Free CIMA CIMAPRA19-P03-1-ENG Exam Questions

Question 1

M, a manufacturing company, has had some problems with defects in one of the main productsitproduces. This product has been made by the company for many years and is very profitable. Last monthithad 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 : could increase the number of quality control staff.

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

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

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

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

Answer: A,B,D

Question 2

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, whichwould 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 : ing so may improve independence.

B : cisions relating to internal audit can be based solely on cost.

C : ternal audit will have a better understanding of D plc's objectives and culture.

D : ecialist skills may be more readily available.

E : k of staff turnover is passed to the outsource company.

Answer: A,D

Question 3

MNBis a multinational IT company with headquarters in Asia and with operations in all continents.
MNBisattempting toexpand its operations in Europe. This is seen as a major challenge as the European market is very well developedand highly competitive.
MNBdevelopsandmanufacturesits own products. Parts and assemblies aresourced 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 equipmentas possible. Transfer pricesbetween MNB's subsidiariescan 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?

A : litical risk

B : rrency risk

C : onomic risk

D : vironmental risk

E : aud risk

F : gal risk

Answer: A,B,C

Question 4

GHY is a listed company. Tom isGHY'sCEO and Peter isitsnon-executive Chair of the Board. Tom and Peterbothhave substantial relevant business and industrial experience andboth are believed to have considerable integrity. Tom and Peter quickly developed a good working relationship after Peter's appointment. They have become close friends.
Tom briefs Peter on every aspect of the business. Tom and Peter jointlyagreethe agenda foreveryboard meetingandboth agree on the manner in which matterswill be presented to theboard.
Taking account of the principles of goodcorporategovernance, which of the following statements is correct?

A : is entirely appropriate that Tom and Peter have this kind of relationship and both are acting in the best interests of the company

B : n-contentious board meetings show how well Tom and Peter are running the company and shows that the management is cohesive.

C : relationship between Peter and Tom may have a detrimental effect on company decision making as the Boardis not always being informed about matters in an unbiased manner.

D : nce the non-executive chair clearly has a significant role within this company there is little danger that any individual will become excessively dominant.

Answer: C

Question 5

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 600,000once, in year 3, when 720,000 units of emissions were emitted.
Calculate the amount that the post completion audit showsTRF overpaid for the ownership costs associated with this machine.
Give your answer to the nearest whole $ (in $'000s).

A :

Answer: A