Free CIMA CIMAPRA19-P03-1-ENG Exam Questions

Question 1

The management of U isreviewing internal controls throughout the company. Ithasnoted 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, astheyarethe only person with sufficient experience to do so. They usea very limited number of suppliers becausethey can rely on these suppliers to provide goods of the quality required at a competitive price. They donot 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?

A : fact that the purchasing manager uses a very small number of suppliers is, in itself, a sign of poor internal controls.

B : is acceptable for clerks in the trade receivables section to make journal adjustments without authorisation provided the amounts involved are not material to U's financial statements.

C : is acceptable for clerks in the trade receivable section to make journal adjustments without authorisation, provided they have no access to cash receipts.

D : fact that the purchasing manager does not keep documentation relating to negotiations with suppliers, or potential suppliers,is evidence that they are involved in fraudulent activity.

E : erks making journal adjustments without reference to their supervisor is evidence of inadequate separation of duties.

F : way the role of purchasing manager is carried out in U increases the chance that the company will fall victim to fraudulent activity.

Answer: A

Question 2

Having carried out a full capital appraisal for a construction project, HCompanyhasapproved the project with initial outflows of $6,000,000 anda net present value of $1,200,000.
The implementation phase has been commenced with 25% of the costs already committed.However whenthe ground was opened, an underground waterway was revealedwhich will need to be diverted if the project is to proceed. Work to carry out this diversion has been estimated at $1,300,000.
Which of the following factors will define whether the project should go ahead or not?

A : project actually has a higher NPV than before.

B : project now has a negative NPV.

C : andoning the project will have an adverse effect on shareholder confidence.

D : ere will be abandonment costs to restore the site.

E : ere may be other unexpected costs to be met if the project continues.

Answer: A,D

Question 3

Which of the following statements are correct?

A : is always possible to remove all risks when undertaking large projects.

B : a project has high risks it should always be accepted as the rewards will always be high.

C : a project has low risks it will usually have relatively low returns.

D : k can always be transferred to someone else.

E : k should be carefully considered when evaluating possible future projects.

Answer: A,C

Question 4

M plc is an IT company thatbids for large contracts to sell computer systems and also to serviceexisting systems. M plc's senior management hasalwayssetbudgets which are hard to achieve andhavemade no allowances for the recession.
The economy has improved andM plc's senior managershave made the budget even more optimistic. The budgetedsalestargethas been increased by 40%.
In the past,sales staffhave not tried to achievethe budgetsales because itwas generallybelieved that the targets wereimpossible to reach.
M plc has recently appointed a new Sales Directorwhohas decided that sales staff will bedismissedif they fail to meet sales targets for three successive months. He is also looking forhighersalesmargins than wereachievedbefore.
What are the likely consequences ofthe new Sales Director'spolicy?

A : les staff will be happier in their jobs.

B : les staff will tender for riskier contracts.

C : les staff will encroach on other sales staff territories to get more work.

D : les staff will look for new jobs.

E : les staff will feel more settled and secure in their jobs.

Answer: B,C,D

Question 5

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?

A : ductions m motorway speed limits

B : need for consumer research

C : creased tax on vehicle emissions

D : cost of designing new cars.

E : tential changes in interest rates.

F : les of JHG's existing range of cars

Answer: A,C,D