P3 Risk Management Questions and Answers

Which of the following is an ethical dilemma?

TRF is conducting a post completion audit on an investment in a pollution control machine that has reached the end of its five year useful life.

TRF could have been heavily fined if the machine had failed to keep pace with the output of emissions, measured in units. TRF ' s cost of capital is 10%. When the machine was purchased, there was a choice of three machines on the market:

TRF purchased the Big machine, but annual requirements only exceeded 600,000 once, in year 3, when 720,000 units of emissions were emitted.

Calculate the amount that the post completion audit shows TRF overpaid for the ownership costs associated with this machine.

Give your answer to the nearest whole $ (in $ ' 000s).

B is a horticultural retailer with limited funds available to acquire new retail property.

B ' s Finance Manager has analysed two potential property investments. Investing in property P shows an IRR of 21% while the IRR on property Q is 17%.

The Finance Manager has also advised that the NPV for property P is $750K, while the NPV of property Q is $850K.

The Board needs to choose between the two properties as it has insufficient funds for both. Based purely on the Finance Manager ' s analysis, which of the following is true?

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?

In-depth analysis showing the identification and quantification of exposure to financial risk has become more accessible in recent years. Several varieties of analysis are now available.

Which of the following statements are true?

The long-term prospects for interest rates in the UK and the USA are 2% and 6% per annum respectively.

The GBP/USD spot rate is currently GBP/USD1.71.

Using interest rate parity theory, what GBP/USD spot rate would you expect to see in six months ' time?

Company W produces mobile phone components and has recently tendered for a substantial contract. The results of the tendering process will not become available until three months from now. If the company is successful it will require 2,000 units of a commodity which is currently traded in an open commodity market for $740 per unit. However, there has been speculation that this commodity could increase substantially in price over the next three months and so the company is considering purchasing the commodity now and storing it for three months.

The funds to buy the commodity would be borrowed at an annual interest rate of 7% and the storage cost of the product would be $5.40 per unit per month. The storage costs would be paid at the end of the three month storage period.

Which of the following represents the gain or loss (to the nearest thousand dollars) that will accrue to Company W assuming that the price of the commodity rises to $800 in three months ' time?

M plc is an IT company that bids for large contracts to sell computer systems and also to service existing systems. M plc ' s senior management has always set budgets which are hard to achieve and have made no allowances for the recession.

The economy has improved and M plc ' s senior managers have made the budget even more optimistic. The budgeted sales target has been increased by 40%.

In the past, sales staff have not tried to achieve the budget sales because it was generally believed that the targets were impossible to reach.

M plc has recently appointed a new Sales Director who has decided that sales staff will be dismissed if they fail to meet sales targets for three successive months. He is also looking for higher sales margins than were achieved before.

What are the likely consequences of the new Sales Director ' s policy?

Select the correct ethical principle that corresponds to each ethical dilemma described.

CH makes a popular type of chocolate bar The bars are made on a production line and are scanned for size and shape as they move along the line Wrong sized and misshapen bars are rejected as being poor quality. The scanner detects 90% of poor quality bars. If CH wants to reduce the risk of poor quality bars being sold to the public it can add a further check by a person scanning the production line as well. this check would detect 80% of poor quality bars

If the further check was implemented what percentage of poor quality bars would still get through the checking process?

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

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

Which of the following statements are true?

Company N is considering opening another production plant in Northland, a country 2000 km from its current production plant location N would also sell its products in Northland

Which TWO of the following are business risks '

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?

Which TWO of the following are likely to be consequences of a weak control environment?

Which of the following is NOT a financial risk.

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.

P Ltd, a service company, is seeking to recruit engineers to work in its maintenance division. Which TWO of the following suggestions will be most likely to help prevent fraud when recruiting the engineers?

Identify, from the list provided, which category of business risk most accurately describes the events detailed below.

A UK based company is considering an investment of GB£1,000,000 in a project in the USA. It is anticipated that the following cash flows will arise from this project.

The cash flows will be either US$400,000 with a probability of 40% or US$700,000 with a probability of 60% for each of the next three years; remitted to the UK at the end of each year.

Currently GB£1.00 is worth US$1.30.

The expected inflation rates in the two countries over the next four years are 2% in the UK and 4% in the US.

Applying the Purchasing Power Parity Theory, which of the following represents the expected net present value of the project in GP£ (to the nearest whole pound)?

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?

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?

JKL is a retailer with more than 45 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?

Multinational companies have a variety of methods by which to manage currency risk.

Select ALL internal hedging methods from the following list.

A project has been evaluated on the basis that it will cost $22 million and will have a net present value of $4.3 million The project has commenced and $5 million of the $22 million has been invested. A problem has been discovered that will cost an additional $4.5 million to rectify. The $4.5 million will be payable immediately. What is the NPV of continuing with this project?

Physical access controls can greatly enhance the security of company assets.

Select THREE methods by which physical access security can be significantly enhanced.

R plc is considering an investment of $1,100,000 in a new machine which is expected to have substantial cash inflows over the next five years.

The annual cash flows from this investment and their probability are shown below:

Annual cash flow ($) Probability

 200,000                         0.4

 280,000                         0.5

 350,000                         0.1

At the end of its five-year life, the asset is expected to sell for $100,000. The cost of capital is 5%.

What is the Expected Net Present Value?

Give your answer to the nearest whole $.

A capital investment project shows a NPV of £3,450 at a discounted rate of 8% and an NPV of £1,210 at a discounted rate of 9%.

What is the internal rate of return?

With regard to the rote of the audit committee which of the following statements are correct? Select ALL that apply

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

HJK is a publishing company that employs several hundred staff A member of the company ' s IT Security Department contacted 30 members of HJK ' s staff selected at random, and told each one that his or her computer appeared to be infected with a virus The staff members were asked to provide their login details and corporate passwords so that IT Security could remove the virus remotely A total of six members of staff provided this information.

Which TWO of the following statements are correct?

There are many method for appraising capital projects.

Select ALL correct statements.

ZZ is a data security company that is responsible for cyber security m a large shopping mall 21 uses Network Configuration Management (NCM) to assist it in meeting the various needs of the mall ' s user community.

Which THREE of the following are advantages provided by NCM?

A consultancy firm has many overseas clients The firm ' s staff are responsible for booking travel and accommodation through an independent travel agent who invoices the firm. There are strict rules governing bookings Staff at all levels must book economy class airfares unless the scheduled flight time is greater than eight hours, in which case they can book a business class seat Hotel accommodation should cost less than $300 per night

One of the firm’s directors is visiting the consultancy team responsible for a large overseas project The director flew business class, even though the flight took only five hours The director is booked into an executive suite at an expensive hotel at a cost of $900 per night

Which TWO of the following statements concerning the director ' s behavior are correct?

Why is it potentially useful for an organisation to maintain a risk register?

ABC has recently appointed a Chief Information Officer who has announced that he wants to start a major clean up starting with all desktop and laptop equipment.

Which THREE of the following measures should be adopted to help enhance security ' ?

A UK based company is considering an investment of GB£1,000,000 in a project in the USA. It is anticipated that the following cash flows will arise from this project.

The cash flows will be either US$400,000 with a probability of 40% or US$700,000 with a probability of 60% for each of the next three years; remitted to the UK at the end of each year.

Currently GB£1.00 is worth US$1.30.

The expected inflation rates in the two countries over the next four years are 2% in the UK and 4% in the US.

Applying the Purchasing Power Parity Theory, which of the following represents the expected net present value of the project in GP£ (to the nearest whole pound)?

JNH is a major corporation that stores its customer database in the Cloud JNH has suffered a data breach that has led to customer credit card details being made available for sale on the internet JNH ' s Head of Security wishes to analyse network traffic at the cloud-based server in order to gain a better understanding of the manner in which the data was intercepted, but has been refused access.

Which of the following is the most likely explanation for the third-party owner ' s refusal to assist JNH ' s Head of Security?

Which of the following will increase the value of a call option?

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?

FGT is evaluating the political risks associated with its operations around the world.

Which of the following would indicate that a particular subsidiary has a high level of political risk?

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?

KLO is a major quoted car rental company The company is considering publishing its first cyber risk management report

AH rental bookings are made online Customers receive a booking reference number that they use to collect their cars from a convenient branch Customers enter their credit card details both so that KLO can take payment for their rental and also so that the customers can be charged automatically for late returns or damage to cars

KLO ' s management believes that it has three key areas of cyber risk Cyber criminals may wish to make bookings using fictitious data in order to steal KLO ' s cars, they may wish to use customers details to identify addresses of people who are away from home so that they can burgle houses and they may wish to abuse customer credit card details

KLO ' s Board is concerned that admitting to the nsk of stealing cars might encourage cnminals to exploit that vulnerability AJso. it is concerned that customers will be reluctant to rent cars if that would mean that their homes could be at risk of burglary while they are away The vulnerability of credit card details seems obvious and so the Board is not reluctant to admit to that.

Which TWO of the following are correct?

JHU has recently completed an eight year project. The project was evaluated at a discount rate of 10% and was accepted because the net present value was $18 million.

In year 3 of the project there was a significant unexpected repair arising because of the implementation stage of the project was rushed and some checks on equipment were skipped to save time. The cost of this was $8 million.

In year 8 of the project the costs of dismantling the project were $11 million more than anticipated because of unexpected changes to the law concerning disposal of industrial scrap.

How should these findings be reflected in the post completion audit?

B is a small retail bank that offers customers many on-the services B is keen to ensure sound security both to protect the bank ' s assets and also to safeguard customer privacy

B ' s IT Security Manager has suggested that the bank should use two phase authentication for access to the on-line systems

Which TWO of the following are examples of two phase authentication?

K is a large mining company. In its risk report it states that there is a risk of accidents and injury because of the nature of the industry. It states that it has staff training in place and complies with all Health and Safety regulations but in spite of this there will still be a residual risk that accidents and injuries may occur.

Which of the following statements are correct?

AB is a manufacturing company which relies heavily on its computerised systems for customer management

Which of the following is the most important factor which will enable AB to continue to operate after an incident which destroys its central computer*?

A large department store has just discovered that the staff in the store coffee shop have been defrauding the company for the past three years. The six employees who work in the coffee shop have been keeping a proportion of the cash takings, concealing the theft by not recording all sales up in the till They shared the proceeds of this fraud between them The fraud was only uncovered when one of the employees left and his replacement reported the theft to management rather than becoming involved in the crime

Which of the following best describes the role of the store ' s internal controls in the context of this fraud?

R is a company running gas-fired power stations in Western Europe. The Risk Committee has just received a report that a power station built to the same design and specification in a developing country has recently collapsed. The causes of the collapse are unclear, but if something similar were to happen in Europe the consequences for R could be catastrophic.

Which of the following actions being considered by the Risk Committee are ethical?

Which THREE of the following are true with regard to managing the changeover from an old to a new computer system?

Which of the following statements are correct?

With regard to the internal audit department, which TWO of the following statements are correct?

Which TWO of the following might create a good control environment?

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?

A government department is conducting a value for money audit on a school.

The school ' s pupils sit leaving exams. Classify each of the audit tests as either economy and efficiency or effectiveness.

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?

You are a member of the Chartered Institute of Management Accountants (CIMA) and you have recently taken up the position of Sales Manager with a company that is facing financial difficulties. The company ' s terms include a commitment to maintain specified profitability, liquidity and solvency measures; failure to do so would render bank loans immediately repayable. The draft financial statements show that the company has not succeeded in complying with all of these requirements.

The financial results are very dependent on various estimates such as receivables impairments. The Chief Executive Officer (CEO) has suggested that these be recalculated so as to bring the financial results within the requirements of the bank. He has asked you to sign pre-dated internal documentation which would imply that, as Sales Manager, you initiated these changes in the belief that they would enhance the accuracy of the Financial Statements.

Which TWO of the following courses of action available to you would be ethically acceptable according to the CIMA Code of Ethics?

Which of the following statements concerning the role of the Audit Committee is correct?

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?

D has decided to invest in a new factory at a cost of $6,000,000. The discount rate of the project is 22% and the PV of tax shield is $80,000.

What is the IRR?

Give your answer to two decimal places.

NTN manufactures mobile phones. The company ' s directors have created a new formal long term strategy The strategy is based on differentiation. NTN ' s phones will be thinner and lighter than those of its competitors.

Which TWO of the following statements are correct?

The shares of a company have a beta factor of 1.15. Therefore, which of the following must be true?

MNB is a multinational IT company with headquarters in Asia and with operations in all continents.

MNB is attempting to expand its operations in Europe. This is seen as a major challenge as the European market is very well developed and highly competitive.

MNB develops and manufactures its own products. Parts and assemblies are sourced across Asia, America and Europe. These are sometimes purchased locally as a condition of a contract, but MNB aims to include as much of its own equipment as possible. Transfer prices between MNB ' s subsidiaries can be set in YEN, USD, EURO, GBP. Transfer prices are revised every month in line with production times as most goods are made on short order with sales cycles running at 3-4 months.

What types of risk are being presented here?

Move the category of risk to the box beside the risk description it best matches.

ABC is an online retail chain which operates on a 24/7 basis It has been updating its Cyber Security processes and has implemented a centralised monitoring process to track activity through its web access portal

Which of the following activities will increase the awareness of its cyber security risk most effectively?

The managers of a company are agents for the shareholders tasked with increasing shareholders ' wealth. Which of the following will usually increase shareholders ' wealth?

Y Company wishes to recruit an employee who will have responsibility for the receipt and handling of cash

From the point of view of the internal auditor which THREE of the following would be most likely to provide useful information about the candidate " ?

TTO is seeking to recruit a new non-executive director TTO produces high quality women ' s clothing, which it sells to retailers Some clothing is sold under the retailer ' s own brand names, some is made on behalf of recognised clothing designers TTO is a well regarded company and its products are of a very high quality.

Several applications have been received, and the Board is seeking to make a shortlist by eliminating unsuitable candidates

Which THREE of the following would make a candidate unsuitable for appointment to the post?

NLC, a retail chain, is considering moving its information systems which support its point of sale infrastructure into the cloud.

Which TWO factors should it consider in choosing its supplier?

Which of the following statements concerning the role of a non-executive director (NED) is correct?

FBK produces motorbikes for the high end sports market. The company has recently developed a bike that uses a powerful electric motor instead of a petrol engine.

Which of the following are product risks?

Select ALL that apply.

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, which would not be the firm that conducts D plc ' s external audit.

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

Which of the following statements best explains why a corporate treasury department should be established as a cost centre rather than a profit centre?

A patient has been prescribed a new medicine by their physician. The medicine is accompanied by a leaflet describing potential adverse effects associated with taking it. Most of these potentially adverse effects are trivial, but the leaflet states that three patients in every 10,000 who take the medicine suffer a severe reaction requiring urgent medical attention.

Which of the following statements is true?

You have just been appointed Financial Controller of Y, a marketing consultancy.

You are in a meeting with the Chief Executive Officer (CEO) of Y, and have been discussing the need for a major upgrade of all the information systems throughout Y, as they are all very old.

Knowing that major change should be managed effectively, you have suggested that Y should have a ' systems steering committee ' .

Advise the CEO which of the following should be included in the terms of reference of the steering committee.

YHJ is considering an investment in a project that will cost $20 million. Annual fixed costs will be $12 million per year, excluding depreciation. Annual sales are forecast at 5 million units, with a contribution per unit of $8. After five years the equipment will be worn out and YHJ will have to spend $50 million on disposal costs. The discount rate is 10%.

Calculate the sensitivity of the net present value of this project to a 20% increase in the disposal costs.

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?

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:

J is a manager in charge of a section in GDD ' s Buying department. J has eight staff who report to her. Including M, who has worked for GDD for seven months.

One afternoon, while J was absent on sick leave, M was asked to place an urgent order for plastic pellets that are vital for GDD ' s production process. The usual supplier could not supply the pellets on time to avoid a shortage and so M telephoned a new supplier and placed an order. When the supplier invoiced for the delivery, GDD ' s Accounts Payable Department rejected the invoice because the supplier did not have a valid account.

On investigation, it was revealed that M did not have the authority to place an order with a new supplier. Only J can authorise new accounts. M claimed that he had been unaware of the need to seek approval because he had never found it necessary to place an order with a new supplier before

Which TWO of the following statements ate correct?

R is a manufacturer of biscuits. The market for biscuits is extremely competitive with many companies competing for contracts with large supermarkets. The intensity of the competition means that prices are kept low; and the buyers can demand higher levels of quality, and greater flexibility in supply arrangements.

Which of the following represent ways that the use of an Information System could help R to win and retain supermarket contracts in such a competitive market?

Which of the following are the Committee of Sponsoring Organisations (COSO) key principles of enterprise risk management?

Select ALL that apply.

The interest rate on EUR deposits is 7%. The interest rate on GBP deposits is 5%. The spot rate is EUR/GBP0.8500. What is the one year forward rate predicted to be assuming interest rate parity holds true?

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

JHG manufactures inexpensive cars that compete largely on price Its cars have very basic equipment and small but economical engines JHG ' s Board is considering launching a luxury brand of cars that will be far better equipped, more comfortable and have much better performance

Which THREE of the following would be relevant factors to incorporate into the stress testing of this new strategy to create a luxury brand?

GUJ 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?

The safety guard on a piece of equipment was broken. The factory manager suspended an operator who refused to operate the equipment until it was repaired. The factory manager paid another operator a bonus for operating the damaged equipment until the safety guard could be repaired.

What does this incident say about the control environment within that factory?

H is a farmer.  An outbreak of a contagious animal disease has just been detected near the region where the farm is located. This could potentially lead to substantial financial losses for H.

In these circumstances, which of the following responses by H is the most appropriate?

Which of the following statements are true of economic risk?

Internal controls are designed to provide reasonable assurance of which of the following?

Return on capital employed (ROCE) can be a useful measure of divisional performance.  For which of the following types of company is ROCE likely to be most appropriate?

BCD has recently experienced a cyber security breach which fortunately was carried out by someone more interested in demonstrating the weakness in its defence than by someone malicious

This has made BCD realise that its cyber defence is inadequate BCD has engaged a cyber security consultant who has advised BCD to set up a Computer Incident Response Team (GIRT)

What THREE of the following activities would this CIRT have responsibility for?

Recruit specialist security staff to avoid an incident

Which of the following statements concerning the use of balanced scorecards to measure divisional performance is correct?

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?

The Dean of Information Technology at Capital City University wishes to develop a degree in ' ethical hacking " Students will graduate from this course with the skills needed to develop malware, so that they have the ability to reverse engineer malicious software The Dean believes that there will be strong demand for such graduates from employers in IT security and related fields.

Which TWO of the following statements are correct?

Which of the following risks should be given highest priority?

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?

B uses a balanced scorecard to monitor the performance of its divisions.

Classify each of the following decisions taken by a division ' s management team as either commercially sound or dysfunctional.

You are a junior accountant in a local accountancy firm with many clients in various businesses.

Your immediate manager has asked you to collect certain personal details about clients ' staff from the firm ' s records. You suspect that his intentions are malicious.

You asked your manager to explain why he required these details and he told you it is none of your business.

What should you do? Select TWO responses.

TT is a jewellery manufacturer in country A It makes jewellery from precious metals and stones and sells it to shops in country A and also overseas It is the 3rd largest company in country A with a huge turnover

TT has found it very difficult to prevent staff committing fraud and last year the Board was sure that the year end inventory was lower than it should have been Gross profit was also slightly lower than expected

Which TWO of the following internal controls would be most effective in helping to reduce staff fraud within TT?