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P3 Risk Management Questions and Answers

Questions 4

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?

Options:

A.

Recovering the stolen credit card details before they can be abused by criminals

B.

Developing an understanding of the vulnerabilities that led to the breach

C.

Identifying customers whose details have been stolen

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

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Questions 5

Under the COSO Enterprise Risk Management Framework, who is responsible for risk management?

Options:

A.

Every member of the entity.

B.

The board of directors only.

C.

Managers and directors only.

D.

The shareholders.

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Questions 6

An oil company has entered into a joint venture with a competing oil company to develop a new oil field. The joint venture arrangement is intended to mitigate the risks associated with developing the oil field.

The following disclosure appears in the oil company's risk report:

"Many of our large projects and operations are conducted through joint ventures. These arrangements involve complex risk allocation and indemnification arrangements and we have less control over these activities than we would have if we had full ownership and control. Our partners may have economic or business interests that are opposed to ours, and may exercise the right to block key decisions or actions. We believe the joint arrangement is in our best interest."

Which of the following statements are correct?

Options:

A.

The risk report means that the shareholders know exactly how bad the risk is.

B.

The risk report says nothing useful about the risk.

C.

Now the shareholders know the directors are aware of the risk.

D.

If the risk report had not reported the risk the shareholders might not have been aware of the risk.

E.

The shareholders now have more useful information.

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Questions 7

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?

Options:

A.

Being asked to buy very small gifts for key clients.

B.

Being asked to work weekends, playing golf with clients.

C.

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.

D.

Being asked to work weekends working out tenders for new contracts.

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Questions 8

B, a construction company, has a policy of carrying out a post completion audit on every construction project undertaken where the value exceeds $1 million.

What is the role of the post completion audit?

Options:

A.

To reward staff and celebrate success.

B.

To signify the end of the project.

C.

To highlight what can be done to improve similar future projects.

D.

To apportion blame for things not done well.

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Questions 9

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?

Options:

A.

Unsuccessful tenders should be analysed to establish the cause of them failing to be awarded the work and help to avoid future failures.

B.

Ensuring a consistent separation of duties between those involved in the preparation of tenders and those involved in the planning of projects.

C.

Ensuring that the minimum legal wage is paid to all workers on the construction sites.

D.

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.

E.

Contract terms should be worded precisely so that additional work is not deemed to form part of the contract.

F.

The project steering committee and project board should receive regular project status reports.

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Questions 10

B is a family run security company with a number of prestigious clients who rely on it to maintain online access to their CCTV and alarm systems and respond to any detected intrusions or malfunctions.

It designs and installs security systems for a number of UHNW (Ultra High Net Worth) individuals who may have several seasonal and city residences largely unoccupied for many months of the year.

B's reputation as 100% secure is crucial to its on-going success in this very specialised marketplace.

Select THREE factors which should be given prominence in B's fraud risk management strategy.

Options:

A.

B should carry out background security, health and financial checks on all employees, their immediate family members and associates on an annual basis.

B.

B should ask new employees to fill in a declaration that they are honest and have no criminal convictions for dishonesty. That can be filed as evidence that the company took this precaution.

C.

B should inform clients that they have a stringent anti-fraud policy.

D.

B should have an active whistle-blower policy whereby all staff are encouraged by positive reward to report any suspicions they may have about other employees.

E.

B should ensure that employees who design or install security systems are not involved with the operation of those systems once implemented.

F.

B Should revise and publish their fraud policy document to employees every three months, highlighting any new elements and industry developments.

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Questions 11

Jo is a well known entrepreneur who founded JIS. a global producer or high technology equipment JIS has grown rapidly and was listed two years ago JIS's share price has grown steadily since its listing Jo serves as both CEO and Chair A recent newspaper article has suggested that JIS would benefit from having a separate CEO and Chair

Which TWO of the following arguments are valid?

Options:

A.

If Jo remains as Chair and a new CEO is appointed then Jo will remain responsible for implementing policies to execute the Board's strategy

B.

Without a Chair to report to, Jo might pressurise the other directors into action that could damage JIS.

C.

If Jo remains as CEO and a new Chair is appointed then Jo should still attend alt meetings between non-executive directors and the Chair.

D.

Jo's setving as both Chair and CEO gives clarity of leadership and means JIS benefits from Jo's skills and knowledge of the company

E.

There should be a division of responsibilities between the CEO running the Board and the Chair running the company's business

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Questions 12

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.

P3 Question 12

Options:

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Questions 13

Which of the following actions would breach CIMA's Code of Ethics for Professional Accountants?

Options:

A.

An accountant has been asked to evaluate an investment opportunity that is open for a very short time. The accountant has recommended rejecting the opportunity without doing any evaluation because he was too busy to study the proposal properly.

B.

An accountant has been asked to select a new supplier and has decided to recommend a supplier based in country A because that will give the accountant an excuse to visit a family member who lives there.

C.

An accountant has been asked to confirm that a complex financial instrument that has been recommended by the bank is suitable for the company. The accountant does not understand the instrument, but has confirmed its suitability because senior management wishes to use it.

D.

An accountant has been asked to compile a list of all contacts at the company's bank so that they can be included in the mailing list for the calendar and coffee mug that are distributed as business gifts by the company in December of every year.

E.

An accountant has been asked to identify the two least profitable factories so that they can be closed down, with the loss of all jobs. All of the company's factories are located in areas of high unemployment.

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Questions 14

A has an opportunity to invest $90,000 in a project that is expected to generate annual cash inflows of $60,000 for each of the next three years. The project's beta coefficient implies a discount rate of 12% for this project, based on a risk-free rate of return of 3%.

A is prepared to forego the expected cash flows from this project in return for a guaranteed payment of $50,000 at the end of year 1, $42,000 at the end of year 2 and $30,000 at the end of year 3.

What is the certainty equivalent value of this opportunity to A?

Options:

A.

$9,493

B.

$25,606

C.

$54,120

D.

$115,606

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Questions 15

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?

Options:

A.

HJK's entire staff should be informed of the investigation and of the disappointing fact that six members of staff handed over their logins and passwords

B.

The investigation should be repeated in the future on a different sample of staff, using other reasons for asking for logins and passwords

C.

HJK's response should be limited to briefing the six staff members on their error and ensuring that they change their passwords.

D.

It was acceptable for the staff to surrender their details because the request had actually been made by members of HJK's IT Security Department.

E.

It was unethical for HJK's IT Security Department to contact staff in this manner, lying about the suspected presence of a virus in order to provoke a response.

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Questions 16

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.

Options:

A.

£(30,000)

B.

0

C.

£570,000

D.

£600,000

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Questions 17

Which of the following best describes the conflict between maximising profit and maximising shareholder wealth?

Options:

A.

Managers are generally more interested in maximising shareholder wealth than in maximising profits or sales.

B.

Profit and shareholder wealth are unrelated.

C.

Tax is paid on profit, but not on shareholder wealth.

D.

Profits can be increased from one year to the next without increasing shareholder wealth.

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Questions 18

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?

Options:

A.

11.85%

B.

10.85%

C.

10.54%

D.

9.54%

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Questions 19

H is a senior production manager for P Ltd which is about to make a strategic decision on setting up a new production line requiring $3 million of new specialist equipment.

H's daughter is friends with and goes to school with the daughter of T, the sales manager in KK Ltd. KK Ltd is a potential supplier of the specialist equipment that P Ltd requires.

T owns a holiday home. H's daughter regularly accompanies T's daughter on family vacations at this holiday home, all at T's expense.

H is the only person working for P Ltd who is qualified to select the specialist equipment. KK Ltd will definitely bid for the sale.

What should H do?

Options:

A.

H should exclude KK Ltd from the bidding process.

B.

H should declare an interest and withdraw from the assessment process.

C.

H should permit KK Ltd to bid, but should insist that T should not be involved.

D.

H should declare an interest, giving details of his daughter's friendship with T's daughter, but should participate fully in the assessment process.

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Questions 20

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.

P3 Question 20

Options:

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Questions 21

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

Options:

A.

The shares have more unsystematic risk than the stock market average.

B.

The shares have more systematic risk than the stock market average.

C.

The shares have more total risk than the stock market average.

D.

The shares have less unsystematic risk than the stock market average.

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Questions 22

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).

Options:

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Questions 23

Which of the following is an ethical dilemma?

Options:

A.

A company is considering giving poorly-paid staff a generous pay rise.

B.

A company is deciding whether to issue debt or equity.

C.

A company is deciding whether to make a substantial bonus payment to its directors by means of cash or shares.

D.

A company must decide whether to settle a claim from an employee who appears to have fabricated a workplace injury. The company want to avoid the cost of defending the claim.

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Questions 24

Company A's gross profit percentage has fallen from 70% to 61 % Which of the following possible explanations would most concern the internal auditors?

Options:

A.

During the year the raw material price increased due to an international shortage of the material

B.

The sales director decided to reduce the selling price to increase the market share

C.

There had been an omission of several items from the inventory records

D.

During the year direct wages had been misclassified as indirect manufacturing expenses

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Questions 25

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?

Options:

A.

-$5million

B.

-$0.2million

C.

$1million

D.

$4.8million

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Questions 26

M built a large factory last year and it has just been completed. The initial outflows on this project have a present value of $400 million and the entire project has a net present value of $30 million.

The initial phase of the project caused problems and there was an overspend of $35 million as there was unstable soil. The foundations had to be underpinned with large steel bars to ensure the building would be safe. There was no other suitable site for the project.

The construction could not be abandoned as the site would have had very little commercial value.

The Internal Audit department has been asked to carry out a post completion audit. What issues should it concentrate on?

Options:

A.

The audit should consider the initial survey report when the land was purchased to see if the survey mentioned the unstable soil.

B.

The audit should look at documentation to ensure proper procedures were followed at all stages of the project.

C.

The audit should consider what lessons could be learned for future projects.

D.

The audit should find out who was to blame for the project being over budget.

E.

The audit should consider whether it should have built the factory without underpinning and sold it on quickly.

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Questions 27

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?

Options:

A.

Introduce credit checks for new customers.

B.

Reduce the company bank loans.

C.

Pay suppliers' invoices quicker.

D.

Look for a loan with a lower interest rate.

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Questions 28

VBN 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.

P3 Question 28

Options:

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Questions 29

ABC is a large supermarket chain which also has online shopping and home deliveries It has a 24/7 service which runs on a central server allowing all customers to enter new orders at any time This is a business critical service which, if not available, may lead to customers turning to alternative supermarket chains offering similar services, resulting in immediate turnover loss and possible long term customer loss.

ABC is contemplating the implementation of a hot standby facility, not only to cover for emergency disaster recovery, but also to allow for business continuity, allowing necessary maintenance and updates without service interruption.

Which of the following cybersecurity objectives is ABC concerned about in this scenario?

Options:

A.

Integrity of data

B.

Integrity of processing

C.

Availability

D.

Confidentiality

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Questions 30

The Board of Directors of VCX, a state-owned electricity company, includes four executive directors the Chief Executive Officer, the Finance Director the Operation Director and the Technical Director

All of the shares in the company vest in the Office of the Minister for Energy, who is entitled to appoint two non-executive directors to the Board It has been alleged that the Minister appoints political "insiders" who have no particular knowledge of. or interest in. the electricity industry

There are three further non-executive directors

• L, who spent seven years as Chief Executive of VCX, but retired from that role two years ago,

• M, who spent several years on the Board of a state electricity company in a different country to VCX but who resigned from it before accepting the position with VCX: and

• N, who is a qualified and experienced professional accountant

In relation to best practice in respect of Corporate Governance, which of the following statements are valid? Select ALL that apply

Options:

A.

None of the executive directors should be allowed to sit on the Remuneration Committee

B.

M is unsuitable to be part of the Board because his previous involvement with a similar company in another country is a conflict of interest.

C.

L can now be considered to be an independent non-executive director

D.

M and N are both suitable appointees to the Audit Committee

E.

The Finance Director should be part of the Audit Committee because of her expertise

F.

Non-executive directors should be responsible for monitoring the performance of executive management especially with regard to company strategy and objectives

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Questions 31

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

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

Options:

A.

Use of CCTV cameras monitoring all access points, with security guards monitoring images and a secured system making a recording.

B.

Use of one way mirrors, so people can be observed undetected.

C.

Use of USB sticks and removable media should be prohibited.

D.

Use of access control pads with numerical keys on every door, which is otherwise locked.

E.

Personal individual ID card access, logging individual person movement through every door, which is otherwise locked.

F.

Visitors to be logged in by security staff and to be accompanied by a member of staff at all times until they leave.

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Questions 32

M, a manufacturing company, has had some problems with defects in one of the main products it produces. This product has been made by the company for many years and is very profitable. Last month it had over 300 defects reported by customers which is more than 15% of products sold. This is a reputation risk for M and is also affecting profitability.

Which of the following controls could M introduce to reduce defects and also increase profitability?

Options:

A.

M could increase the number of quality control staff.

B.

M could introduce a procedure where quality control staff sign a form at the end of each day to say they have examined 1 in 10 products for defects and they are satisfied with the quality.

C.

The production director could examine one in every 10 products and sign a form to say they are satisfactory.

D.

M could service machinery at least once a month as recommended by the machinery supplier.

E.

M could check all employees qualifications to ensure they are qualified for their jobs.

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Questions 33

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?

Options:

A.

V$4.628 million

B.

V$5.684 million

C.

V$4.444 million

D.

V$5.5 million

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Questions 34

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?

Options:

A.

Payments could be made to non-existent suppliers

B.

The purchase ledger clerk could make fraudulent payments to herself.

C.

The purchase ledger clerk could have ordered goods for her own personal use.

D.

The discrepancy is a minor one and should be ignored

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Questions 35

A publicly funded hospital has put various features in place in an attempt to improve strategic control and create an improved control environment.

Which TWO of the following features are most likely to meet this objective?

Options:

A.

An Audit Committee consisting of five independent persons with expertise in finance, human resources, and medicine.

B.

A strict policy of capping the maximum salary payable to any employee at 110% of the average earned by that category of employee in the country in which the hospital is located.

C.

The setting up of a Risk Management Committee to examine the strategic risks applicable to the entity and to formally report on a quarterly basis.

D.

Ensuring that all medical staff are aware that their first priority should be to discharge patients as quickly as possible at all times so as to minimise wasting hospital resources.

E.

Ensuring that the Head of Internal Audit examines and authorises all expense claims by hospital staff.

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Questions 36

CVB is a consulting firm that occupies a large office with many individual staff offices Staff access the corporate network through a wired network AM work files and company emails are accessed through this network

CVB is upgrading its office heating system At present, each room in the building has a simple, mechanical thermostat that can be used to regulate the heating CVB plans to install smart thermostats in each room These will make it possible to reduce heating costs by monitoring room temperatures centrally, using software that will be installed on the corporate network It would be expensive to connect the thermostats to CVB's existing wired network but it would be possible to connect a wireless router to the network so that CVB could install wireless smart thermostats instead The software on the network's server could then monitor and control the thermostats via the Wi-Fi connection that would be created by the wireless router.

Which TWO of the following statements are correct?

Options:

A.

Security concerns should not prevent CVB from upgrading its heating system

B.

The wireless thermostats will be designed to be secure

C.

Cyber criminals could not identify and exploit vulnerabilities in the heating system

D.

The wireless thermostats could enable a breach of CVB's data

E.

Wired network connections are outdated and should not be used

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Questions 37

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?

Options:

A.

GBP/USD = 1.74

B.

GBP/USD = 1.78

C.

GBP/USD = 1.65

D.

GBP/USD = 1.67

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Questions 38

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?

Options:

A.

18%

B.

17.77%

C.

18.23%

D.

16.50%

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Questions 39

Which of the following is an ethical dilemma?

Options:

A.

A company is considering giving poorly-paid staff a generous pay rise.

B.

A company is deciding whether to issue debt or equity.

C.

A company is deciding whether to make a substantial bonus payment to its directors by means of cash or shares.

D.

A company must decide whether to settle a claim from an employee who appears to have fabricated a workplace injury. The company want to avoid the cost of defending the claim.

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Questions 40

Kate is a management accountant. Her immediate superior plans to apply for a promotion and his strongest competitor is the sales manager. Kate's superior has ordered her to set unattainable sales targets in a sales budget in order to reduce the sales manager's promotion prospects. He told her not to tell anybody.

Kate asked the finance director for advice. He told her that he wanted her immediate superior to get the promotion and so she should set the unattainable budget as instructed.

Kate set the budget as instructed.

Which THREE fundamental ethical principles has Kate breached?

Options:

A.

Integrity

B.

Objectivity

C.

Professional competence and due care

D.

Confidentiality

E.

Professional behaviour

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Questions 41

Smalltown had a problem with people parking cars on the town's mam shopping streets instead of in the nearby car parks The parked cars created congestion and made it difficult for delivery vehicles to unload Smalltown's local government had employed traffic wardens to enforce parking regulations by issuing parking fines to motorists who parked for more than the permitted 30 minutes.

The local government took further action to deal with this problem It banned parking on the busiest streets, it introduced parking charges in the remaining streets and it made it free to park m the town's car parks for up to two hours Fewer people now park cars on the streets because of the charges, but those who do generate significant revenues for the local government Fewer traffic wardens are required and so wage costs have reduced

The local goverment auditors have decided to carry out a value for money audit of the parking system

Which of the following is a measure of effectiveness?

Options:

A.

The main shopping streets are no longer congested

B.

The remaining traffic wardens are less stressed because they no longer receive abuse by motorists.

C.

Parking enforcement costs less than before

D.

Revenues from parking have increased

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Questions 42

An electricity company owns and operates a nuclear power station located ten miles from a large city. A recent and very extensive engineering examination of the power station concludes with the estimate that the probability of a major nuclear disaster within the next 20 years is 0.2%.

Which of the following best explains the relevance of quantifying the risk in that way?

Options:

A.

There is no acceptable level of risk for a major nuclear accident and so the probability has little information value in itself.

B.

The probability is so low as to be ignored.

C.

The directors will be able to argue that they were not negligent in the event of a major disaster within the 20 year period.

D.

The calculation of a precise probability demonstrates that the engineers who conducted the inspection are experts in their field.

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Questions 43

Which of the following are true of interest rate swaps?

Options:

A.

Risk of default is high from the floating interest rate payer if interest rates rise.

B.

An interest rate swap is an external hedging technique.

C.

When interest rates are falling, the risk of default by the fixed interest rate payer is low.

D.

Some companies use interest rate swaps to deliberately increase their risks because they believe that they are better at predicting future interest rates than the market.

E.

An interest rate swap is an internal hedging technique.

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Questions 44

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)?

Options:

A.

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

B.

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

C.

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

D.

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

E.

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

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Questions 45

S Doc is an out-of-hours service provided by a country's government. The service allows members of the public to call and speak to a nurse who can advise on medical situations which are not obviously emergencies. Depending on the situation the caller can be referred to the full emergency services, or be advised to go to Accident and Emergency at the nearest hospital. Alternatively, a callout from a general practitioner (GP) can be organised; the caller can be advised of where GP services are available; advice can be given over the phone; or a decision can be taken that no further action is required at least until normal services resume on the next working day.

There has been a suggestion that the nurses who take these calls could be replaced by suitably trained operatives who have available to them a specially designed expert system.

Which of the following are advantages of using an expert system instead of nurses?

Options:

A.

The operatives would be too careful and therefore would recommend unnecessary treatments or interventions.

B.

Some callers may present with complicated scenarios that a non-medically trained operative or expert system would be unable to recognise (for example, psychological issues).

C.

Using an expert system would make operatives less inclined to feel sorry for the caller and ensure that only relevant facts were considered in coming to a decision.

D.

The use of an expert system would ensure that only relevant questions were asked of the caller and that operatives did not miss something vital due to distraction or fatigue.

E.

The expert system will always follow the same path whereas the nurses may have more knowledge about some health issues and very little about others.

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Questions 46

An electricity company owns and operates a nuclear power station located ten miles from a large city. A recent and very extensive engineering examination of the power station concludes with the estimate that the probability of a major nuclear disaster within the next 20 years is 0.2%.

Which of the following best explains the relevance of quantifying the risk in that way?

Options:

A.

There is no acceptable level of risk for a major nuclear accident and so the probability has little information value in itself.

B.

The probability is so low as to be ignored.

C.

The directors will be able to argue that they were not negligent in the event of a major disaster within the 20 year period.

D.

The calculation of a precise probability demonstrates that the engineers who conducted the inspection are experts in their field.

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Questions 47

An internal auditor has just completed an investigation into human resource (HR) procedures in the Springtown branch of IUY The Springtown branch is too small to have its own full-time HR staff All HR work is undertaken by the Branch Manager, assisted by the Branch Administrator

The internal auditor has discovered a number of problems with branch HR records. These are due to a misunderstanding of the regulations by the Branch Manager and the Branch Administrator, neither of whom has any specific HR training The Branch Manager has asked that the problems be omitted from the internal audit report because they were due to a lack of training and will be rectified immediately

Which TWO of the following actions should the internal auditor take with regard to the audit report on the Springtown Branch?

Options:

A.

Omit the problems from the report, but recommend that the Branch Manager and Branch Administrator should both receive HR training

B.

Document the changes that are required at the branch in the audit report and set a time for a return visit to review the changes

C.

Describe the problems encountered at the branch in detail and recommend that disciplinary action be taken against the Branch Manager.

D.

Expand the report to develop it into a description of lUY's HR procedures, but tailored to the needs of the Springtown Branch.

E.

Include the Branch Manager's claim that the HR problems are due to a lack of HR training in the report

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Questions 48

M is a listed company. It is hoping to invest in a risky new venture. M has a substantial amount of cash to invest in the venture. M would have found it difficult to raise new finance as it has a high level of gearing. Which of the following statements about stakeholders' conflicting interests are true?

Options:

A.

M's shareholders would only be exposed to the systematic risk from the investment in the new venture.

B.

M's credit rating is likely to fall as a result of this new venture.

C.

The directors would only be exposed to the systematic risk from the investment in the new venture.

D.

M's diversification will mean less risk for the shareholders.

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Exam Code: P3
Exam Name: Risk Management
Last Update: Aug 17, 2022
Questions: 321

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