Free CIMA CIMAPRA19-P03-1-ENG Exam Questions

Question 1

Company M has lost 25% of its revenue in the last three months due to bad debts. One of thereceivables written offwasfroma long standing customer and the other three werefromnew customers. The management accountant has warned the sales team that the company cannot survive any more substantial bad debts.
Which of the following internal controls should be put in place to try and prevent further bad debts?

A : credit check should be carried out on each new customer.

B : edit limits should be set for all customers. However, if the credit limit will cost a sale then sales staff can override this limit.

C : o sales staff must authorise new customers and sign a form stating that they have done so.

D : aged analysis of customer balances must be reviewed every month.

E : soon as a customer payment is overdue they should not be allowed to purchase more until their balance has been reduced

Answer: A,D

Question 2

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 3

DFR is an online retailer that sells picture frames The software running on DFR's website enables customers to log in and make purchases by inputting an email address as a user name and a password that must contain at least eight characters, including upper and lower case letters, numbers and punctuation marks (e.g. , $ or!) Once logged in, customers can check previous orders that they have placed.
Customers can also use DFR's website to change personal details, including credit card numbers and delivery addresses Whenever they wish to use those facilities, the software sends a text message containing a six-digit number to their mobile phones They must input that number before the system will accept changes to their personal details
Which TWO of the following statements are correct?

A : It is illogical to have different security measures in place for orders and for access to personal details.

B : software treats customers' personal details as being more sensitive than their ordering histories

C : arrangement with the text message will have no effect on the security associated with changing personal details

D : tomers should be able to update the mobile phone numbers in their DFR accounts using only their email addresses and passwords for access

E : software should never show the whole of a customer's credit card number on screen, even if the customer has logged in and input the six-digit number.

Answer: A,C

Question 4

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 5

You are theManagementAccountant for a company which supplies baked food to a string of retail outlets; biscuits, cakes, savoury snacks etc.
You discover that a trainee employee, who is responsible for cleaning out the delivery vans has been taking damaged goods and packets which have reached their sales expiry date and has been selling them to friends. These products would otherwise have been discarded as waste.
The trainee in question is the nephew of one of the senior managers.
What is the correct course of action?

A : ve a quiet word with the trainee and ask him to stop.

B : ve a quiet word with the senior manager, the trainee's relative and askthem to deal with it.

C : cument the facts and escalate to the trainee's manager.

D : nothing, the product was designated as waste anyway.

Answer: C