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P3 Exam Dumps - Risk Management

Question # 4

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.

CW has just opened a bank account in the currency in which the newly opened branch is now operating

B.

Establishing an internal audit department

C.

Excess funds are now invested, by the finance director, in short-term securities The finance director initiates buy and sell transactions and she also receives and retains all correspondence relating to the investments

D.

Purchase invoices are now approved for payment at branches and a list of approved invoices are sent to head office for payment The invoices, supporting documentation and suppliers' statements are retained at the branches

E.

A policy has been initiated to complete a physical inventory of all non-current assets at least annually This is then reconciled with the non-current asset register

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Question # 5

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?

A.

A dishonest member of staff could input an invalid transaction

B.

Two fraudulent members of staff could collude.

C.

The internal audit department cannot be expected to identify control weaknesses.

D.

The accounting system could combine manual and computerised controls.

E.

A director could override a control procedure.

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Question # 6

P Ltd, a service company, is seeking to recruit engineers to work in its maintenance division. Which TWO of the following suggestions will be most likely to help prevent fraud when recruiting the engineers?

A.

Checking that the engineers have previous experience in a similar business.

B.

Checking that the engineers do not belong to a union.

C.

Checking that the engineers have a professional engineering qualification.

D.

Taking up references from previous employers.

E.

Having a defined fraud policy statement that includes recruitment issues.

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Question # 7

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

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Question # 8

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.

The main shopping streets are no longer congested

B.

The remaining traffic wardens are less stressed because they no longer receive abuse by motorists.

C.

Parking enforcement costs less than before

D.

Revenues from parking have increased

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Question # 9

A UK based company is considering an investment of GB£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 UK at the end of each year.

Currently GB£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 GP£ (to the nearest whole pound)?

A.

GB£287,639

B.

GB£391,640

C.

GB£(111,973)

D.

GB£554,047

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Question # 10

In-depth analysis showing the identification and quantification of exposure to financial risk has become more accessible in recent years. Several varieties of analysis are now available.

Which of the following statements are true?

A.

Value at risk analysis, which has become available through increased computing power, is now easier to implement and can cater for extreme market conditions.

B.

Monte Carlo analysis is a modelling technique which can be applied to financial analysis, allowing thousands of variables to be integrated together to show standard behaviours and outlier abnormalities requiring detailed understanding in a 'what if?' environment.

C.

Sensitivity analysis involves checking the performance of a financial risk model against the various interrelationships between the different input variables in the model.

D.

Simulation, which is becoming available through standard computing packages, is complex to implement but dynamic and adaptable to cater for different assumptions.

E.

Regression analysis is easy to understand and implement, and based on future expectations.

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Question # 11

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?

A.

HJK's entire staff should be informed of the investigation and of the disappointing fact that six members of staff handed over their logins and passwords

B.

The investigation should be repeated in the future on a different sample of staff, using other reasons for asking for logins and passwords

C.

HJK's response should be limited to briefing the six staff members on their error and ensuring that they change their passwords.

D.

It was acceptable for the staff to surrender their details because the request had actually been made by members of HJK's IT Security Department.

E.

It was unethical for HJK's IT Security Department to contact staff in this manner, lying about the suspected presence of a virus in order to provoke a response.

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Question # 12

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.

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Question # 13

Which THREE of the following form part of the role of Internal Audit?

A.

Working with operational management teams to help identify risks to the business.

B.

Working with operational management teams to devise new controls to help minimise risk to the business.

C.

Providing training to operational management on the identification of risk

D.

Implementing internal controls which address the key business risks identified by the risk management team

E.

Carrying out special investigations of risk.

F.

Monitoring the effectiveness of controls implemented by operational management

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Question # 14

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?

A.

$900,000

B.

$600,000

C.

51,200,000

D.

S450,000

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Question # 15

M, a manufacturing company, has had some problems with defects in one of the main products it produces. This product has been made by the company for many years and is very profitable. Last month it 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.

M could increase the number of quality control staff.

B.

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

C.

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

D.

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

E.

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

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Question # 16

A US company has to pay £500,000 for a new machine.

You have the following information on currencies.

EUR 1 = £1.2300

EUR 1 = USD 1.6200

What is the cost of the machine in USD?

Give your answer to the nearest $.

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Question # 17

Which risks should be given the highest priority?

A.

Risks which have a high impact and have a low likelihood of arising.

B.

Risks which have a low impact but which arise frequently.

C.

Risks which have a low impact and a low likelihood of arising.

D.

Risks which have a high impact and which may arise occasionally.

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Question # 18

Which of the following statements are true of residual risk?

A.

Residual risk has to be accepted.

B.

Residual risk is the risk that remains after risk mitigation has taken place.

C.

If residual risk is too great then the company should not expose itself to the risk situation.

D.

Residual risk may be accepted if management feels the company can bear the risk.

E.

Residual risk should never be accepted.

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Question # 19

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?

A.

Passwords should be short words or names that users will easily remember.

B.

Passwords should contain 20 characters or more.

C.

Passwords should be changed on a regular basis.

D.

The strength of a password is increased by using upper and lower case and including numerals.

E.

Passwords should be written down in a secret place.

F.

Passwords should never be shared.

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Question # 20

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?

A.

To reward staff and celebrate success.

B.

To signify the end of the project.

C.

To highlight what can be done to improve similar future projects.

D.

To apportion blame for things not done well.

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Question # 21

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

• L, who spent seven years as Chief Executive of VCX, but retired from that role two years ago,

• 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

• 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

A.

None of the executive directors should be allowed to sit on the Remuneration Committee

B.

M is unsuitable to be part of the Board because his previous involvement with a similar company in another country is a conflict of interest.

C.

L can now be considered to be an independent non-executive director

D.

M and N are both suitable appointees to the Audit Committee

E.

The Finance Director should be part of the Audit Committee because of her expertise

F.

Non-executive directors should be responsible for monitoring the performance of executive management especially with regard to company strategy and objectives

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Question # 22

Which of the following scenarios might be relevant stress tests for a potential lender to conduct? Which TWO of the following answers are correct?

A.

The potential borrower could be involved in an accounting scandal

B.

The potential borrower might have manipulated the figures in the loan application.

C.

The potential borrower might lose its three main customers.

D.

The potential borrower might seek further debt in the future.

E.

The potential borrower might have to agree to a major wage increase for its employees.

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Question # 23

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 600,000 once, in year 3, when 720,000 units of emissions were emitted.

Calculate the amount that the post completion audit shows TRF overpaid for the ownership costs associated with this machine.

Give your answer to the nearest whole $ (in $'000s).

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Question # 24

Rio owns an architects business which employs 12 skilled architects and four administrative staff.

The Office Manager 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?

A.

Internal controls are only suitable for large businesses.

B.

Employees could ignore the internal controls.

C.

If Rio does not support the internal control system then the controls may not be adhered to.

D.

Internal controls may slow down the speed with which the architects can respond to enquiries.

E.

Internal controls will usually mean hiring more staff.

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Question # 25

GHY is a listed company. Tom is GHY's CEO and Peter is its non-executive Chair of the Board. Tom and Peter both have substantial relevant business and industrial experience and 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 jointly agree the agenda for every board meeting and both agree on the manner in which matters will be presented to the board.

Taking account of the principles of good corporate governance, which of the following statements is correct?

A.

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

B.

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

C.

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

D.

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

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Question # 26

B is a company with a strong risk appetite. Which of the following are benefits of using the certainty equivalent method of capital investment appraisal in B's case?

A.

A high level of subjective judgment is required from the decision maker.

B.

It avoids the need for the investor to estimate an appropriate discount rate which reflects the risk of the project cash flows.

C.

By building a risk adjustment into the discount rate, it takes greater account of risk in later time periods.

D.

More risky projects are more likely to be accepted using this method of appraisal.

E.

The method produces the most appropriate results in cases where project cash flows do not increase in risk over time.

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Question # 27

The management of U is reviewing internal controls throughout the company. It has 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, as they are the only person with sufficient experience to do so. They use a very limited number of suppliers because they can rely on these suppliers to provide goods of the quality required at a competitive price. They do 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.

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

B.

It 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.

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

D.

The 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.

Clerks making journal adjustments without reference to their supervisor is evidence of inadequate separation of duties.

F.

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

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Question # 28

A project requires a capital investment of £2.7million. The project will save £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 £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 £1million, which is £27,000 per year in perpetuity.

Calculate the project's adjusted present value.

A.

£(30,000)

B.

0

C.

£570,000

D.

£600,000

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Question # 29

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?

A.

The remuneration committee should consider incentives such as share options to encourage the Board to focus on COM's long term strategy

B.

The nomination committee should have had a succession plan in place for directors.

C.

The nomination committee should be operating for the benefit of the directors.

D.

The audit committee should have alerted the Board to the impact of falling profit margins

E.

The non-executive directors should have challenged the lack of long term strategic planning

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Question # 30

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?

A.

L should cease trading

B.

L should pay the very high insurance premiums demanded by its insurance company

C.

L should diversify into low risk diving contract s.

D.

L should stop accepting these risky contracts.

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Question # 31

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?

A.

The risk of an increase in the cost of injury insurance cover should be made the responsibility of the company's finance function

B.

The automatic increase in the insurance premium is part of the financial risk associated with industrial injuries.

C.

Linking the risks associated with industrial injuries will overcomplicate the management of those risks.

D.

The risk that a serious accident could impair the morale of uninjured staff is related to the financial risk associated with accidents.

E.

The insurance cover means that management need only be concerned with the possibility of a 10% increase in the premium m the event of a serious accident.

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Question # 32

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?

A.

$62,000 gain

B.

$95,000 gain

C.

$88,000 gain

D.

$16,000 loss

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Question # 33

Match the descriptions shown in the boxes below with the method of quantifying risk exposure it best describes.

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Question # 34

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?

A.

Work with politicians to discredit the proposed restrictions on the use of fossil fuels

B.

Commission research into the development of battery-powered aircraft

C.

Adapt existing engine designs so that they can use plant-based fuels, such as vegetable oils

D.

Dispose of manufacturing plant and move into more sustainable transport, such as electric trains

E.

Develop more efficient engines that minimise the use of fossil fuels

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Question # 35

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

A.

The audit committee should design the system of internal controls

B.

The audit committee should decide annually whether it needs an internal audit function

C.

The audit committee should decide annually whether it needs an external audit function

D.

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

E.

The audit committee should provide arrangements for whistle blowing

F.

The audit committee should engage consultants to carry out business reviews

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Question # 36

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?

A.

If YHU admits to this error then there is a strong risk that customers will take legal action for being sold a dangerous product and that the courts will find in the customers' favors.

B.

YHU should ignore the interaction between risk factors when considering its response to the possibility of mislabelled ingredients

C.

YHU's total risk is affected by both the risk that the flour was incorrectly labelled and that the company was unaware of that fact

D.

The risk of YHU discovering this error is minimal because the wholesaler will both have to realise its mistake and be willing to admit to it.

E.

YHU could easily eliminate the risks associated with such errors by putting a prominent warning on its flour bags that they may contain flour made from non-organic or genetically modified flour.

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Question # 37

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?

A.

V$4.628 million

B.

V$5.684 million

C.

V$4.444 million

D.

V$5.5 million

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Question # 38

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

A.

T had been too busy to stay up to date with continuing professional development requirements

B.

Since the loss the client's chief executive has spoken to her business contacts m the industry and all had hedged against a decline in this currency

C.

T had studied all relevant economic forecasts and had concluded that it would be too expensive to hedge this receivable

D.

T had offered the client two alternatives showing the costs and benefits of hedging the position, but did not strongly recommend either alternative

E.

T had never offered advice on foreign currency management before

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Question # 39

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.

it is unlikely that DBB will be able to transfer the risk of these injuries by insurance.

B.

The fact that there are very few accidents supports the argument that the likelihood

C.

The director's recommendation that the risk should be reclassified will make the risk map more useful

D.

Risk maps enable companies to identify the correct migration for any given risk

E.

Discussing likelihood and impact will help DBB's Board to mitigate the risk of industrial inquiry

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Question # 40

A capital investment project shows a NPV of £3,450 at a discounted rate of 8% and an NPV of £1,210 at a discounted rate of 9%.

What is the internal rate of return?

A.

11.85%

B.

10.85%

C.

10.54%

D.

9.54%

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Question # 41

Under the COSO Enterprise Risk Management Framework, who is responsible for risk management?

A.

Every member of the entity.

B.

The board of directors only.

C.

Managers and directors only.

D.

The shareholders.

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Question # 42

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.

Reductions m motorway speed limits

B.

The need for consumer research

C.

Increased tax on vehicle emissions

D.

The cost of designing new cars.

E.

Potential changes in interest rates.

F.

Sales of JHG's existing range of cars

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Question # 43

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.

A.

11%

B.

13%

C.

31%

D.

20%

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Question # 44

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?

A.

W plc shall not use its buying power unscrupulously.

B.

W plc shall endeavour to adhere to the terms of its contracts with its suppliers at all times.

C.

W plc shall keep confidential all information received from suppliers and potential suppliers.

D.

W plc shall continuously remind suppliers that it always has several alternative suppliers to choose from.

E.

W plc shall endeavour to take as high a percentage of each supplier's output as possible.

F.

W plc shall insist on an exclusivity agreement with each supplier so that identical products are not available from other outlets.

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Question # 45

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?

A.

Value at Risk

B.

Regression analysis

C.

Simulation

D.

Expected value

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Question # 46

Having carried out a full capital appraisal for a construction project, H Company has approved the project with initial outflows of $6,000,000 and a net present value of $1,200,000.

The implementation phase has been commenced with 25% of the costs already committed. However when the ground was opened, an underground waterway was revealed 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.

The project actually has a higher NPV than before.

B.

The project now has a negative NPV.

C.

Abandoning the project will have an adverse effect on shareholder confidence.

D.

There will be abandonment costs to restore the site.

E.

There may be other unexpected costs to be met if the project continues.

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Question # 47

A UK manufacturing company has simultaneously:

   • purchased a put option to sell USD 1million at an exercise price of GBP1.00 = USD1.65

   • sold a call option that grants the option holder the right to buy USD 1million at a price of GBP1.00 = USD1.61 (this option has the same maturity date as the put).

Which of the following is a valid explanation for entering into these option positions?

A.

The company expects to receive USD 1million from a customer and wishes to offset the cost of the put option by the premium on the call option.

B.

The company expects to pay USD 1million to a supplier and wishes to offset the premium from the call option against the cost of the put option.

C.

The company expects to receive USD 1million from a customer and wishes to obtain an additional benefit if the USD strengthens beyond GBP 1.00 = USD 1.61.

D.

The company expects to pay USD 1million to a supplier and wishes to obtain additional protection against the USD strengthening beyond GBP 1.00 = USD 1.65.

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Question # 48

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.

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Question # 49

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?

A.

An Internal Auditor should drive round the site perimeter to check whether a laptop can detect HGPs wi-fi network

B.

All staff should be trained in wi-fi security

C.

Wi-fi enabled devices should be removed where possible

D.

HGF should shield the factory and office buildings and connect them through a wired link

E.

Security can be assured by encrypting the wi-fi network

F.

Networked factory equipment is inherently secure

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Question # 50

SC is a professional 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. 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 the board of SC is correct?

A.

SC is now a listed company and so the board should prioritise the interests of shareholders to the exclusion of other stakeholders.

B.

A football club needs to be part of the community in which it exists and so the board should consider the other stakeholders.

C.

The board should conclude that objectors to the new stadium have a legal course of action open to them and if they do not take legal action they should ignore them.

D.

If the board of directors is seen as acknowledging its responsibility to stakeholders other than shareholders this will enhance the reputation of the club and it will be more likely that a compromise can be reached with objectors.

E.

The board should share information about the new development with the local community only to the extent that it is legally obliged to do so.

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