CIMA CIMAPRA19-P03-1 Exam Practice Test Instant Access

Question 1

A large, publicly funded university is considering introducing a new information system in order to enhance its ability to store and retrieve academic records for past and current students, including the registration and deregistration of students.

In conducting an evaluation of the system, which THREE features would the management of the college be most likely to consider as essential prerequisites to implementation?

AThe system has the capacity to deal with all existing records and all new records to be created in the foreseeable future.

BThe system is capable of being run in parallel with the current system so as to have the opportunity to examine and overcome any unforeseen difficulties that might arise.

CThe system has been demonstrated to operate with a degree of accuracy at least as good as the existing system and as good as that used by similar universities.

DThe system can link seamlessly with the system used by the university for processing financial transactions and producing financial statements.

EAll information on the system can be accessed easily from outside the university through the internet.

Answer : A, C, D

Question 2

RFG is considering a major expansion that will result in a more diversified business model.

At present, RFG's market capitalisation is $240 million. This is based on a beta of 1.6. The risk free rate is 4% and the market rate of return is 9%. RFG is financed entirely by equity. The company generates an annual cash surplus of $28.8 million.

The expansion will cost $50 million and will generate future cash flows of $12 million in perpetuity. This new business will reduce RFG's beta to 1.4.

Calculate the adjusted present value of the expansion.

A$81 million

B$131 million

C$321 million

D$59 million

Answer : A

Question 3

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?

AConduct additional detailed testing on overtime payments.

BConduct additional detailed testing of all figures.

CIncrease the evaluation of inherent risk.

DIncrease the evaluation of control risk.

Answer : A

Question 4

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

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

APrepare the report.

BEstablish whether the controls are adequate or not.

CDecide how the controls will be tested.

DLearn all about the systems and controls in the department.

ECarefully consider any control weaknesses that are reported.

FReview previous audit findings for the department.

Answer : C, D, F

Question 5

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

WhichTHREE of the following are true?

APhased changeover is the safest and slowest method of changeover.

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

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

DParallel 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.

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

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

Answer : B, D, F

Question 6

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

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

BProfit and shareholder wealth are unrelated.

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

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

Answer : D

Question 7

The management of U isreviewing internal controls throughout the company. Ithasnoted 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, astheyarethe only person with sufficient experience to do so. They usea very limited number of suppliers becausethey can rely on these suppliers to provide goods of the quality required at a competitive price. They donot 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?

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

BIt 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.

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

DThe 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.

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

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

Answer : E, F

CIMA P3 Risk Management (Online) CIMAPRA19-P03-1 Exam Practice Test