JKL makes large export sales to customers in country X, whose currency fluctuates significantly
against JKL's home currency JKL also makes large purchases from suppliers in countrrOC All of these
transactions are in country X's currency
JKL's treasurer does not actively hedge currency risks because there is a natural hedge in place due to
the company making both sales and purchases in the same currency
JKL's board has instructed the treasurer to put active hedging measures in place because the risk
report would otherwise have to disclose the fact that JKL has a currency risk which is not actively
hedged
Which of the following statements are correct? Select ALL that apply.
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Correct Answer:
A, C, D
Q: 2
The management of U is reviewing internal controls throughout the company. It has noted 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,
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?
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Correct Answer:
E, F
Q: 3
The shares of a company have a beta factor of 1.15. Therefore, which of the following must be true?
Options
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Correct Answer:
B
Q: 4
Which of the following are the Committee of Sponsoring Organisations (COSO) key principles of
enterprise risk management?
Select ALL that apply.
Options
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Correct Answer:
B, D, E
Q: 5
H manufactures and sells healthy dietary supplements. The company recruits individuals as part-
time agents to sell its products to friends and colleagues. These agents are required to buy H's
products and to resell them at a small mark-up.
For a fee, H will provide agents with training in persuasive selling techniques. Agents who pass
exams at the conclusion of this training can become distributors. Distributors buy bulk quantities of
H's products at a discount and can recruit their own sales agents. Those agents can also take training
and can recruit agents of their own.
At what stage does H stop being a legitimate business and become a pyramid selling fraud?
Options
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Correct Answer:
C
Q: 6
B is a company with a strong risk appetite. Which of the following are benefits of using the certainty
equivalent method of capital investment appraisal in B's case?
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Correct Answer:
B, C
Q: 7
Rio owns an architects business which employs 12 skilled architects and four administrative staff.
The Office Manager has just attended a workshop on internal controls and the way in which they can
improve organisations. He intends to implement some internal controls as soon as possible.
What are the limitations of an internal control system in Rio's business?
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Correct Answer:
B, C, D
Q: 8
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?
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Correct Answer:
A
Calculation_F0
Q: 9
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?
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Correct Answer:
C
Q: 10
Which of the following summarises Purchasing Power Parity Theory (PPPT)?
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Correct Answer:
B
Q: 11
Zia is an accountant and wishes to take out a Forward Rate Agreement (FRA) as a hedging
instrument. The company treasurer has advised that a short-term interest rate (STIR) future would be
better.
Which of the following is true of an STIR?
Options
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Correct Answer:
B
Q: 12
Which of the following actions would breach CIMA's Code of Ethics for Professional Accountants?
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Correct Answer:
A, B, C
Q: 13
DRAG DROP H sells machinery and also associated services, such as advice and repairs. H's industry is going through considerable transformation. Classify each of the examples of information available to H's management as strategic, operational or of having little value.
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Answer Area
Strategic: B. Details of forecast data for 3 years per product line; C. Details of sales figures and forecasts for regional areas for both the previous 3 vears and the next; F. Details of customer base evolution over the past 3 years
Operational: A. Details of all service calls processed over the past two years; E. Details of qualifications held by staff.
Little value: D. Details of market research data carried out 4 vears ago
Q: 14
DRAG DROP Y plc, a pharmaceutical company, has dealt with a number of risks in the manner indicated below. Use the TARA framework to classify each of Y plc's responses.
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Answer Areas
Transfer: A. A small number of patients have suffered a rash after taking Y plc's best selling drug. Y plc has highlighted the possibility of such a reaction on the drug's packaging.; F. A member of production staff was overcome by fumes from a leaking pipe. Y plc has since increased its insurance against industrial injuries.
Accept: D. One of Y plc's drugs is less popular because many doctors now prescribe a more modern drug instead. Y plc has decided to keep producing the drug.; E. One of Y plc's competitors has reduced the price of a drug similar to one of Y plc's most popular drugs. Y plc has not reduced the price
Reduce: C. A pill making machine was not getting the dose contained in each pill absolutely correct, so Y plc replaced the machine.
Abandon: B. Three patients died after taking one of Y plc's drugs. Y plc does not believe that the drug caused the deaths, but it has nevertheless ceased production of the drug.
Q: 15
DRAG DROP Identify, from the list provided, which category of business risk most accurately describes the events detailed below.
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Answer Area
Legal/litigation Risk: E. The Company exceeding the amount of pollution it is legally allowed to emit.; F. Taxation authorities disputing eligibility of the company to exemption from certain classes of taxation in prior years.
Foreign Exchange Risk: D. Losses due to currency movements.
Strategic Risk: A. Failure of a major merger.
Product Reputation Risk: B. A recall of a product due to the discovery of a potentially dangerous flaw.
Credit Risk: C. The risk of non-receipt of payments owed to the company.
Q: 16
DRAG DROP 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.
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Answer Area
True: A. V's share price is likely to fall as a result of this article.; D. It will be difficult for V to restore its reputation.; E. V should investigate the conditions at all of the other farms that it uses.
False: B. V is entitled to blame the Government of the farms' host country for failing to supervise conditions properly; C. V's only responsibility is to its shareholders and those who are employed directly by the company
Q: 17
DRAG DROP G plc has decided to move its production plant to overseas Country A. 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 A. The Production Director has identified that there are some political risks in moving to Country A. Match the methods of reducing the political risks associated with the move to Country A with the corresponding risks.
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Answer Area
Import partly completed products from G pic's own country: C. Local staff could find out how to make the produ and use that knowledge to start a production plant of their own
Employ at least 50% local people in the production plant: B. The Government of country A could refuse to grant visas to G pic's staff who have to move to country A; D. The Government of country A could refuse to renew visas for staff brought from G pic's own country
Take out a loan with a bank in country A.: A. The Government of Country A could introduce high taxes for outside companies which would make it difficult for G pic to continue production i
Q: 18
DRAG DROP 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.
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Answer Area
Risk manager: B. Liase with the company's insurance company on claims and insurance cover; C. Ensure compliance with regulations and legislation.
Internal auditor: A. Investigate suspicion of fraud in the purchasing department; D. Ensure compliance with internal controls.
Q: 19
DRAG DROP Z is a multinational pharmaceuticals company with operations across Europe, America and Asia. It is currently investigating the possibility of setting up a chemical and specialist production facility in South Americ a. This would be a multi $billion investment. What steps should Z take to manage the following risks in this long term venture.
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Answer Area
Look at future economic predictions for the country.: C. Z has concerns about future lack of political stability.; E. Z has concerns that it may be difficult to persuade research staff to transfer to South America.
Invest in local education and healthcare.: F. Z has concerns over accusations of exploitation of cheap workforce.
Set up a joint venture with the government for the investment.: A. Z has concerns that a future government may try to nationalise the assets.
Set up local financing.: B. Z has concerns about not being allowed to repatriate profits.
Seek consultation with local industrial representatives.: D. Z has concerns that construction period may be disrupted by local industrial action.
Q: 20
DRAG DROP E purchases parts for one of the machines it manufactures from Country X Place the risk classification next to the risk it relates to:
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Correct Answer:
Answer Area
Reputation risk: B. The factory where the parts are made uses child labour.
Financial risk: A. The currency in Country X strengthens against the currency in E's country.
Business risk: C. There are defects in approximately 2 parts in every 50 parts purchased. If the parts with defects are used in the manufacturing process the machine will breakdown within six months of use by a customer.
Ethical risk: D. A factory in Country X may manufacture the machines themselves and be able to sell them at a lower price.
