CIMA CIMAPRA19-P03-1 Exam Questions Instant Access

Question 1

You are in process of compiling ariskregister for P, a company whichmaintains railway tracks.This helps prevent accidents and ensures the trains are not disrupted due to problems with the track.

Which of the following statements are valid?

AA properly compiled risk register will identify all the risks to which P could possibly be exposed.

BA risk register should profile each risk in terms of probability and consequence.

CA risk register should concern itself with only the direct consequences of each risk such as injury to passengers and ignore indirect risks, such as re-routing trains due to an accident.

DThe risk register for P should be updated frequently: for example, every two weeks.

EThe risk register should specify the individual, or group of individuals, responsible for the management of each risk.

Answer : B, E

Question 2

Which of the following is an ethical dilemma?

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

BA company is deciding whether to issue debt or equity.

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

DA 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.

Answer : A

Question 3

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

Question 4

P Ltd, a manufacturing company, is considering a new capital investment project to set up a new production line. The initial appraisal shows a healthy net present value of $6,465 millionat a discount rate of 10% as shown in the table below:

However, management is unsure about the demand for theproduct which will be produced and has insisted that the future revenues should be reduced to certainity equivalents by taking 70%, 65% and 60% of the years 1,2, and 3 cash inflows respectively.

What should P do?

AProceed with the project, it has a healthy net present value.

BStop the project, it has considerable risk.

CPut pressure on sales and marketing to re-verify their forecasts.

DRe-appraise the project using other capital appraisal techniques to get a more balanced view.

Answer : D

Question 5

K is a large mining company. Initsrisk reportitstates that there is a risk of accidents and injury because of the nature of the industry. Itstates thatithasstaff training in place and complieswith allHealth and Safety regulations but in spite of this there will still be a residual risk that accidents and injuries may occur.

Which of the followingstatements are correct?

AThe shareholders should not invest because there is still a residualrisk.

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

CSome risks cannot be eliminated.

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

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

Answer : C, D, E

Question 6

Which of the following statements are correct?

AIt is always possible to remove all risks when undertaking large projects.

BIf a project has high risks it should always be accepted as the rewards will always be high.

CIf a project has low risks it will usually have relatively low returns.

DRisk can always be transferred to someone else.

ERisk should be carefully considered when evaluating possible future projects.

Answer : C, E

Question 7

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?

AIntroduce credit checks for new customers.

BReduce the company bank loans.

CPay suppliers' invoices quicker.

DLook for a loan with a lower interest rate.

Answer : A

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