Pass Your CIMA Exam with P3 Exam Dumps (Updated 268 Questions)
P3 Exam Dumps - CIMA Practice Test Questions
NEW QUESTION 26
The Head of IT Security has been asked to conduct a detailed forensic analysis of a suspected data breach that ted to customer credit card details being intercepted.
Which TWO of the following would be suitable objectives for such a forensic analysis?
- A. Recovering the stolen credit card details before they can be abused by criminals
- B. Identifying customers whose details have been stolen
- C. Developing an understanding of the vulnerabilities that led to the breach
- D. The collection of evidence that can be used to convict the perpetrators of the breach.
- E. Preventing the credit card companies from blaming the entity for fraudulent charges
Answer: B,C
NEW QUESTION 27
The list below has duties performed by risk managers and internal auditors. Show who would carry out the duties assuming the company has both risk managers and internal auditors.
Answer:
Explanation:
NEW QUESTION 28
A small but rapidly expanding company has recently opened several branches in locations far away from the Head Office. All of the branches are relatively small with no one branch accounting for more than 5% of turnover. Management has decided that the company is not yet large enough to install an Internal Audit function but is, nonetheless, concerned about maintaining adequate control and monitoring at the branches whilst allowing Branch Managers the opportunity to react to local circumstances as appropriate.
Which of the following measures would assist Head Office management in maintaining appropriate monitoring and control at the branches?
- A. Instituting the use of a formalised budgetary control system at head office for all branches.
- B. Establishing an open communication policy for employees at branches to allow them to contact Head Office on any matter that concerns them.
- C. Dealing with all Human Resource, recruitment, and similar issues directly from Head Office.
- D. Restricting the autonomy of individual Branch Managers to purely routine matters and instructing them to refer everything else to Head Office.
- E. Arranging visits by senior management to each branch periodically.
Answer: A,B,E
NEW QUESTION 29
WTW is a global company which produces high-tech equipment such as smart televisions and mobile phones The CFO has just resigned, having been offered a post at a competitor The CFO was well regarded and WTWs share price has fallen in response to the announcement At a board meeting the production director commented that the share price fall is the fault of the nomination committee Which THREE of the following statements are correct?
- A. When planning the CFO's replacement the nominations committee should consider the diversity of the board
- B. Most of the members of the nomination committee should be executive directors as they are responsible for ensuring the share price recovers quickly.
- C. If the nomination committee had been working effectively the CFO would not have resigned
- D. The nomination committee should have considered succession planning for directors before the CFO resigned
- E. The nomination committee should prepare a description of the role and capabilities required for the CFO's replacement
Answer: A,D,E
NEW QUESTION 30
The list below has duties performed by risk managers and internal auditors. Show who would carry out the duties assuming the company has both risk managers and internal auditors.
Answer:
Explanation:
NEW QUESTION 31
P has decided to invest in a new warehouse at a cost of $2,000,000. The discount rate of the project is 18% and the present value of the tax shield is £26,000.
What is the minimum acceptable Internal Rate of Return of the project?
- A. 16.50%
- B. 17.77%
- C. 18%
- D. 18.23%
Answer: B
NEW QUESTION 32
An internal audit investigation involved conducting compliance tests on the processing of purchase invoices.
The purchase ledger clerk compares invoices against purchase orders and passes them for payment The invoices are then input into a computerised purchase ledger system The system checks that the supplier has a valid purchase ledger account, as authorised by the chief buyer, before crediting the supplier's account with the value of the invoice.
The internal auditor checked a sample of recorded purchase invoices against their corresponding purchase orders The internal auditor found four cases where invoices could not be agreed to corresponding purchase orders.
What is the potential significance of this compliance error?
- A. Payments could be made to non-existent suppliers
- B. The discrepancy is a minor one and should be ignored
- C. The purchase ledger clerk could have ordered goods for her own personal use.
- D. The purchase ledger clerk could make fraudulent payments to herself.
Answer: D
NEW QUESTION 33
Laura is an accounts clerk. She is supposed to sign each invoice as evidence that she has conducted checks against supporting documents. Sometimes Laura signs invoices without making these checks.
Terry is a member of the internal audit team. Terry has been told to conduct compliance tests on whether Laura is checking the invoices properly.
Which of the following would give Terry a false sense of assurance that Laura's checks have been operating?
- A. Terry examined a sample of invoices to make sure that they had been signed by Laura. All had been signed.
- B. Terry reviewed a sample of invoices for purchases of plant and equipment and found that Laura had not signed them. Laura explained that she believed that those were authorised by someone else, although the accounts manual indicates that it was her responsibility.
- C. Terry asked Laura a series of open-ended questions about the operation of the purchases system. She did not mention anything about detailed checks of invoices against documents.
- D. Terry selected a sample of purchase invoices and compared each to the supporting documents that Laura is supposed to review. Every one of Terry's invoices was supported by the related documents.
- E. Terry worked at a spare desk in the accounts department and quietly watched Laura without telling her.
She checked every invoice carefully while Terry was present.
Answer: A,D,E
NEW QUESTION 34
Why is it potentially useful for an organisation to maintain a risk register?
- A. To ensure that there are no undiscovered risks.
- B. To ensure that recognised risks are adequately managed.
- C. To eliminate all recognised risks.
- D. To provide the risk manager with a role.
Answer: B
NEW QUESTION 35
Which of the following statements are correct?
- A. It is always possible to remove all risks when undertaking large projects.
- B. Risk should be carefully considered when evaluating possible future projects.
- C. Risk can always be transferred to someone else.
- D. If a project has low risks it will usually have relatively low returns.
- E. If a project has high risks it should always be accepted as the rewards will always be high.
Answer: B,D
NEW QUESTION 36
X Company M has lost 25% of its revenue in the last three months due to bad debts. One of the receivables written off was from a long standing customer and the other three were from new 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?
- A. Credit limits should be set for all customers. However, if the credit limit will cost a sale then sales staff can override this limit.
- B. An aged analysis of customer balances must be reviewed every month.
- C. Two sales staff must authorise new customers and sign a form stating that they have done so.
- D. A credit check should be carried out on each new customer.
- E. As soon as a customer payment is overdue they should not be allowed to purchase more until their balance has been reduced.
Answer: B,D,E
NEW QUESTION 37
Having carried out a full capital appraisal for a construction project, H Company has approved the project with initial outflows of $6,000,000 and a net present value of $1,200,000.
The implementation phase has been commenced with 25% of the costs already committed. However when the ground was opened, an underground waterway was revealed which will need to be diverted if the project is to proceed. Work to carry out this diversion has been estimated at $1,300,000.
Which of the following factors will define whether the project should go ahead or not?
- A. Abandoning the project will have an adverse effect on shareholder confidence.
- B. There will be abandonment costs to restore the site.
- C. The project now has a negative NPV.
- D. The project actually has a higher NPV than before.
- E. There may be other unexpected costs to be met if the project continues.
Answer: B,D
NEW QUESTION 38
V buys vegetables and fruit from three farms located in a different part of V's country and sells them to large supermarket chains.
A recent newspaper magazine had an article on these farms showing that the farms employ illegal immigrants whose status was used by the factory's owners to force them to work for low wages and in unpleasant conditions. They are forced to live in small overcrowded caravans with no running water. They are also given meals which are cold and poor quality. These farms are located in a developed country with strong labour laws.
Classify each of the following statements as true or false.
Answer:
Explanation:
NEW QUESTION 39
H Ltd is a company providing postal and courier services to small businesses. Customers pay a monthly or annual subscription fee to use the service, plus a very small fee for each item delivered.
A year ago, H employed a new sales team. Their remuneration is dependent on the number of new customers they sign up. Sales increased dramatically in the first six months, but now difficulties are emerging such as new customers dropping their subscription once the initial period has expired; subscriber direct debits being returned unpaid; subscribers going out of business and other similar issues.
Which of the following would be appropriate to help resolve these problems?
- A. Alter the commission arrangements so that commission is payable only when the subscriber signs up for a second year.
- B. Ensure that a credit check is carried out before a subscriber is accepted.
- C. Alter the pricing structure in order to increase the price for sending each item but decrease the subscription element of the fee.
- D. Preparing a monthly report for sales persons detailing the performance of each new customer they have signed up over the previous year.
- E. Reduce the rate of commission payable to any sales person who fails to sign up at least an agreed minimum number of customers each month.
Answer: A,B,D
NEW QUESTION 40
RFD, a listed company, is considering making an investment in a risky new venture. RFD has a substantial cash surplus that will be used to acquire the necessary resources. It is unlikely that RFD would have been able to raise finance for this investment because the company is already highly geared.
Which of the following statements about stakeholders' conflicting interests are true?
- A. The diversification of RFD's interests will reduce the risks for all stakeholders.
- B. RFD's existing employees are likely to enjoy a significant upside risk from this project.
- C. RFD's lenders are likely to suffer a greater risk than RFD's equity investors.
- D. Neither RFD's shareholders or lenders are likely to have the means to prevent the directors from making this investment.
- E. RFD's shareholders are exposed to the systematic risk from this project and the directors are exposed to total risk.
Answer: C,D,E
NEW QUESTION 41
The internal audit department should always give a report at the end of its audit. This report is intended to be useful and help the company going forward. The report should always include any recommendations for improvements. Which of the following statements are true and which are false?
Answer:
Explanation:
NEW QUESTION 42
XYZ is unhappy with the way it decides on the likelihood and impact of risks when it completes the TARA matrix XYZ has decided to try other ways to get more consensus over the evaluation of risks as high, medium and low impact and likelihood Which of the following methods is likely to be most successful?
- A. Allowing the risk manager to decide.
- B. Sending questionaires to all employees
- C. Using the Delphi method
- D. Searching online to see how the risks are evaluated in other companies
Answer: C
NEW QUESTION 43
UIO designs clothes and pays third parties to manufacture them A recent television programme showed that two of the factories used by UIO were employing illegal immigrants whose status was used by the factory's owners to force them to work for low wages and in unpleasant and dangerous conditions. These factories were located in a developed country with strong labour laws Classify each of the following statements as true or false:
Answer:
Explanation:
NEW QUESTION 44
Division A of X plc produced the following results in the last financial year.
Net profit $200,000 Gross capital employed $1,000,000
For evaluation purposes all divisional assets are valued at original cost.
The division is considering a project that has a positive NPV, will increase annual net profit by $15,000, but will require average inventory levels to increase by $50,000 and non-current assets to increase by $50,000.
X plc imposes a 16% capital charge on its divisions. Given these circumstances, will the evaluation criteria of return on investment (ROI) and residual income (RI) motivate division A managers to accept the project?
- A. ROI No RI Yes
- B. ROI No RI No
- C. ROI Yes RI No
- D. ROI Yes RI Yes
Answer: B
NEW QUESTION 45
Which of the following best describes the relevance of value at risk (VaR) as a decision tool?
- A. VaR quantifies past volatility
- B. VaR quantifies future volatility
- C. VaR quantifies the maximum loss that could ever be incurred
- D. VaR can only measure downside risk
Answer: A
NEW QUESTION 46
A US company enters into a five year borrowing with bank A at a floating rate of USD Libor plus 2%.
It simultaneously enters into an interest rate swap with bank B at 3.5% fixed against USD Libor plus 1%.
What is the hedged borrowing rate, taking the borrowing and swap into account?
Give your answer to 1 decimal place
Answer:
Explanation:
4.5%
NEW QUESTION 47
A project requires a capital investment of £2.7million. The project will save £450,000 each year after taxation.
Assume the savings are in perpetuity. The business risk of the venture requires a 15% discount rate. The company has to borrow £1million to finance the project at a rate of 9% and the net tax shield is 30%, the project supports debt which generates an interest tax shield of 0.30 x 0.09 x £1million, which is £27,000 per year in perpetuity.
Calculate the project's adjusted present value.
- A. £570,000
- B. 0
- C. £(30,000)
- D. £600,000
Answer: D
NEW QUESTION 48
You are in process of compiling a risk register for P, a company which maintains 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?
- A. A risk register should profile each risk in terms of probability and consequence.
- B. A properly compiled risk register will identify all the risks to which P could possibly be exposed.
- C. A 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.
- D. The risk register for P should be updated frequently: for example, every two weeks.
- E. The risk register should specify the individual, or group of individuals, responsible for the management of each risk.
Answer: A,E
NEW QUESTION 49
H has a floating rate loan that it wishes to replace with a fixed rate. The cost of the existing loan is LIBOR +
4%. H would have to pay a fixed rate of 8% on a fixed rate loan. H's bank has found a potential counterparty for a swap arrangement.
The counterparty wishes to raise a variable rate loan. It would pay LIBOR + 1% on a variable rate loan and
9% on a fixed rate.
The bank will require 10% of the savings from the swap and H and the counterparty will share the remaining saving equally.
Calculate H's effective rate of interest from this swap arrangement.
- A. H would pay 6.2%
- B. H would pay Libor + 1%
- C. H would pay 6.4%
- D. H would pay 6%
Answer: A
NEW QUESTION 50
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