CW is a large company in the food production industry. It has grown over the years by the acquisition of several smaller rivals CW has ten branches located in its home country and has just opened a foreign branch for the first time It has recently made some changes to the structure and implementation of its control system.
Which TWO of the following changes would be most likely to improve the overall control system?
A company has a sound system of internal controls that have been reviewed by the internal audit department.
Which TWO of the following correctly identify reasons why the company's control system might fail to prevent or detect an irregularity?
P Ltd, a service company, is seeking to recruit engineers to work in its maintenance division. WhichÂ TWOÂ of the following suggestions will be most likely to help prevent fraud when recruiting the engineers?
A US company enters into a five year borrowing with bank A at a floating rate of USD Libor plus 2%.
It simultaneously enters into an interest rate swap with bank B at 3.5% fixed against USD Libor plus 1%.
What is the hedged borrowing rate, taking the borrowing and swap into account?
Give your answer to 1 decimal place
Smalltown had a problem with people parking cars on the town's mam shopping streets instead of in the nearby car parks The parked cars created congestion and made it difficult for delivery vehicles to unload Smalltown's local government had employed traffic wardens to enforce parking regulations by issuing parking fines to motorists who parked for more than the permitted 30 minutes.
The local government took further action to deal with this problem It banned parking on the busiest streets, it introduced parking charges in the remaining streets and it made it free to park m the town's car parks for up to two hours Fewer people now park cars on the streets because of the charges, but those who do generate significant revenues for the local government Fewer traffic wardens are required and so wage costs have reduced
The local goverment auditors have decided to carry out a value for money audit of the parking system
Which of the following is a measure of effectiveness?
A UK based company is considering an investment of GBÂ£1,000,000 in a project in the USA. It is anticipated that the following cash flows will arise from this project.
The cash flows will be either US$400,000 with a probability of 40% or US$700,000 with a probability of 60% for each of the next three years; remitted to the UKÂ at the end of each year.
Currently GBÂ£1.00 is worth US$1.30.
The expected inflation rates in the two countries over the next four years are 2% in the UK and 4% in the US.
Applying the Purchasing Power Parity Theory, which of the following represents the expected net present value of the project in GPÂ£ (to the nearest whole pound)?
In-depth analysis showing theÂ identification and quantification of exposure to financial risk has become more accessible in recent years. Several varieties of analysis are now available.
WhichÂ of the followingÂ statementsÂ are true?
HJK is a publishing company that employs several hundred staff A member of the company's IT Security Department contacted 30 members of HJK's staff selected at random, and told each one that his or her computer appeared to be infected with a virus The staff members were asked to provide their login details and corporate passwords so that IT Security could remove the virus remotely A total of six members of staff provided this information.
Which TWO of the following statements are correct?
Will owns $400,000 of shares in Company X.
Company X has a daily volatility of 1% of its share price.
Calculate the 28 day value at risk that shows the most Will can expect to lose during a 28 day period.
(Will wishes to be 90% certain that the actual loss in any month will be less than your predicted figure).
Give your answer to the nearest $000.
Which THREE of the following form part of the role of Internal Audit?
AZX sells electrical components.
AZX's annual turnover is S24 million. Half of all sales are on 30 days' (1 month) credit
5% of credit sales have to be written off as unrecovered debt
25% of such write off is subsequently recovered through debt collection and legal action.
What is the expected loss each year due to credit risk?
M, a manufacturing company, has had some problems with defects in one of the main productsÂ itÂ produces. This product has been made by the company for many years and is very profitable. Last monthÂ itÂ 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 US company has to pay Â£500,000 for a new machine.
You have the following information on currencies.
EURÂ 1 = Â£1.2300
EUR 1Â = USDÂ 1.6200
What is the cost of the machine in USD?
Give your answer to the nearest $.
Which risks should be given the highest priority?
Which of the following statements are true of residual risk?
Passwords are frequently used to control access to computer systems.
Which of the following characteristics should a password have in order to make it effective?
B, a construction company, has a policy of carrying out a post completion audit on every construction project undertaken where the value exceeds $1 million.
What is the role of the post completion audit?
The Board of Directors of VCX, a state-owned electricity company, includes four executive directors the Chief Executive Officer, the Finance Director the Operation Director and the Technical Director
All of the shares in the company vest in the Office of the Minister for Energy, who is entitled to appoint two non-executive directors to the Board It has been alleged that the Minister appoints political "insiders" who have no particular knowledge of. or interest in. the electricity industry
There are three further non-executive directors
â€¢ L, who spent seven years as Chief Executive of VCX, but retired from that role two years ago,
â€¢ M, who spent several years on the Board of a state electricity company in a different country to VCX but who resigned from it before accepting the position with VCX: and
â€¢ N, who is a qualified and experienced professional accountant
In relation to best practice in respect of Corporate Governance, which of the following statements are valid? Select ALL that apply
Which of the following scenarios might be relevant stress tests for a potential lender to conduct? Which TWO of the following answers are correct?
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 600,000Â once, in year 3, when 720,000 units of emissions were emitted.
Calculate the amount that the post completion audit showsÂ TRF overpaid for the ownership costs associated with this machine.
Give your answer to the nearest whole $ (in $'000s).
Rio owns an architects business which employs 12 skilled architects and four administrative staff.
TheÂ OfficeÂ ManagerÂ has just attended a workshop on internal controls and the way in which they can improve organisations. He intends to implement some internal controls as soon as possible.
What are the limitations of an internal control system in Rio's business?
GHY is a listed company. Tom isÂ GHY'sÂ CEO and Peter isÂ itsÂ non-executive Chair of the Board. Tom and PeterÂ bothÂ have substantial relevant business and industrial experience andÂ both 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 jointlyÂ agreeÂ the agenda forÂ everyÂ board meetingÂ andÂ both agree on the manner in which mattersÂ will be presented to theÂ board.
Taking account of the principles of goodÂ corporateÂ governance, which of the following statements is correct?
B is a company with a strong risk appetite.Â Which of the following are benefits of using the certainty equivalent method of capital investment appraisal in B's case?
The management of U isÂ reviewing internal controls throughout the company. ItÂ hasÂ noted 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, asÂ theyÂ areÂ the only person with sufficient experience to do so. They useÂ a very limited number of suppliers becauseÂ they can rely on these suppliers to provide goods of the quality required at a competitive price. They doÂ not 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 project requires a capital investment of Â£2.7million. The project will save Â£450,000 each year after taxation. Assume the savings are in perpetuity. The business risk of the venture requires a 15% discount rate. The company has to borrow Â£1million to finance the project at a rate of 9% and the net tax shield is 30%, the project supports debt which generates an interest tax shield of 0.30 x 0.09 x Â£1million, which is Â£27,000 per year in perpetuity.
Calculate the project'sÂ adjustedÂ presentÂ value.
COM is a well established company in the construction industry The company was founded by the Mac family 30 years ago and several family members still serve on the Board The company obtained a listing five years ago The Board has an appropriate balance between executive and non-executive members It also has audit remuneration and nomination committees The average age of board members is 68
COM is profitable but profit margins have been falling steadily and this year's revenues are lower than it was achieved last year The Board recognis thai it does not have a long term strategy in place and has been losing business to newer, more aggressive competitors
Which THREE of the following statements are correct?
L is a specialist deep sea diving company The company specialises in challenging tasks that are often rejected by other companies as being too risky Most assignments are difficult and some are very dangerous L has very experienced divers who are highly trained and are safety conscious In spite of the dangerous work, L has an excellent success rate and is highly sought after L charges very high fees for its work Despite L's precautions, the likelihood of accidents is high and the consequences are also high L has an excellent insurance which has always been very expensive but the price has just been increased by 40%
Which of the following is correct?
GHJ is a manufacturing company that insures against the financial costs associated with industrial injuries involving staff. The Health and Safety Office is part of GHJ's Operations Department. GHJ's insurers will automatically increase the insurance premium by 10% in the event of a claim against the policy.
Which TWO of the following are correct?
Company W produces mobile phone components and has recently tendered for a substantial contract. The results of the tendering process will not become available until three months from now. If the company is successful it will require 2,000 units of a commodity which is currently traded in an open commodity market for $740 per unit. However, there has been speculation that this commodity could increase substantially in price over the next three months and so the company is considering purchasing the commodity now and storing it for three months.
The funds to buy the commodity would be borrowed at an annual interest rate of 7% and the storage cost of the product would be $5.40 per unit per month. The storage costs would be paid at the end of the three month storage period.
Which of the following represents the gain or loss (to the nearest thousand dollars) that will accrue to Company W assuming that the price of the commodity rises to $800 in three months' time?
Match the descriptions shown in the boxes below with the method of quantifying risk exposure it best describes.
IOP manufactures aircraft engines. The company is presently engaged in a scenario planning exercise to consider the implications of a possible ban on the use of fossil fuels by the year 2040.
Which TWO of the following would be realistic responses to the scenario?
With regard to the rote of the audit committee which of the following statements are correct? Select ALL that apply
YHU manufactures flour from wheal (hat it purchases from wheat wholesalers who buy the gram in bulk from farmers around the world and import it to YHU's home country.
YHU sells its flour as "organic and free from genetically modified grain" It is difficult to test wheat to ensure that it is organic and impossible to prove that it has not been obtained from genetically modified crops YHU must trust its wholesalers to check the provenance of the wheat that they buy for resale to YHU.
Without YHU's knowledge, a consignment of wheat that it has used to make flour was purchased from a farmer who used genetically modified seed. The wholesaler made an error in tracking this consignment through its inventory system and sold it to YHU as organic and free from genetically modified gram
Which TWO of the following are correct?
VBN's home currency is the V$. On 1 January, VBN must make a payment of C$2 million on 31 March of that same year.
On 1 January the spot exchange rate was V$1 = C$0.4.
On 1 January VBN paid $180,000 for a call option to buy C$2 million for V$5.5 million on 31 March. VBN's cost of borrowing was 8% per year.
On 31 March the spot rate was V$1 = C$0.45.
What was the total cost, including the cost of the option, of settling the payable?
T is an accountant who has been accused of professional incompetence T agreed to advise a client on currency management and the client lost a great deal of money when a large foreign currency trade receivable declined in value without having been hedged.
Which of the following factors strengthens the case that T has been incompetent?
Select ALL that apply
DBB is a mining company. The company's business requires manners to work underground in hazardous conditions DBB takes every possible precaution to protect the safety and wellbeing of its miners, but that does not prevent the occurrence of four or five serious injuries every year. That number is small in relation to the many thousands of owners employed by DBB.
DBB's Board is preparing a risk map Most directors believe that injuries to miners should be classified as high Likelihood and high impact, which Is a category of risk that should be avoided according to the TARA framework One of the directors has suggested that the risk should be classified as low likelihood and high impact because that would move the risk into the quadrant associated with transference or sharing and so could be draft with by, say, insurance
Which TWO of the following are correct?
A capital investment project shows a NPV of Â£3,450 at a discounted rate of 8% and an NPV of Â£1,210 at a discounted rate of 9%.
WhatÂ isÂ theÂ internal rate ofÂ return?
Under the COSO Enterprise Risk Management Framework, who is responsible for risk management?
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?
YHJ is considering an investment in a project that will cost $20 million. Annual fixed costs will be $12 million per year, excluding depreciation. Annual sales are forecast at 5 million units, with a contribution per unit of $8. After five years the equipment will be worn out and YHJ will have to spend $50 million on disposal costs. The discount rate is 10%.
Calculate the sensitivity of the net present value of this project to a 20% increase in the disposal costs.
W plc is a large international supermarket chain. It has many thousands of suppliers and many thousands of others competing for "shelf space" in its supermarkets.
Which of the following would be appropriate provisions for W plc to include in its Ethical Code in relation to its suppliers?
Which method of quantifying risk exposure can be used to calculate the maximum loss on a portfolio occurring within a period of time with a given probability?
Having carried out a full capital appraisal for a construction project, HÂ CompanyÂ hasÂ approved the project with initial outflows of $6,000,000 andÂ a net present value of $1,200,000.
The implementation phase has been commenced with 25% of the costs already committed.Â However whenÂ the ground was opened, an underground waterway was revealedÂ which 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 UK manufacturing company has simultaneously:
Â Â Â â€¢ purchased a put option to sell USD 1million at an exercise price of GBP1.00 = USD1.65
Â Â Â â€¢ sold a call option that grants the option holder the right to buy USD 1million at a price of GBP1.00 = USD1.61Â (this option has the same maturity date as the put).
Which of the following is a valid explanation for entering into these option positions?
As part of risk assessment exercise for a low-cost airline you are requested to match the risks listed below with the most approriate method of minimising or dealing with each risk.
HGF is a medium-sized manufacturing company its factory and administrative offices are in separate building on the same site. The company uses a wireless network that enables factory and office staff to access systems and to access email.
Which THREE of the following statements are correct?
SC is a professionalÂ 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.Â 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 theÂ board of SC is correct?