Free CIMA CIMAPRO19-P03-1-ENG Exam Questions

Question 1

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

Answer: A

Question 2

R is a company running gas-fired power stations in Western Europe. The Risk Committee hasjust received a reportthata power station built to the same design and specification in a developing country has recently collapsed. The causes of the collapse are unclear,but if something similiar were to happen in Europe the consequencesfor Rcould be catastrophic.

Which of the following actions being considered by the Risk Committee are ethical?

A : mmission a reputable firm of structural engineers to carry out a review of all power stations owned by R.

B : cide that the information available to date is too uncertain to take any action for now.

C : nd experts employed by R to the site of the collapse so that they can gather information first hand on what happened.

D : ue a press release confirming that all R's power stations are 'entirely safe'.

E : tempt to increase the level of insurance cover against this type of eventuality.

F : aw up contingency plans in case some ofR's power stations need to be shut down.

Answer: A,C

Question 3

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 4

Which TWO of the following are reasons for a company to comply with the Committee of Sponsoring Organisations of the Treadway Commission 2017 Enterprise Risk Management Framework (COSO Framework)?

A : mplying with the COSO Framework will mean all employees of a company will comply with internal controls

B : mplying with the COSO Framework will mean that a company's internal controls will work properly

C : mplying with the COSO Framework will mean there is a good structure to a company's risk management system

D : mplying with the COSO Framework will mean that all staff will understand a company's risk management system

E : mplying with the COSO Framework will improve a company's reputation

Answer: A,C

Question 5

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 : audit committee should engage consultants to carry out business reviews

Answer: A,D