100% Valid CIMAPRA19-P03-1-ENG Exam Questions - Pass P3 Risk Management (Online) Exam Successfully

100% Valid CIMAPRA19-P03-1-ENG Exam Questions – Pass P3 Risk Management (Online) Exam Successfully

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CIMAPRA19-P03-1-ENG exam questions have been proved that the questions and answers are 100% valid to ensure that you can pass P3 Risk Management (Online) exam successfully. The CIMA CIMAPRA19-P03-1-ENG exam questions with the precise answers are specially created for the preparation on the P3 Risk Management (Online) certification exam. Now, you can start your preparation of CIMAPRA19-P03-1-ENG P3 Risk Management (Online) exam with the valid exam questions and answers, which will help you to achieve the target with the CIMAPRA19-P03-1-ENG valid online exam questions.

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Page 1 of 4

1. Which THREE of the following are principles of good corporate governance according to the UK Corporate Governance Code?

Leadership

Reliability

Remuneration

Honesty

Accountability

2. You are the Management Accountant for a company which supplies baked food to a string of retail outlets; biscuits, cakes, savoury snacks etc.

You discover that a trainee employee, who is responsible for cleaning out the delivery vans has been taking damaged goods and packets which have reached their sales expiry date and has been selling them to friends. These products would otherwise have been discarded as waste.

The trainee in question is the nephew of one of the senior managers.

What is the correct course of action?

Have a quiet word with the trainee and ask him to stop.

Have a quiet word with the senior manager, the trainee's relative and ask them to deal with it.

Document the facts and escalate to the trainee's manager.

Do nothing, the product was designated as waste anyway.

3. Company H operates a fleet of lorries. The Internal Auditor recently conducted an investigation into the transport needs of the company. Their report recommended that the lorries be disposed of, the drivers made redundant, and the distribution of the company's products be outsourced.

The type of investigation carried out by the Internal Auditor is best described as a:

Compliance Audit

Economy Audit

Efficiency Audit

Effectiveness Audit

4. 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?

The 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.

The 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.

The 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.

The 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.

5. DRF is a manufacturing company

The internal auditor is conducting an investigation into the operation of the payroll system and has discovered a compliance error

The Head of Human Resources (HR) is required to add any new names to the payroll, using a specific computer password The Head of HR was absent for a month because of ill health During that period a senior member of the Wages Office, who is normally responsible only for organising wage payments, was issued a temporary password in order to add new names to the payroll The password was cancelled when the Head of HR returned to work

Which TWO of the following statements are correct?

The senior member of the Wages Office should be disciplined for being in breach of the rules

The senior member of the Wages Office could have committed fraud

The compliance error should be overlooked because it was as a result of staff absence

The internal auditor should ignore the error because it only lasted for one month

The payroll should be checked thoroughly to ensure that only authorised staff are present

6. Which TWO of the following are reasons for a company to comply with the Committee of Sponsoring Organisations of the Treadway Commission 2017 Enterprise Risk Management Framework (COSO Framework)?

Complying with the COSO Framework will mean all employees of a company will comply with internal controls

Complying with the COSO Framework will mean that a company's internal controls will work properly

Complying with the COSO Framework will mean there is a good structure to a company's risk management system

Complying with the COSO Framework will mean that all staff will understand a company's risk management system

Complying with the COSO Framework will improve a company's reputation

7. UJK manufactures garden machinery. The company is dependent upon another manufacturer for the motors that power its products.

One of the factors that is being considered in a stress test requested by UJK's Board is the possibility that the motor manufacturer increases its selling prices by 10% The motor accounts for a significant proportion of the overall manufacturing cost of UJK's products

Which of the following are correct?

The motor manufacturer should be contacted and told that a substantial increase in selling prices would have a drastic impact on UJK

The possibility of an increase in selling prices due to increased costs should be noted in the stress test report

UJK should estimate the impact on demand of increasing selling prices to pass on the increased cost of the motors.

The impact of absorbing the increased cost of motors on UJK's profits should be calculated.

UJK should identify an alternative vendor of suitable motors as part of its stress test

8. 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 check should be carried out on each new customer.

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

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

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

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

9. 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.

£(30,000)

£570,000

£600,000

10. VBN is a multinational company that has 60 subsidiary companies that operate in 11 countries. VBN evaluates the performance of each subsidiary as an investment centre, using residual income to measure performance.

Which THREE of the following threats of dysfunctional behaviour may arise from VBN's use of residual income to measure subsidiaries' performance?

Subsidiary boards may actively hedge translation risks.

Subsidiary boards may take a short-term view to investment projects.

Subsidiary boards may waste time by arguing over transfer prices.

Subsidiary boards may waste time and incur unnecessary fees in order to recognise gains on the revaluation of property.

Subsidiary boards may be motivated to spend heavily on capital expenditure in order to ensure that budget allocations are maintained and even increased.

Page 2 of 4

11. UIO sells mobile phones through a cham of 100 shops spread across the country Shop managers have considerable discretion over pncmg and the incentives offered to sales staff Shop managers are evaluated on the monthly contribution from completed sales.

Those who exceed targets by more than 10% for three successive months are promoted Those who fail to achieve monthly targets in two successive months lose their jobs

Which of the following statements are true of the performance management of UIO's shop managers?

Select ALL that apply

LHO's shop managers have an incentive to offer excellent customer service

UIO's shop managers are encouraged to take risks that may harm UIO

UIO's shop managers have an incentive to develop attractive sates promotions for their shops

UIO's shop managers are encouraged to sell phones at a loss

UIO's shop managers may have very little sense of loyalty to the company

12. Which risks should be given the highest priority?

Risks which have a high impact and have a low likelihood of arising.

Risks which have a low impact but which arise frequently.

Risks which have a low impact and a low likelihood of arising.

Risks which have a high impact and which may arise occasionally.

13. Which of the following summarises Purchasing Power Parity Theory (PPPT)?

Government intervention cannot affect the inevitable rise or fall of its currency in the short-term.

The difference between the spot and the forward exchange rates is equal to the differential between the inflation rates in the two countries.

PPPT predicts that the country with the lower inflation rate will see the currency devalue accordingly.

The difference between the interest rates in the two countries is equal to the differential between the spot and the forward exchange rate for the currency in the two countries.

14. 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.

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.

15. N, a large company in the food production industry, has grown over the years by the acquisition of several smaller rivals. The company has ten branches located in its home country and has just opened a foreign branch for the first time. It has recently made some changes to the structure and implementation of its control system.

Which TWO of these would be most likely to improve the overall control system?

Establishing an Internal Audit department.

Purchase invoices are now approved for payment at branches and a list of approved invoices are sent to head office for payment. The invoices, supporting documentation and suppliers' statements are retained at the branches.

Excess funds are now invested, by the Finance Director, in short-term securities. The Finance Director initiates buy and sell transactions and she also receives and retains all correspondence relating to the investments.

A policy has been initiated to complete a physical inventory of all non-current assets at least annually. This is then reconciled with the non-current asset register.

N has just opened a bank account in the currency in which the newly opened branch is now operating.

16. DRAG DROP

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?

17. The managers of a company are agents for the shareholders tasked with increasing shareholders' wealth.

Which of the following will usually increase shareholders' wealth?

Investing in projects with the shortest payback period.

Investing in projects with positive net present value.

Investing in projects with the greatest level of risk.

Not paying a dividend for several years in order to invest in new projects.

18. A project has a net present value of $2 million.

Total cash outflows of this project have a present value of $14 million, which includes staff costs of $10 million.

What is the project's sensitivity to staff costs?

20%

63%

71%

14%

19. K has several subsidiary companies. The directors of K's subsidiaries are paid an annual b onus based upon their particular subsidiary's reported profits.

The directors of one of K's subsidiaries are considering the choice between two models of a machine.

Which of the following is most likely to explain the decision to choose model X over model Y?

Model X has a better combination of investment and running costs.

Model X is the less risky investment.

Investing in model X will mean the subsidiary will show a higher profit.

Investing in model X will lead to a higher share price.

20. The senior manager in the accounts department is going on annual leave for three weeks and Jo, a supervisor is being put in charge of the department for that time.

Which TWO of the following statements are correct?

Authorisation of exceptional overtime due to the year end which takes place while the senior manager is on leave should be postponed until the senior manager returns

The annual staff appraisals should be postponed until the senior manager returns

Authorisation of expenses should wait until the senior manager returns.

Jo should not have all of the same authority as the senior manager

Job interviews for an office junior should be cancelled until the senior manager returns.

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21. DRAG DROP

As part of risk assessment exercise for a low-cost airline you are requested to match the risks listed below with the most approriate method of minimising or dealing with each risk.

22. 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

23. DRAG DROP

Select the most appropriate level of responsibility for managing each of the following risks.

24. Which of the following statements are correct?

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

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

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

Risk can always be transferred to someone else.

Risk should be carefully considered when evaluating possible future projects.

25. DFR is an online retailer that sells picture frames The software running on DFR's website enables customers to log in and make purchases by inputting an email address as a user name and a password that must contain at least eight characters, including upper and lower case letters, numbers and punctuation marks (e.g. £, $ or!) Once logged in, customers can check previous orders that they have placed.

Customers can also use DFR's website to change personal details, including credit card numbers and delivery addresses Whenever they wish to use those facilities, the software sends a text message containing a six-digit number to their mobile phones They must input that number before the system will accept changes to their personal details

Which TWO of the following statements are correct?

It is illogical to have different security measures in place for orders and for access to personal details.

The software treats customers' personal details as being more sensitive than their ordering histories

The arrangement with the text message will have no effect on the security associated with changing personal details

Customers should be able to update the mobile phone numbers in their DFR accounts using only their email addresses and passwords for access

The software should never show the whole of a customer's credit card number on screen, even if the customer has logged in and input the six-digit number.

26. VBN's home currency is the V$. On 1 January, VBN must make a payment of C$2 million on 31 March of that same year.

On 1 January the spot exchange rate was V$1 = C$0.4.

On 1 January VBN paid $180,000 for a call option to buy C$2 million for V$5.5 million on 31 March. VBN's cost of borrowing was 8% per year.

On 31 March the spot rate was V$1 = C$0.45.

What was the total cost, including the cost of the option, of settling the payable?

V$4.628 million

V$5.684 million

V$4.444 million

V$5.5 million

27. DFG's home currency is the D$.

DFG is heavily exposed to the exchange rate between the D$ and the L$, country L's currency.

DFG's treasurer has noted the following:

• Inflation has been running at 5% in DFG's home country and 8% in country L

• Interest rates are 7% in DFG's home country and 11% in country L

• The spot rate is D$1.0000 = L$2.1000 and the three month forward rate is D$1.0 = L$2.1196

Which of the following statements is consistent with these figures?

Interest rates are expected to continue unchanged, but country L's inflation rate will increase in proportion to the inflation rate in DFG's home country.

Interest rates are expected to continue unchanged, but country L's inflation rate will decrease in proportion to the inflation rate in DFG's home country.

Country L's interest rate is expected to decline relative to that of DFG's home country and inflation rates are expected to continue unchanged.

Country L's interest rate is expected to increase relative to that of DFG's home country and inflation rates are expected to continue unchanged.

28. DRAG DROP

A's directors do not believe that they always get value for money from their investment in capital projects. Over the past decade the company has invested in 55 projects that have cost more than $1m. They are considering introducing a system of post completion audit to see if this will help them to understand any problems they have had with projects in the past. They hope to use the results of the post completion audits to significantly improve the results of their capital investments

State whether you agree or disagree with the points raised by A's directors.

29. DRAG DROP

G plc has decided to move its production plant to overseas Country

This would make the product cheaper to produce. The technology used to make the product is very advanced and some of the staff would have to move to Country

The Production Director has identified that there are some political risks in moving to Country

Match the methods of reducing the political risks associated with the move to Country A with the corresponding risks.

30. DFG's call centre budgets four minutes for its operators to deal with a customer's enquiry and conclude the call. Team leaders are evaluated on the basis of the average call length.

Simone is a team leader. Her team's average call length is five minutes and 30 seconds. Simone accepts full responsibility. She encourages her team members to check that the customer is satisfied before concluding the call.

On investigation, it was discovered that 2% of the customers who dealt with Simone's team had to call DFG again within seven days. Other teams had an average of 25% of customers call back within seven days because their first call had not fully resolved their problem.

Which of the following statements are true?

The use of average call length may be leading to dysfunctional behaviour.

Simone is in breach of call centre policy.

It would be better to evaluate team leaders on the basis of multiple criteria.

Team leaders should be responsible for setting policy on performance measurement within the call centre.

Average call length should be replaced with the average rate of return calls as the primary performance measure for team leaders.

Page 4 of 4

31. 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.

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.

32. JC is a car manufacturing company in country C and manufactures diesel cars It is facing a number of serious risks .

Which TWO of the following nsk factors are external?

JC's marketing director is considering an attractive job offer from one of J's main competitors

Country F, JC's main market, is threatening to impose tariffs on car imports

JC is facing court action arising from injuries to customers caused by an alleged brake failure in one of its cars

Diesel cars are being criticised by experts because it is believed they cause more harmful pollution than petrol

JC's production staff are complaining that their wages are too low compared to wages paid to other employees.

33. CORRECT TEXT

A project has an NPV of £1,200,000. The present value of material costs which are included in the NPV calculation are £8,000,000.

What is the sensitivity of the project to changes in material costs? Give your answer to the nearest whole percentage.

34. 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?

Introduce credit checks for new customers.

Reduce the company bank loans.

Pay suppliers' invoices quicker.

Look for a loan with a lower interest rate.

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100% Valid CIMAPRA19-P03-1-ENG Exam Questions – Pass P3 Risk Management (Online) Exam Successfully

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