CIMA P3 Deluxe Study Guide with Online Test Engine
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NEW QUESTION 77
J is a manager in charge of a section in GDD's Buying department. J has eight staff who report to her.
Including M, who has worked for GDD for seven months.
One afternoon, while J was absent on sick leave, M was asked to place an urgent order for plastic pellets that are vital for GDD's production process. The usual supplier could not supply the pellets on time to avoid a shortage and so M telephoned a new supplier and placed an order. When the supplier invoiced for the delivery, GDD's Accounts Payable Department rejected the invoice because the supplier did not have a valid account.
On investigation, it was revealed that M did not have the authority to place an order with a new supplier. Only J can authorise new accounts. M claimed that he had been unaware of the need to seek approval because he had never found it necessary to place an order with a new supplier before Which TWO of the following statements ate correct?
- A. M should be disciplined for exceeding his authority
- B. GDD's Internal Audit Department should have cancelled the order.
- C. GDD's directors are ultimately responsible for M's error
- D. The investigation of this matter was a waste of time because the pellets were urgently required
- E. should have made certain that M knew and understood the limits of his responsibility
Answer: A,D
NEW QUESTION 78
Match the descriptions shown in the boxes below with the method of quantifying risk exposure it best describes.
Answer:
Explanation:
NEW QUESTION 79
B is a quoted construction company. Its Board consists of qualified and experienced engineers Which TWO of the following statements are correct?
- A. B's Board cannot be blamed for recruiting like-minded individuals
- B. The greater consistency arising from the composition of B's Board will be beneficial
- C. There is a greater risk of B's Board making strategic errors.
- D. The quality of Board decisions may decrease.
- E. Creating a nominations committee from B's Board will resolve any issues
Answer: B,E
NEW QUESTION 80
Which of the following are the Committee of Sponsoring Organisations (COSO) key principles of enterprise risk management?
Select ALL that apply.
- A. Risk management is the responsibility of the risk committee
- B. Consideration of the main risk only which is financial risk
- C. The creation of a risk aware culture
- D. Consideration of risk management in the context of business strategy
- E. A comprehensive and holistic approach to risk management
Answer: C,D,E
NEW QUESTION 81
TRF is conducting a post completion audit on an investment in a pollution control machine that has reached the end of its five year useful life.
TRF could have been heavily fined if the machine had failed to keep pace with the output of emissions, measured in units. TRF's cost of capital is 10%. When the machine was purchased, there was a choice of three machines on the market:
TRF purchased the Big machine, but annual requirements only exceeded 600,000 once, in year 3, when 720,000 units of emissions were emitted.
Calculate the amount that the post completion audit shows TRF overpaid for the ownership costs associated with this machine.
Give your answer to the nearest whole $ (in $'000s).
Answer:
Explanation:
$12582
NEW QUESTION 82
D's Board has been advised by the auditors that D's control environment is weak and should be improved.
Which TWO of the following measures will help to improve the control environment?
- A. The Board will meet annually to discuss the report from the external auditors.
- B. The sales managers will encourage the sales team to increase sales by 50% in the next six months.
- C. The Board will put in place a fraud policy
- D. The directors will have special rules for claiming expenses and will not have to follow the procedures in place for all staff
- E. The Board will appoint an additional accountant in the Finance Department.
Answer: A,C
NEW QUESTION 83
H sells machinery and also associated services, such as advice and repairs. H's industry is going through considerable transformation.
Classify each of the examples of information available to H's management as strategic, operational or of having little value.
Answer:
Explanation:
NEW QUESTION 84
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?
- 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 guarantee that there are no control weaknesses in HBN's systems, provided its results prove satisfactory
- 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 disclose all of the shortcomings that it identifies in its report, even if they embarrass HBN
Answer: C,D
NEW QUESTION 85
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?
- A. It would mean that R's products would be more prominently displayed on the supermarket shelves.
- 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. 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.
- D. It could facilitate product ordering and selection by the use of Electronic Data Interchange.
- E. It could be used to facilitate more timely and accurate delivery which would minimising waste.
Answer: B,D,E
NEW QUESTION 86
UIO designs clothes and pays third parties to manufacture them A recent television programme showed that two of the factories used by UIO were employing illegal immigrants whose status was used by the factory's owners to force them to work for low wages and in unpleasant and dangerous conditions. These factories were located in a developed country with strong labour laws Classify each of the following statements as true or false:
Answer:
Explanation:
NEW QUESTION 87
Which categories on a risk map best describe the loss of sales floor staff in a fast fashion chain?
- A. Low likelihood; high consequence
- B. High likelihood; high consequence
- C. Low likelihood; low consequence
- D. High likelihood, low consequence
Answer: D
NEW QUESTION 88
In relation to the use of the adjusted present value (APV) technique, which of the following statements are correct?
- A. The interest tax shield on the project's debt must be known, or at least estimated.
- B. The weighted average cost of capital - net present value technique and the APV technique will, if applied correctly, give the same answer.
- C. To apply APV the actual amounts of debt and equity in the capital structure must be known.
- D. To apply APV, the proportions of debt and equity in the capital structure must be known.
Answer: A,B
NEW QUESTION 89
Under the COSO Enterprise Risk Management Framework, who is responsible for risk management?
- A. The board of directors only.
- B. Managers and directors only.
- C. Every member of the entity.
- D. The shareholders.
Answer: C
NEW QUESTION 90
Which TWO of the following are reasons for a company to comply with the Committee of Sponsoring Organisations of the Treadway Commission 2017 Enterprise Risk Management Framework (COSO Framework)?
- A. Complying with the COSO Framework will mean that all staff will understand a company's risk management system
- B. Complying with the COSO Framework will mean that a company's internal controls will work properly
- C. Complying with the COSO Framework will mean all employees of a company will comply with internal controls
- D. Complying with the COSO Framework will improve a company's reputation
- E. Complying with the COSO Framework will mean there is a good structure to a company's risk management system
Answer: D,E
NEW QUESTION 91
P Ltd manufactures and sells electrical goods through retail outlets.
N is P Ltd's Sales Director. He has been recently promoted from a senior sales position with P Ltd. He has been forced to spend the first six months as Sales Director on dealing with an administrative mess left behind by the previous sales director.
You are a Senior Management Accountant at P Ltd. You have worked with N for many years.
N has worked hard and has made many changes that have brought significant benefit to the business.
N has asked you to postpone the recording of some purchase invoices so that he will meet his quarterly targets on profit margin.
What should you do?
- A. Collect all the facts, distance yourself from the situation but say nothing.
- B. Write up the facts of the issue and put it on your files.
- C. Document the situation and present the facts to your manager.
- D. Do nothing, no rules have been broken, tell N that you cannot do as he asks and that he needs to abide by the professional codes.
Answer: D
NEW QUESTION 92
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?
- A. Dealing with all Human Resource, recruitment, and similar issues directly from Head Office.
- B. Instituting the use of a formalised budgetary control system at head office for all branches.
- C. Arranging visits by senior management to each branch periodically.
- D. Restricting the autonomy of individual Branch Managers to purely routine matters and instructing them to refer everything else to Head Office.
- E. Establishing an open communication policy for employees at branches to allow them to contact Head Office on any matter that concerns them.
Answer: B,C,E
NEW QUESTION 93
M plc has a $2 million loan outstanding on which the interest rate is reset every 6 months for the following 6 months and the interest is payable at the end of that 6-month period. The next 6-monthly reset period starts in 3 months and the treasurer of M plc thinks that interest rates are likely to rise between now and then.
Current 6-month rates are 7.2% and the treasurer can get a rate of 7.7% for a 6-month forward rate agreement (FRA) starting in 3 months' time. By transacting an FRA the treasurer can lock in a rate today of 7.7%.
If interest rates are 8.5% in 3 months' time, what will the net amount payable be?
Give your answer to the nearest thousand dollars.
Answer:
Explanation:
$77000
NEW QUESTION 94
In-depth analysis showing the identification and quantification of exposure to financial risk has become more accessible in recent years. Several varieties of analysis are now available.
Which of the following statements are true?
- A. Regression analysis is easy to understand and implement, and based on future expectations.
- B. Value at risk analysis, which has become available through increased computing power, is now easier to implement and can cater for extreme market conditions.
- C. Simulation, which is becoming available through standard computing packages, is complex to implement but dynamic and adaptable to cater for different assumptions.
- D. Monte Carlo analysis is a modelling technique which can be applied to financial analysis, allowing thousands of variables to be integrated together to show standard behaviours and outlier abnormalities requiring detailed understanding in a 'what if?' environment.
- E. Sensitivity analysis involves checking the performance of a financial risk model against the various interrelationships between the different input variables in the model.
Answer: C,D
NEW QUESTION 95
JHG manufactures inexpensive cars that compete largely on price Its cars have very basic equipment and small but economical engines JHG's Board is considering launching a luxury brand of cars that will be far better equipped, more comfortable and have much better performance Which THREE of the following would be relevant factors to incorporate into the stress testing of this new strategy to create a luxury brand?
- A. Sales of JHG's existing range of cars
- B. The cost of designing new cars.
- C. Reductions m motorway speed limits
- D. The need for consumer research
- E. Increased tax on vehicle emissions
- F. Potential changes in interest rates.
Answer: A,B,E
NEW QUESTION 96
Match the descriptions shown in the boxes below with the method of quantifying risk exposure it best describes.
Answer:
Explanation:
NEW QUESTION 97
Which of the following will increase the value of a call option?
- A. A decrease in the market value of the share.
- B. An increase in the strike price.
- C. An increase in the time to expiry.
- D. A decrease in the volatility of the share.
Answer: C
NEW QUESTION 98
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.
Answer:
Explanation:
NEW QUESTION 99
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.
Answer:
Explanation:
NEW QUESTION 100
Why do businesses take risks?
Select the TWO correct answers.
- A. Risk taking can give the impression that senior management roles are very dynamic.
- B. Risk taking allows for multiple random outcomes, some of which may be worth chasing.
- C. Risk taking can assist businesses to gain an advantage on their competitors.
- D. Risk taking provides businesses with opportunities to make better returns.
- E. Risk taking allows businesses to save time by not having to find out all the facts before they embark on new projects.
Answer: C,D
NEW QUESTION 101
NTN manufactures mobile phones. The company's directors have created a new formal long term strategy The strategy is based on differentiation. NTN's phones will be thinner and lighter than those of its competitors.
Which TWO of the following statements are correct?
- A. NTN's strategy is likely to cause competitor price wars.
- B. NTN is likely to be able to reduce its spend on research and development
- C. NTN is likely to incur higher marketing costs.
- D. NTN's strategy will make demand for its products less price elastic.
- E. NTN's strategy is likely to be particularly successful in a recession
Answer: C,D
NEW QUESTION 102
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