's policy?

Options:

A.

Sales staff will be happier in their jobs.

B.

Sales staff will tender for riskier contracts.

C.

Sales staff will encroach on other sales staff territories to get more work.

D.

Sales staff will look for new jobs.

E.

Sales staff will feel more settled and secure in their jobs.

Buy Now
Questions 53

C Ltd is a private, family-owned company which is hoping to become listed on a recognised Stock Exchange within the next two years. At the moment, the Board of Directors comprises five directors; four of whom are from the founding family and all of whom are involved in the day-to-day running of the business. The remaining director obtained a seat on the Board three years ago as a condition of an investment by a venture capital fund.

The Board meets in half-day sessions once a fortnight and the Board meetings are reasonably well run. All decisions are taken by the Board as a whole. There are no sub-committees.

Which of the following steps would it be appropriate for C Ltd to take in the light of the proposed listing?

Options:

A.

Appoint enough independent non-executive directors (NEDs) that they make up at least 50% of the Board.

B.

Appoint one of the NEDs as Chair of the Board.

C.

Insist that the venture capital company director be removed as he is not necessarily motivated to act in the best interests of C Ltd.

D.

Set up at least three sub-committees namely remuneration, nomination, and audit committees.

E.

Ensure that the current executive directors are given 10 year contracts starting on the day the company is floated, to ensure consistency and continuity in the management of the company.

F.

Set up an "agenda setting" sub-committee consisting of the current executive directors to decide the agenda for each Board meeting.

Buy Now
Questions 54

R is a manufacturer of biscuits. The market for biscuits is extremely competitive with many companies competing for contracts with large supermarkets. The intensity of the competition means that prices are kept low; and the buyers can demand higher levels of quality, and greater flexibility in supply arrangements.

Which of the following represent ways that the use of an Information System could help R to win and retain supermarket contracts in such a competitive market?

Options:

A.

It could facilitate product ordering and selection by the use of Electronic Data Interchange.

B.

If R's system is integrated with that of a particular supermarket, then this will make it more expensive for the supermarket to change to a different supplier.

C.

It would mean that R's products would be more prominently displayed on the supermarket shelves.

D.

It could be used to facilitate more timely and accurate delivery which would minimising waste.

E.

If R's system is integrated to that of a particular supermarket then other supplier's systems cannot also be integrated to that supermarket system.

Buy Now
Questions 55

BCD has set up a number of functions within its security operations centre (SOC) One of these is a Hunt team. Which of the following is the primary function of a Hunt team?

Options:

A.

To look for weaknesses in other peoples' systems

B.

To look for solutions in response to threats.

C.

To look for signs that BCD's system has been breached

D.

To look for weaknesses in BCD's cyber security system.

Buy Now
Questions 56

Division A of X plc produced the following results in the last financial year.

Net profit      $200,000   Gross capital employed   $1,000,000

For evaluation purposes all divisional assets are valued at original cost.

The division is considering a project that has a positive NPV, will increase annual net profit by $15,000, but will require average inventory levels to increase by $50,000 and non-current assets to increase by $50,000.

X plc imposes a 16% capital charge on its divisions. Given these circumstances, will the evaluation criteria of return on investment (ROI) and residual income (RI) motivate division A managers to accept the project?

Options:

A.

ROI Yes  RI Yes

B.

ROI Yes  RI No

C.

ROI No  RI Yes

D.

ROI No  RI No

Buy Now
Questions 57

Amber selects appropriate suppliers and places purchase orders.

Brian passes invoices for payment and submits payment instructions to the bank.

Chris checks incoming inventory and unpacks goods from their containers.

Dirwan posts purchase invoices and files invoices and supporting documents.

Which member of staff could most easily commit fraud?

Options:

A.

Amber

B.

Brian

C.

Chris

D.

Dirwan

Buy Now
Questions 58

R plc is considering an investment of $1,100,000 in a new machine which is expected to have substantial cash inflows over the next five years.

The annual cash flows from this investment and their probability are shown below:

Annual cash flow ($) Probability

 200,000                         0.4

 280,000                         0.5

 350,000                         0.1

At the end of its five-year life, the asset is expected to sell for $100,000. The cost of capital is 5%.

What is the Expected Net Present Value?

Give your answer to the nearest whole $.

Options:

Buy Now
Questions 59

A project has a net present value of $2 million.

Total cash outflows of this project have a present value of $14 million, which includes staff costs of $10 million.

What is the project's sensitivity to staff costs?

Options:

A.

20%

B.

63%

C.

71%

D.

14%

Buy Now
Questions 60

J plc is a wholesale building supply business. It has a large warehouse where some of its materials are stored. Last month three accidents occurred where employees were slightly injured whilst moving items from the 5th shelf. The 5th shelf is located 15 metres up from the ground.

This is a health and safety risk and could also be a reputation risk in the longer term.

Which of the following risk mitigations should the company employ?

Options:

A.

Transfer by insuring against this risk.

B.

Reduce by storing some items on the first three shelves and storing other items outside.

C.

Accept by just accepting this is a risk the company has to take and some employees may get injured.

D.

Avoid by sending the employees on a training course on Health and Safety.

Buy Now
Questions 61

Which of the following are threats to the control environment?

Options:

A.

Directors not producing receipts for their expenses.

B.

Internal auditors not following up on internal control problems.

C.

Directors ignoring unethical practices that increase sales.

D.

Regularly changing procedures to comply with legislation.

E.

Allowing staff to follow unwritten policies.

Buy Now
Questions 62

AB is a manufacturing company which relies heavily on its computerised systems for customer management

Which of the following is the most important factor which will enable AB to continue to operate after an incident which destroys its central computer*?

Options:

A.

A duplicate copy of its computer hardware at a remote location

B.

The ability to replicate its data and applications elsewhere

C.

A good insurance policy.

D.

Paper hardcopies of all original documents

Buy Now
Questions 63

Which of the following scenarios might be relevant stress tests for a potential lender to conduct? Which TWO of the following answers are correct?

Options:

A.

The potential borrower could be involved in an accounting scandal

B.

The potential borrower might have manipulated the figures in the loan application.

C.

The potential borrower might lose its three main customers.

D.

The potential borrower might seek further debt in the future.

E.

The potential borrower might have to agree to a major wage increase for its employees.

Buy Now
Questions 64

When a new computer system is being implemented there are several possible methods for managing the changeover from the old system to the new system.

Which THREE of the following are true?

Options:

A.

Phased changeover is the safest and slowest method of changeover.

B.

Phased changeover moves individual portions of the business to the new system one at a time.

C.

Pilot changeover moves the simplest part of the business to the new system first.

D.

Parallel running involves keeping the old system running, normally until certain data retention criteria are met or confidence is gained, while the new system deals with the new workload. Data input is usually carried out on both systems.

E.

Direct changeover, or Big Bang is only used when the systems are significantly different such that comparing the outputs of the two systems is largely irrelevant.

F.

All methods of changeover carry high risk and it is the preparation, consideration of data compatibility and data cleansing before the changeover which has the biggest impact on the smoothness of the transition.

Buy Now
Questions 65

Company A's gross profit percentage has fallen from 70% to 61 % Which of the following possible explanations would most concern the internal auditors?

Options:

A.

During the year the raw material price increased due to an international shortage of the material

B.

The sales director decided to reduce the selling price to increase the market share

C.

There had been an omission of several items from the inventory records

D.

During the year direct wages had been misclassified as indirect manufacturing expenses

Buy Now
Questions 66

V buys vegetables and fruit from three farms located in a different part of V's country and sells them to large supermarket chains.

A recent newspaper magazine had an article on these farms showing that the farms employ illegal immigrants whose status was used by the factory's owners to force them to work for low wages and in unpleasant conditions. They are forced to live in small overcrowded caravans with no running water. They are also given meals which are cold and poor quality. These farms are located in a developed country with strong labour laws.

Classify each of the following statements as true or false.

Options:

Buy Now
Questions 67

Which of the following is an ethical dilemma?

Options:

A.

A company is considering giving poorly-paid staff a generous pay rise.

B.

A company is deciding whether to issue debt or equity.

C.

A company is deciding whether to make a substantial bonus payment to its directors by means of cash or shares.

D.

A company must decide whether to settle a claim from an employee who appears to have fabricated a workplace injury. The company want to avoid the cost of defending the claim.

Buy Now
Questions 68

M is a multinational IT company with headquarters in Asia and with operations in all continents.

It is now trying to expand its operations in Europe. This is seen as a major challenge as the European market is very well developed with established players in fierce competition against each other.

As well as developing and producing its own products, it sources products across Asia, America and Europe as part of infrastructure deals which have to include as much of its own equipment as possible. In doing this, transfer prices can be set in YEN, USD, EURO, GBP. Transfer prices are revised every month in line with production times as most goods are made on short order times with sales cycles running at 3-4 months.

The longer sales cycle against committed transfer pricing presents problems as customers expect quotes to be valid for 90 days whereas M's suppliers reserve the right to revise pricing at the end of every month with quotes only valid for 8 days in the following month.

How should M deal with this problem?

Options:

A.

Use a centralised treasury function to set up unilateral netting so that all trades can be balanced off against each other before any money is transferred.

B.

Offer a small discount for any customers who pay in M's home currency.

C.

Do nothing, everyone is in the same situation.

D.

Incentivise sales persons to be more accurate when forecasting prices.

Buy Now
Questions 69

Physical access controls can greatly enhance the security of company assets.

Select THREE methods by which physical access security can be significantly enhanced.

Options:

A.

Use of CCTV cameras monitoring all access points, with security guards monitoring images and a secured system making a recording.

B.

Use of one way mirrors, so people can be observed undetected.

C.

Use of USB sticks and removable media should be prohibited.

D.

Use of access control pads with numerical keys on every door, which is otherwise locked.

E.

Personal individual ID card access, logging individual person movement through every door, which is otherwise locked.

F.

Visitors to be logged in by security staff and to be accompanied by a member of staff at all times until they leave.

Buy Now
Questions 70

D has decided to invest in a new factory at a cost of $6,000,000. The discount rate of the project is 22% and the PV of tax shield is $80,000.

What is the IRR?

Give your answer to two decimal places.

Options:

Buy Now
Questions 71

M, a manufacturing company, has had some problems with defects in one of the main products it produces. This product has been made by the company for many years and is very profitable. Last month it had over 300 defects reported by customers which is more than 15% of products sold. This is a reputation risk for M and is also affecting profitability.

Which of the following controls could M introduce to reduce defects and also increase profitability?

Options:

A.

M could increase the number of quality control staff.

B.

M could introduce a procedure where quality control staff sign a form at the end of each day to say they have examined 1 in 10 products for defects and they are satisfied with the quality.

C.

The production director could examine one in every 10 products and sign a form to say they are satisfactory.

D.

M could service machinery at least once a month as recommended by the machinery supplier.

E.

M could check all employees qualifications to ensure they are qualified for their jobs.

Buy Now
Questions 72

Which of the following is NOT a financial risk.

Options:

A.

Selling goods on credit terms.

B.

Taking out variable rate loans to finance short term investments.

C.

Sourcing raw materials overseas to manufacture goods.

D.

Global warming.

Buy Now
Questions 73

K is a large mining company. In its risk report it states that there is a risk of accidents and injury because of the nature of the industry. It states that it has staff training in place and complies with all Health and Safety regulations but in spite of this there will still be a residual risk that accidents and injuries may occur.

Which of the following statements are correct?

Options:

A.

The shareholders should not invest because there is still a residual risk.

B.

The directors are avoiding their responsibilities by saying there is a residual risk.

C.

Some risks cannot be eliminated.

D.

Accepting a residual risk does not imply the company is reckless.

E.

Most companies in this industry will say something similar in their risk report.

Buy Now
Questions 74

CH makes a popular type of chocolate bar The bars are made on a production line and are scanned for size and shape as they move along the line Wrong sized and misshapen bars are rejected as being poor quality. The scanner detects 90% of poor quality bars. If CH wants to reduce the risk of poor quality bars being sold to the public it can add a further check by a person scanning the production line as well. this check would detect 80% of poor quality bars

If the further check was implemented what percentage of poor quality bars would still get through the checking process?

Options:

A.

7.2%

B.

10%

C.

30%

D.

2%

Buy Now
Questions 75

You are the management accountant for YY a food manufacturing company with an annual sales revenue of $6 million

You discover that the production manager's records are inconsistent Raw materials purchased do not agree with the total recorded for transfers to production plus wastage There is an average shortfall of 2% of purchases

You have investigated and discovered that there are often errors made during manufacturing that results in food that is safe to eat but. because of visual flaws, cannot be sold

The production manager is supposed to scrap all such damaged products and write all such losses off as waste You have discovered however that he has been giving the damaged food to a charity that assists homeless people No records are made of such gifts in order to conceal the losses due to manufacturing errors

Which of the following actions should you take? Select ALL that apply

Options:

A.

Instigate disciplinary action this is both theft and poor management

B.

Do nothing; this is a good cause and the amount is insignificant

C.

Instigate a review of the production process to potentially reduce the amount of wastage.

D.

Instigate a confidential but documented review with the production manager and tell him to stop

E.

Instigate a process whereby edible but unsellable items can be given to the charity officially

Buy Now
Questions 76

YGH has recently completed a post completion audit on a five year contract that has only recently come to a conclusion. The main finding was that the project delivered most of the expected benefits, but that it cost significantly more to implement than had been anticipated at the project appraisal stage. YGH would not have proceeded if the true cost had been known at that stage.

The project was the responsibility of the production department, which is presently managed by G.

When the project was proposed, the production department was managed by H. H is now YGH's Director of Operations.

How should the finding from this post completion audit be interpreted?

Options:

A.

YGH should consider introducing more detailed checking of the assumptions underlying the costs of future projects.

B.

The production department should not be granted funding for future projects unless there are compelling reasons to proceed.

C.

G should be held accountable for the overspend on the project.

D.

H should be held accountable for the overspend on the project.

Buy Now
Questions 77

Which of the following summarises Purchasing Power Parity Theory (PPPT)?

Options:

A.

Government intervention cannot affect the inevitable rise or fall of its currency in the short-term.

B.

The difference between the spot and the forward exchange rates is equal to the differential between the inflation rates in the two countries.

C.

PPPT predicts that the country with the lower inflation rate will see the currency devalue accordingly.

D.

The difference between the interest rates in the two countries is equal to the differential between the spot and the forward exchange rate for the currency in the two countries.

Buy Now
Questions 78

The managers of a company are agents for the shareholders tasked with increasing shareholders' wealth. Which of the following will usually increase shareholders' wealth?

Options:

A.

Investing in projects with the shortest payback period.

B.

Investing in projects with positive net present value.

C.

Investing in projects with the greatest level of risk.

D.

Not paying a dividend for several years in order to invest in new projects.

Buy Now
Questions 79

B is a horticultural retailer with limited funds available to acquire new retail property.

B's Finance Manager has analysed two potential property investments. Investing in property P shows an IRR of 21% while the IRR on property Q is 17%.

The Finance Manager has also advised that the NPV for property P is $750K, while the NPV of property Q is $850K.

The Board needs to choose between the two properties as it has insufficient funds for both. Based purely on the Finance Manager's analysis, which of the following is true?

Options:

A.

Premises P is clearly better than property Q in all respects.

B.

Premises Q is clearly better than property P in all respects.

C.

Board members who wish to maximise return on capital employed will want property P while those who wish to maximise shareholder wealth will want property Q.

D.

Board members who wish to maximise return on capital employed will want property Q while those who wish to maximise shareholder wealth will want property P.

Buy Now
Questions 80

SC is a professional football club which is currently listed on a recognised stock exchange. There is a proposal that it builds a new stadium at a location a considerable distance from its current stadium.

There is strong support within the club for the move as the current ground is now over 40 years old and has not been extensively modernised in that time.

However, there is a lot of opposition to the move in the area where it is proposed to locate the new stadium. Objectors claim that the new stadium will increase traffic and pollution in the area and will adversely affect the value of their properties.

Which of the following statements about the responsibility of the board of SC is correct?

Options:

A.

SC is now a listed company and so the board should prioritise the interests of shareholders to the exclusion of other stakeholders.

B.

A football club needs to be part of the community in which it exists and so the board should consider the other stakeholders.

C.

The board should conclude that objectors to the new stadium have a legal course of action open to them and if they do not take legal action they should ignore them.

D.

If the board of directors is seen as acknowledging its responsibility to stakeholders other than shareholders this will enhance the reputation of the club and it will be more likely that a compromise can be reached with objectors.

E.

The board should share information about the new development with the local community only to the extent that it is legally obliged to do so.

Buy Now
Questions 81

QAW is a quoted building company QAW has detailed rules relating to the wording of its contracts and the need to seek Board approval for any changes to the standard wording

The Convener of the Audit Committee has just received a copy of an internal audit report relating to the QAW Land Reclamation subsidiary The subsidiary has signed several construction contracts over the past two years that have made significant changes to the standard wording, with no attempt to seek approval from QAW's Board

The internal audit report quotes the manager in charge of QAW Land Reclamation as refusing to accept that there is a compliance error at the subsidiary The manager stated that the nature of the business done by QAW Land Reclamation would make it inappropriate to use the standard contract terms and that it would be impractical to seek permission for every one of the many changes that are necessary

Which of the following would be an appropriate response to this item by QAW's Board?

Options:

A.

QAW's Director of Legal Affairs should investigate the matter and. if necessary, develop suitable standard contracts for QAW Land Reclamation.

B.

The Audit Committee should treat this as an internal matter that should be dealt with by the management team of QAW's Land Reclamation.

C.

The Audit Committee should disregard the point because an explanation has been offered by the manager in charge of QAW Land Reclamation.

D.

The Audit Committee should seek an indication of the number of contracts with non-standard conditions are still in effect before deciding how to act.

Buy Now
Questions 82

A company has a sound system of internal controls that have been reviewed by the internal audit department.

Which TWO of the following correctly identify reasons why the company's control system might fail to prevent or detect an irregularity?

Options:

A.

A dishonest member of staff could input an invalid transaction

B.

Two fraudulent members of staff could collude.

C.

The internal audit department cannot be expected to identify control weaknesses.

D.

The accounting system could combine manual and computerised controls.

E.

A director could override a control procedure.

Buy Now
Questions 83

Internal controls are designed to provide reasonable assurance of which of the following?

Options:

A.

Material errors will be prevented or detected in a reasonable time period by employees in the course of carrying out their job

B.

Management's plans have not been circumvented by collusion

C.

Management procedures and processes are properly evaluated

D.

The internal auditing department's oversight of management's performance is achieved economically and efficiently

Buy Now
Questions 84

VBN's home currency is the V$. On 1 January, VBN must make a payment of C$2 million on 31 March of that same year.

On 1 January the spot exchange rate was V$1 = C$0.4.

On 1 January VBN paid $180,000 for a call option to buy C$2 million for V$5.5 million on 31 March. VBN's cost of borrowing was 8% per year.

On 31 March the spot rate was V$1 = C$0.45.

What was the total cost, including the cost of the option, of settling the payable?

Options:

A.

V$4.628 million

B.

V$5.684 million

C.

V$4.444 million

D.

V$5.5 million

Buy Now
Questions 85

GUJ A small but rapidly expanding company has recently opened several branches in locations far away from the Head Office. All of the branches are relatively small with no one branch accounting for more than 5% of turnover. Management has decided that the company is not yet large enough to install an Internal Audit function but is, nonetheless, concerned about maintaining adequate control and monitoring at the branches whilst allowing Branch Managers the opportunity to react to local circumstances as appropriate.

Which of the following measures would assist Head Office management in maintaining appropriate monitoring and control at the branches?

Options:

A.

Restricting the autonomy of individual Branch Managers to purely routine matters and instructing them to refer everything else to Head Office.

B.

Dealing with all Human Resource, recruitment, and similar issues directly from Head Office.

C.

Arranging visits by senior management to each branch periodically.

D.

Instituting the use of a formalised budgetary control system at head office for all branches.

E.

Establishing an open communication policy for employees at branches to allow them to contact Head Office on any matter that concerns them.

Buy Now
Questions 86

W plc is a large international supermarket chain. It has many thousands of suppliers and many thousands of others competing for "shelf space" in its supermarkets.

Which of the following would be appropriate provisions for W plc to include in its Ethical Code in relation to its suppliers?

Options:

A.

W plc shall not use its buying power unscrupulously.

B.

W plc shall endeavour to adhere to the terms of its contracts with its suppliers at all times.

C.

W plc shall keep confidential all information received from suppliers and potential suppliers.

D.

W plc shall continuously remind suppliers that it always has several alternative suppliers to choose from.

E.

W plc shall endeavour to take as high a percentage of each supplier's output as possible.

F.

W plc shall insist on an exclusivity agreement with each supplier so that identical products are not available from other outlets.

Buy Now
Questions 87

Which THREE of the following are key elements of cyber security risk governance?

Options:

A.

Ensure all employees have their passwords changed every 30 days.

B.

Ensure the organisation has defined standards of conduct for IT use.

C.

Ensure all employees are trained in IT use

D.

Ensure all employees have at least two cyber security objectives in their development plans.

E.

Ensure the organisation has defined structures for cyber security management

F.

Ensure all employees have anti-virus software on their equipment

Buy Now
Questions 88

The shares of a company have a beta factor of 1.15. Therefore, which of the following must be true?

Options:

A.

The shares have more unsystematic risk than the stock market average.

B.

The shares have more systematic risk than the stock market average.

C.

The shares have more total risk than the stock market average.

D.

The shares have less unsystematic risk than the stock market average.

Buy Now
Questions 89

Which of the following best describes the conflict between maximising profit and maximising shareholder wealth?

Options:

A.

Managers are generally more interested in maximising shareholder wealth than in maximising profits or sales.

B.

Profit and shareholder wealth are unrelated.

C.

Tax is paid on profit, but not on shareholder wealth.

D.

Profits can be increased from one year to the next without increasing shareholder wealth.

Buy Now
Questions 90

TYU is a retailer selling televisions. The company is financed wholly by equity.

Why might TYU be exposed to interest rate risk?

Options:

A.

Customers' disposable income may change.

B.

TYU's competitors may have variable rate borrowings.

C.

TYU's suppliers may have borrowings.

D.

TYU's cost of capital will vary with interest rates.

E.

TYU's competitors may have fixed rate borrowings.

Buy Now
Questions 91

Which THREE of the following are true with regard to managing the changeover from an old to a new computer system?

Options:

A.

Pilot changeover moves the simplest part of the business to the new system first

B.

Parallel running involves keeping the old system running normally until certain data retention criteria are met or confidence is gained, while the new system deals with the new workload Data input is usually earned out on both systems

C.

All methods of changeover carry high risk and it is the preparation consideration of data compatibility and data cleansing before the changeover which has the biggest impact on the smoothness of the transition

D.

Phased changeover moves individual portions of the business to the new system one at a time

E.

Direct changeover, or big bang, is only used when the systems are significantly different such that comparing the outputs of the two systems is largely irrelevant

F.

Phased changeover is the safest and slowest method of changeover

Buy Now
Questions 92

The senior manager in the accounts department is going on annual leave for three weeks and Jo, a supervisor is being put in charge of the department for that time.

Which TWO of the following statements are correct?

Options:

A.

Authorisation of exceptional overtime due to the year end which takes place while the senior manager is on leave should be postponed until the senior manager returns

B.

The annual staff appraisals should be postponed until the senior manager returns

C.

Authorisation of expenses should wait until the senior manager returns.

D.

Jo should not have all of the same authority as the senior manager

E.

Job interviews for an office junior should be cancelled until the senior manager returns.

Buy Now
Questions 93

An electricity company owns and operates a nuclear power station located ten miles from a large city. A recent and very extensive engineering examination of the power station concludes with the estimate that the probability of a major nuclear disaster within the next 20 years is 0.2%.

Which of the following best explains the relevance of quantifying the risk in that way?

Options:

A.

There is no acceptable level of risk for a major nuclear accident and so the probability has little information value in itself.

B.

The probability is so low as to be ignored.

C.

The directors will be able to argue that they were not negligent in the event of a major disaster within the 20 year period.

D.

The calculation of a precise probability demonstrates that the engineers who conducted the inspection are experts in their field.

Buy Now
Questions 94

The board of OKN is considering an investment opportunity that will require the company to borrow a large amount in month 10 of the current financial year and to invest it immediately in property, plant and equipment. This investment has a positive net present value that justifies the risk, but the directors are reluctant to invest in the project.

Why might the directors be reluctant?

Options:

A.

The return on capital employed for the year will be reduced if the investment is made.

B.

The return on capital employed for the year will be increased if the investment is made.

C.

The year's profit will be depressed by the amount of the investment.

D.

Future profits will be depressed.

Buy Now
Questions 95

R plc is considering an investment of $1,100,000 in a new machine which is expected to have substantial cash inflows over the next five years.

The annual cash flows from this investment and their probability are shown below:

Annual cash flow ($) Probability

 200,000                         0.4

 280,000                         0.5

 350,000                         0.1

At the end of its five-year life, the asset is expected to sell for $100,000. The cost of capital is 5%.

What is the Expected Net Present Value?

Give your answer to the nearest whole $.

Options:

Buy Now
Questions 96

James owns a small company which sometimes suffers from credit risk.

Which of the following measures should he put in place to help reduce this risk?

Options:

A.

Introduce credit checks for new customers.

B.

Reduce the company bank loans.

C.

Pay suppliers' invoices quicker.

D.

Look for a loan with a lower interest rate.

Buy Now
Questions 97

H Ltd is a company providing postal and courier services to small businesses. Customers pay a monthly or annual subscription fee to use the service, plus a very small fee for each item delivered.

A year ago, H employed a new sales team. Their remuneration is dependent on the number of new customers they sign up. Sales increased dramatically in the first six months, but now difficulties are emerging such as new customers dropping their subscription once the initial period has expired; subscriber direct debits being returned unpaid; subscribers going out of business and other similar issues.

Which of the following would be appropriate to help resolve these problems?

Options:

A.

Alter the pricing structure in order to increase the price for sending each item but decrease the subscription element of the fee.

B.

Ensure that a credit check is carried out before a subscriber is accepted.

C.

Reduce the rate of commission payable to any sales person who fails to sign up at least an agreed minimum number of customers each month.

D.

Alter the commission arrangements so that commission is payable only when the subscriber signs up for a second year.

E.

Preparing a monthly report for sales persons detailing the performance of each new customer they have signed up over the previous year.

Buy Now
Questions 98

JNH is a major corporation that stores its customer database in the Cloud JNH has suffered a data breach that has led to customer credit card details being made available for sale on the internet JNH's Head of Security wishes to analyse network traffic at the cloud-based server in order to gain a better understanding of the manner in which the data was intercepted, but has been refused access.

Which of the following is the most likely explanation for the third-party owner's refusal to assist JNH's Head of Security?

Options:

A.

The Cloud is impregnable and so the breach must have been elsewhere

B.

The network data will not have been stored by the server's owner

C.

The server will contain data belonging to other clients

D.

Admitting the breach would harm the reputation of the Cloud

Buy Now
Questions 99

P sells mobile phones and accessories The directors of P are concerned that there is a high risk of fraud being carried out by employees in the retail stores. There is a high turnover of employees in the shops as the sales targets are difficult to meet

Which TWO of the following controls would reduce this risk?

Options:

A.

Ensure employees work with the same staff all the time to build team spirit

B.

References should be obtained for all new employees from their last two employers

C.

Introduce a policy that all new employees must undertake a three month trial period

D.

Carry out a criminal record check for all new employees.

E.

Only employ people who have been employed in the retail mobile phone industry for two years

Buy Now
Questions 100

HGY is a major global corporation that has decided to implement the COSO Enterprise Risk Management Framework and integrate management practices throughout the organisation

Which THREE of the following would be appropriate for HGY?

Options:

A.

Authorise managers and supervisors to respond immediately to any risks that emerge

B.

Make risk management an element of everyone's responsibility

C.

Recruit a Director of Risk, who will lead risk management procedures.

D.

Train staff at all levels to identify and report risks to their superiors

E.

Create a risk management team that will take responsibility for identifying and mitigating risk

F.

Identify risk as an element of HGY's overall strategy.

Buy Now
Questions 101

Which TWO of the following might create a good control environment?

Options:

A.

Managers have good job descriptions that define their roles in the organisation clearly

B.

Management has just revisited the annual budget and made it much harder to achieve in order to try and boost profits

C.

The Board has just issued an ethical code

D.

The Finance Director has just been given a place on the audit committee to increase the committee's financial knowledge

E.

Management did not have time to carry out all the staff appraisals this year but all staff have received a pay increase instead

Buy Now
Exam Code: P3
Exam Name: Risk Management
Last Update: May 25, 2024
Questions: 339
$99.6  $249
$90  $225
$79.6  $199
buy now P3