Free CIMA CIMAPRA19-P03-1-ENG Exam Questions

Question 1

With regard to the rote of the audit committee which of the following statements are correct? Select ALL that apply

A : audit committee should design the system of internal controls

B : audit committee should decide annually whether it needs an internal audit function

C : audit committee should decide annually whether it needs an external audit function

D : audit committee should review and monitor the effectiveness of the company's internal audit function

E : audit committee should provide arrangements for whistle blowing

F : The audit committee should engage consultants to carry out business reviews

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

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

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?

A : ere is no acceptable level of risk for a major nuclear accident and so the probability has little information value in itself.

B : probability is so low as to be ignored.

C : directors will be able to argue that they were not negligent in the event of a major disaster within the 20 year period.

D : The calculation of a precise probability demonstrates that the engineers who conducted the inspection are experts in their field.

Answer: A