CIMA CIMAPRO19-P03-1 Exam Questions Instant Access

Question 1

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?

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

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

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

DH should be held accountable for the overspend on the project.
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Answer : A

Question 2

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 3

IOP manufactures aircraft engines. The company is presently engaged in a scenario planning exercise to consider the implications of a possible ban on the use of fossil fuels by the year 2040.

Which TWO of the following would be realistic responses to the scenario?

AWork with politicians to discredit the proposed restrictions on the use of fossil fuels

BCommission research into the development of battery-powered aircraft

CAdapt existing engine designs so that they can use plant-based fuels, such as vegetable oils

DDispose of manufacturing plant and move into more sustainable transport, such as electric trains

EDevelop more efficient engines that minimise the use of fossil fuels

Answer : B, C

Question 4

A US company has to pay 500,000 for a new machine.

You have the following information on currencies.

EUR1 = 1.2300

EUR 1= USD1.6200

What is the cost of the machine in USD?

Give your answer to the nearest $.

See Below Explanation:

Answer : A

Question 5

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?

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

BThe risk report says nothing useful about the risk.

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

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

EThe shareholders now have more useful information.

Answer : C, D, E

Question 6

Company M has lost 25% of its revenue in the last three months due to bad debts. One of thereceivables written offwasfroma long standing customer and the other three werefromnew 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?

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

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

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

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

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

Answer : A, D, E

Question 7

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?

AThe 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.

BThe 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.

CThe 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.

DThe 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.

Answer : A

CIMA P3 Risk Management CIMAPRO19-P03-1 Exam Questions