CIMA CIMAPRO19-P03-1 Exam Questions Instant Access

Question 1

D plc is a public relations company. Shares in D plc have recently been listed on the UK stock exchange.

D plc has an internal audit department that reports to the Chief Executive Officer (CEO). The CEO is considering outsourcing internal audit to an audit firm, whichwould not be the firm that conducts D plc's external audit.

Identify THREE advantages to D plc of outsourcing internal audit in this way.

ADoing so may improve independence.

BDecisions relating to internal audit can be based solely on cost.

CInternal audit will have a better understanding of D plc's objectives and culture.

DSpecialist skills may be more readily available.

ERisk of staff turnover is passed to the outsource company.

Answer : A, D, E

Question 2

DFG is the largest bridge-building company in its home country, H. DFG works exclusively for thegovernment ofcountry H and thegovernment awards DFG 80% of the contracts to build new bridges.

DFG's directors are considering using thebigdata approach to identify opportunities to increase sales revenues and profit.

Which of the following statements are true?

ABig data has the potential to identify ways in which DFG can reduce construction costs.

BDFG should supplement its existing databases in order to enhance the benefit from big data.

CThe big data approach may help DFG to price contract bids more accurately.

DBig data has the potential to identify ways in which DFG can increase sales.

EIt would be unethical for DFG to use big data in order to compete even more effectively with its rivals.

Answer : A, B, C

Question 3

B, a construction company, has a policy of carrying out a post completion audit on every construction project undertaken where the value exceeds $1 million.

What is the role of the post completion audit?

ATo reward staff and celebrate success.

BTo signify the end of the project.

CTo highlight what can be done to improve similar future projects.

DTo apportion blame for things not done well.

Answer : C

Question 4

DFG is the largest bridge-building company in its home country, H. DFG works exclusively for thegovernment ofcountry H and thegovernment awards DFG 80% of the contracts to build new bridges.

DFG's directors are considering using thebigdata approach to identify opportunities to increase sales revenues and profit.

Which of the following statements are true?

ABig data has the potential to identify ways in which DFG can reduce construction costs.

BDFG should supplement its existing databases in order to enhance the benefit from big data.

CThe big data approach may help DFG to price contract bids more accurately.

DBig data has the potential to identify ways in which DFG can increase sales.

EIt would be unethical for DFG to use big data in order to compete even more effectively with its rivals.

Answer : A, B, C

Question 5

The treasurer of IOK is considering entering into a money market hedge in order to hedge a payable.

Which of the following might be valid explanations for the use of a money market hedge for this purpose?

AThere are no forward contracts available for the purchase of the payable currency using IOK's home currency.

BThe timing of the payable does not permit the use of a forward contract.

CThe relevant currency markets are very thinly traded and the treasurer believes that forward contracts are mispriced.

DA money market hedge is easier and less expensive to organise than a future or forward contract.

EMoney market hedges can be unwound whereas positions in derivatives cannot.

Answer : A, B, C

Question 6

ERT is choosing between two maintenance policies for its vehicles. The outcomes of these policies are difficult to predict and so ERT has run a simu-lation of both.

Policy 1 has an expected annual cost of $400,000 per year, with a standard deviation of $80,000.

Policy 2 has an expected value of $350,000, with a standard deviation of $150,000.

Which of the following statements are correct?

APolicy 2 is the more risky.

BPolicy 1 will always be the more expensive in any given period.

CPolicy 2 is the more likely to cost more than $500,000 in any given year.

DPolicy 2 has the greater potential upside risk.

EPolicy 2 is clearly the better policy.

Answer : A, C, D

Question 7

Z plc has recently undertaken a SWOT analysis. The SWOT analysis identified two main threats to Z plc:

* The threat that the currency of Z plc's main overseas competitor weakens compared to Z plc's home currency.

* The threat that there will be a military coup which will overthrow the government in the country that Z plc purchases most of its raw materials from.

WhichTWOof the following categories of risk correspond most closely to the above threats?

AFinancial risk

BPolitical risk

CBusiness risk

DEconomic risk

Answer : B, D

CIMA P3 Risk Management CIMAPRO19-P03-1 Exam Questions