Cima P3 Test

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CIMA P3 - Risk Management exam in just 24
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• Question No 1
• W is a construction company which undertakes
  large projects for governments and other clients
  worldwide. Following extensive tendering
  processes, contracts are issued for successful
  tenders, and projects typically take three to
  five years to complete. Contracts are normally
  fixed-price and many have considerable penalty
  clauses. Which of the following would be
  appropriate policies and controls for W to
  implement?
• Unsuccessful tenders should be analysed to
  establish the cause of them failing to be
  awarded the work and help to avoid future
  failures.
• Ensuring a consistent separation of duties
  between those involved in the preparation of
  tenders and those involved in the planning of
  projects.
• Ensuring that the minimum legal wage is paid to
  all workers on the construction sites.
• In order to ensure the maximum chance of winning
  the contract, tenders always commit W to
  completing the work at the lowest possible price
  and in the shortest possible time.
• Contract terms should be worded precisely so that
  additional work is not deemed to form part of
  the contract.
• The project steering committee and project board
  should receive regular project status
• reports.
• Answer A, E, F Question No 2
• You are the Management Accountant for P, a food
  manufacturing company with an annual sales
  revenue of 5 million. You discover that the
  Production Manager's records are inconsistent.
  Raw materials purchased do not agree to the total
  recorded for transfers to production plus
  wastage. There is an average shortfall of 2 of
  purchases. You investigated and discovered that
  there are often mistakes made during
  manufacturing that results in food that is safe
  to eat, but cannot be sold because of visual
  flaws. The Production Manager is supposed to
  scrap all such damaged product and write all such
  losses off as waste, but you discovered that he
  has been giving the damaged food to a charity
  that assists homeless people. No records are
  made of such gifts in order to conceal the losses
  due to manufacturing errors. What should you do?
• Do nothing, this is a good cause and the amount
  is insignificant.
• Instigate disciplinary action, this is both theft
  and poor management.
• Instigate a confidential, but documented, review
  with the Production Manager and tell him to
  stop.
• Instigate a review of the production process to
  potentially reduce the amount of wastage.
• Instigate a process whereby edible but unsellable
  items can be given to the charity officially.

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• Answer C, D, E Question No 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?
• Conduct additional detailed testing on overtime
  payments.
• Conduct additional detailed testing of all
  figures.
• Increase the evaluation of inherent risk.
• Increase the evaluation of control risk.
• Answer A Question No 4
• In relation to the use of the adjusted present
  value (APV) technique, which of the following
  statements are correct?
• To apply APV, the proportions of debt and equity
  in the capital structure must be known.
• To apply APV the actual amounts of debt and
  equity in the capital structure must be known.
• The interest tax shield on the project's debt
  must be known, or at least estimated.
• The weighted average cost of capital - net
  present value technique and the APV technique
  will, if applied correctly, give the same answer.
• Answer C, D Question No 5
• You have just been employed as a management
  accountant in a small business with an annual
  turnover of 0.5 million. You have a wide range
  of duties because the business is small. Which
  of the following is an ethical risk?
• Being asked to buy very small gifts for key
  clients.
• Being asked to work weekends, playing golf with
  clients.
• Being asked to work weekends, taking clients to
  night clubs making sure they have as much
  alcoholic drink as they want so that they will
  sign contracts.
• Being asked to work weekends working out tenders
  for new contracts.

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• Answer C
• Question No 6
• A project has been evaluated on the basis that it
  will cost 14 million and will have a net
  present value of 2.3 million.The project has
  commenced and 3 million of the initial 14
  million has been invested. A problem has been
  discovered that will cost an additional 2.5
  million to rectify. The 2.5 million will be
  payable immediately. What is the NPV of
  continuing with this project?
• -3 million
• -0.2 million
• 1.8 million
• 2.8 million
• Answer D Question No 7
• The management of U is reviewing internal
  controls throughout the company. It has noted
  the following-
• 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.
• In the purchasing department, the purchasing
  manager selects and approves all suppliers, as
  they are the only person with sufficient
  experience to do so. They use a very limited
  number of suppliers because they can rely on
  these suppliers to provide goods of the quality
  required at a competitive price. They do not 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?
• The fact that the purchasing manager uses a very
  small number of suppliers is, in itself, a sign
  of poor internal controls.
• It 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.
• It is acceptable for clerks in the trade
  receivable section to make journal adjustments
  without authorisation, provided they have no
  access to cash receipts.
• The 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.

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• Clerks making journal adjustments without
  reference to their supervisor is evidence of
  inadequate separation of duties.
• The 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 No 8
• A US company has to pay 500,000 for a new
  machine.
• You have the following information on currencies.
• EUR 1 1.2300 EUR 1 USD 1.6200
• What is the cost of the machine in USD?
• Give your answer to the nearest .
• Answer 658501, 658537
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