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CIMA P3: Risk Management is a professional qualification exam offered by the Chartered Institute of Management Accountants (CIMA). P3 exam is designed to test the candidate's ability to identify, assess and manage risks within an organization. P3 exam is essential for individuals aspiring to become certified management accountants, business analysts, or financial analysts.
NEW QUESTION # 21
UIO sells mobile phones through a cham of 100 shops spread across the country Shop managers have considerable discretion over pncmg and the incentives offered to sales staff Shop managers are evaluated on the monthly contribution from completed sales. Those who exceed targets by more than 10% for three successive months are promoted Those who fail to achieve monthly targets in two successive months lose their jobs Which of the following statements are true of the performance management of UIO's shop managers?
Select ALL that apply
- A. UIO's shop managers have an incentive to develop attractive sates promotions for their shops
- B. UIO's shop managers are encouraged to sell phones at a loss
- C. UIO's shop managers are encouraged to take risks that may harm UIO
- D. UIO's shop managers may have very little sense of loyalty to the company
- E. LHO's shop managers have an incentive to offer excellent customer service
Answer: B,C,D
NEW QUESTION # 22
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.
Answer:
Explanation:
NEW QUESTION # 23
K is a manufacturing company. It has sourced new equipment from the US to equip a new production facility.
It has to make a payment of USD1,000,000 in 3 months' time.
K's production manager needs to know whether it is cheaper to use a forward contract or a money market hedge.
Current spot and forward exchange rates are as follows:
Current mid-point money market rates (annual) are as follows:
Ignoring taxation, which of the following statements is correct?
- A. The money market hedge saves GBP15,196
- B. The forward contract saves GBP2,629
- C. The money market hedge saves GBP32,078
- D. The forward contract saves GBP1,901
Answer: A
NEW QUESTION # 24
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?
- A. Dealing with all Human Resource, recruitment, and similar issues directly from Head Office.
- B. Instituting the use of a formalised budgetary control system at head office for all branches.
- C. Arranging visits by senior management to each branch periodically.
- D. Establishing an open communication policy for employees at branches to allow them to contact Head Office on any matter that concerns them.
- E. Restricting the autonomy of individual Branch Managers to purely routine matters and instructing them to refer everything else to Head Office.
Answer: B,C,D
NEW QUESTION # 25
A company is keen to avoid becoming a victim to malware. Which TWO of the following techniques would be valid responses to this threat?
- A. Paying ransomware demands immediately in order to ensure that malware is removed promptly
- B. Conducting denial of service attacks against perpetrators who attempt to infect the company
- C. Removing USB ports from all networked computers
- D. Reverse engineering all viruses that are discovered on company machines
- E. Providing computers with independent internet access in the staff break room for personal emails and online shopping
Answer: C,E
NEW QUESTION # 26
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.
Answer:
Explanation:
NEW QUESTION # 27
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
- A. asked C a series of open-ended questions about the operation of the purchases system She did not mention anything about detailed checks of invoices against documents
- B. D reviewed a sample of invoices for purchases of plant and equipment and found that C had not signed them C explained that she believed that those were authonsed by someone else although the accounts manual indicates that it was her responsibility
- C. D worked at a spare desk in the accounts department and quietly watched C without telling her She checked every invoice carefully while D was present
- D. D examined a sample of invoices to make sure that they had been signed by C AH had been signed selected a sample of purchase invoices and compared each to the supporting documents that C is supposed to review Every one of D's invoices was supported by the related documents
Answer: A,C,D
NEW QUESTION # 28
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?
- A. M should be disciplined for exceeding his authority
- B. should have made certain that M knew and understood the limits of his responsibility
- C. The investigation of this matter was a waste of time because the pellets were urgently required
- D. GDD's directors are ultimately responsible for M's error
- E. GDD's Internal Audit Department should have cancelled the order.
Answer: A,C
NEW QUESTION # 29
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?
- A. 18%
- B. 17.77%
- C. 18.23%
- D. 16.50%
Answer: B
NEW QUESTION # 30
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?
- A. The diversification of RFD's interests will reduce the risks for all stakeholders.
- B. Neither RFD's shareholders or lenders are likely to have the means to prevent the directors from making this investment.
- C. RFD's lenders are likely to suffer a greater risk than RFD's equity investors.
- D. RFD's existing employees are likely to enjoy a significant upside risk from this project.
- E. RFD's shareholders are exposed to the systematic risk from this project and the directors are exposed to total risk.
Answer: B,C,E
NEW QUESTION # 31
Division A of X plc produced the following results in the last financial year.
Net profit $200,000 Gross capital employed $1,000,000
For evaluation purposes all divisional assets are valued at original cost.
The division is considering a project that has a positive NPV, will increase annual net profit by $15,000, but will require average inventory levels to increase by $50,000 and non-current assets to increase by $50,000.
X plc imposes a 16% capital charge on its divisions. Given these circumstances, will the evaluation criteria of return on investment (ROI) and residual income (RI) motivate division A managers to accept the project?
- A. ROI No RI No
- B. ROI Yes RI No
- C. ROI No RI Yes
- D. ROI Yes RI Yes
Answer: A
NEW QUESTION # 32
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?
- A. Send experts employed by R to the site of the collapse so that they can gather information first hand on what happened.
- B. Issue a press release confirming that all R's power stations are "entirely safe".
- C. Decide that the information available to date is too uncertain to take any action for now.
- D. Draw up contingency plans in case some of R's power stations need to be shut down.
- E.
- F. Commission a reputable firm of structural engineers to carry out a review of all power stations owned by
- G. Attempt to increase the level of insurance cover against this type of eventuality.
Answer: A,D,F
NEW QUESTION # 33
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.
Answer:
Explanation:
NEW QUESTION # 34
The list below has duties performed by risk managers and internal auditors. Show who would carry out the duties assuming the company has both risk managers and internal auditors.
Answer:
Explanation:
NEW QUESTION # 35
SC is a professional football club which is currently listed on a recognised stock exchange. There is a proposal that it builds a new stadium at a location a considerable distance from its current stadium.
There is strong support within the club for the move as the current ground is now over 40 years old and has not been extensively modernised in that time.
However, there is a lot of opposition to the move in the area where it is proposed to locate the new stadium. Objectors claim that the new stadium will increase traffic and pollution in the area and will adversely affect the value of their properties.
Which of the following statements about the responsibility of the board of SC is correct?
- A. SC is now a listed company and so the board should prioritise the interests of shareholders to the exclusion of other stakeholders.
- B. The board should share information about the new development with the local community only to the extent that it is legally obliged to do so.
- C. A football club needs to be part of the community in which it exists and so the board should consider the other stakeholders.
- D. If the board of directors is seen as acknowledging its responsibility to stakeholders other than shareholders this will enhance the reputation of the club and it will be more likely that a compromise can be reached with objectors.
- E. The board should conclude that objectors to the new stadium have a legal course of action open to them and if they do not take legal action they should ignore them.
Answer: C,D
NEW QUESTION # 36
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?
- A. The production department should not be granted funding for future projects unless there are compelling reasons to proceed.
- B. YGH should consider introducing more detailed checking of the assumptions underlying the costs of future projects.
- C. G should be held accountable for the overspend on the project.
- D. H should be held accountable for the overspend on the project.
Answer: B
NEW QUESTION # 37
P Ltd manufactures and sells electrical goods through retail outlets.
N is P Ltd's Sales Director. He has been recently promoted from a senior sales position with P Ltd. He has been forced to spend the first six months as Sales Director on dealing with an administrative mess left behind by the previous sales director.
You are a Senior Management Accountant at P Ltd. You have worked with N for many years.
N has worked hard and has made many changes that have brought significant benefit to the business.
N has asked you to postpone the recording of some purchase invoices so that he will meet his quarterly targets on profit margin.
What should you do?
- A. Write up the facts of the issue and put it on your files.
- B. Collect all the facts, distance yourself from the situation but say nothing.
- C. Document the situation and present the facts to your manager.
- D. Do nothing, no rules have been broken, tell N that you cannot do as he asks and that he needs to abide by the professional codes.
Answer: D
NEW QUESTION # 38
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?
- A. Avoid the risk by the immediate cessation of all animal farming activities and the sale or disposal of all animals currently held on the farm.
- B. Reduce the risk by strict adherence to all government imposed animal movement restrictions, by the appropriate use of disinfectants and by similiar precautions.
- C. Accept the risk and carry on as previously.
- D. Transfer the risk by taking out a substantial level of insurance cover.
Answer: B
NEW QUESTION # 39
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?
- A. 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.
- B. M could check all employees qualifications to ensure they are qualified for their jobs.
- C. M could increase the number of quality control staff.
- D. The production director could examine one in every 10 products and sign a form to say they are satisfactory.
- E. M could service machinery at least once a month as recommended by the machinery supplier.
Answer: A,B,E
NEW QUESTION # 40
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CIMA P3 Certification Exam is a globally recognized certification program that equips candidates with advanced knowledge and skills in risk management. P3 exam covers various topics related to risk management, and candidates who successfully complete it are equipped to make informed decisions, assess and manage risks, and develop risk management plans. Obtaining this certification is an excellent way for individuals to demonstrate their expertise and commitment to the field of risk management and is highly valued by employers worldwide.
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