CW is a large company in the food production industry. It has grown over the years by the acquisition of several smaller rivals CW 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 the following changes would be most likely to improve the overall control system?
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?
Laura is an accounts clerk. She is supposed to sign each invoice as evidence that she has conducted checks against supporting documents. Sometimes Laura signs invoices without making these checks.
Terry is a member of the internal audit team. Terry has been told to conduct compliance tests on whether Laura is checking the invoices properly.
Which of the following would give Terry a false sense of assurance that Laura's checks have been operating?
QAW is a quoted building company QAW has detailed rules relating to the wording of its contracts and the need to seek Board approval for any changes to the standard wording
The Convener of the Audit Committee has just received a copy of an internal audit report relating to the QAW Land Reclamation subsidiary The subsidiary has signed several construction contracts over the past two years that have made significant changes to the standard wording, with no attempt to seek approval from QAW's Board
The internal audit report quotes the manager in charge of QAW Land Reclamation as refusing to accept that there is a compliance error at the subsidiary The manager stated that the nature of the business done by QAW Land Reclamation would make it inappropriate to use the standard contract terms and that it would be impractical to seek permission for every one of the many changes that are necessary
Which of the following would be an appropriate response to this item by QAW's Board?
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?
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 actions would breach CIMA's Code of Ethics for Professional Accountants?
B is a quoted construction company. Its Board consists of qualified and experienced engineers Which TWO of the following statements are correct?
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?
K has several subsidiary companies. The directors of K's subsidiaries are paid an annual bonus 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?
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 $.
HIW manufactures motorcycles and has factories in several countries HIW produces several different types of motorcycle, with different models often being tailored to suit the needs of customers in specific countries HIW has identified a positive net present value project to build a new factory in Farland, which will make motorcycles for sale in Farland and for export to neighbouring countries HIW has not previously traded in Fartand or its neighbours Farland is regarded as politically and economically unstable and its currency is highly volatile against other leading currencies
HIWs Board wishes to consider the interests of different stakeholder groups who will be affected by the investment in Farland The Board recognises that there could be conflict between the goals of maximising profit and of maximising shareholder wealth
Which THREE of the following statements are correct?
Which of the following scenarios might be relevant stress tests for a potential lender to conduct? Which TWO of the following answers are correct?
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?
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?
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?
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?
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?
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.
Under the COSO Enterprise Risk Management Framework, who is responsible for risk management?
You are the management accountant for YY a food manufacturing company with an annual sales revenue of $6 million
You discover that the production manager's records are inconsistent Raw materials purchased do not agree with the total recorded for transfers to production plus wastage There is an average shortfall of 2% of purchases
You have investigated and discovered that there are often errors made during manufacturing that results in food that is safe to eat but. because of visual flaws, cannot be sold
The production manager is supposed to scrap all such damaged products and write all such losses off as waste You have discovered however 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
Which of the following actions should you take? Select ALL that apply
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.
M plc has a $2 million loan outstanding on which the interest rate is reset every 6 months for the following 6 months and the interest is payable at the end of that 6-month period. The next 6-monthly reset period starts in 3 months and the treasurer of M plc thinks that interest rates are likely to rise between now and then.
Current 6-month rates are 7.2% and the treasurer can get a rate of 7.7% for a 6-month forward rate agreement (FRA) starting in 3 months' time. By transacting an FRA the treasurer can lock in a rate today of 7.7%.
If interest rates are 8.5% in 3 months' time, what will the net amount payable be?
Give your answer to the nearest thousand dollars.
C is an accounts clerKwho is supposed to sign each invoice as evidence that she has conducted checks against supporting documents Sometimes C signs invoices without making these checks
D is a member of the internal audit team He has been told to conduct compliance tests on whether C is checking the invoices property
Which of the following would grve D a false sense of assurance that C's checks have been in operation?
Select ALL that appry
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?
Match the descriptions shown in the boxes below with the method of quantifying risk exposure it best describes.
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.
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
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?
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?
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?
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.
A company is keen to avoid becoming a victim to malware. Which TWO of the following techniques would be valid responses to this threat?
Which of the following statements best explains why a corporate treasury department should be established as a cost centre rather than a profit centre?
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?
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?
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:
GHJ is a manufacturing company that insures against the financial costs associated with industrial injuries involving staff. The Health and Safety Office is part of GHJ's Operations Department. GHJ's insurers will automatically increase the insurance premium by 10% in the event of a claim against the policy.
Which TWO of the following are correct?
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?
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.
A project requires a capital investment of £2.7million. The project will save £450,000 each year after taxation. Assume the savings are in perpetuity. The business risk of the venture requires a 15% discount rate. The company has to borrow £1million to finance the project at a rate of 9% and the net tax shield is 30%, the project supports debt which generates an interest tax shield of 0.30 x 0.09 x £1million, which is £27,000 per year in perpetuity.
Calculate the project's adjusted present value.
A 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?
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?
The technology used by 3D printers is developing rapidly These machines can now use a data file to print a solid object Depending on the printer the object can be plastic, metal or ceramic The increasing capability of those printers is being matched by the falling prices of the printers themselves and of the materials that they use to create the finished product
Which THREE of the following suggest that 3D printing is a potentially disruptive technology?
TESTED 17 May 2024
