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CIMA P3 - Risk Management

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Page: 7 / 11
Total 339 questions

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.

Complying with the COSO Framework will mean all employees of a company will comply with internal controls

B.

Complying with the COSO Framework will mean that a company's internal controls will work properly

C.

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

D.

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

E.

Complying with the COSO Framework will improve a company's reputation

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.

C Ltd is a private, family-owned company which is hoping to become listed on a recognised Stock Exchange within the next two years. At the moment, the Board of Directors comprises five directors; four of whom are from the founding family and all of whom are involved in the day-to-day running of the business. The remaining director obtained a seat on the Board three years ago as a condition of an investment by a venture capital fund.

The Board meets in half-day sessions once a fortnight and the Board meetings are reasonably well run. All decisions are taken by the Board as a whole. There are no sub-committees.

Which of the following steps would it be appropriate for C Ltd to take in the light of the proposed listing?

A.

Appoint enough independent non-executive directors (NEDs) that they make up at least 50% of the Board.

B.

Appoint one of the NEDs as Chair of the Board.

C.

Insist that the venture capital company director be removed as he is not necessarily motivated to act in the best interests of C Ltd.

D.

Set up at least three sub-committees namely remuneration, nomination, and audit committees.

E.

Ensure that the current executive directors are given 10 year contracts starting on the day the company is floated, to ensure consistency and continuity in the management of the company.

F.

Set up an "agenda setting" sub-committee consisting of the current executive directors to decide the agenda for each Board meeting.

Kate is a management accountant. Her immediate superior plans to apply for a promotion and his strongest competitor is the sales manager. Kate's superior has ordered her to set unattainable sales targets in a sales budget in order to reduce the sales manager's promotion prospects. He told her not to tell anybody.

Kate asked the finance director for advice. He told her that he wanted her immediate superior to get the promotion and so she should set the unattainable budget as instructed.

Kate set the budget as instructed.

Which THREE fundamental ethical principles has Kate breached?

A.

Integrity

B.

Objectivity

C.

Professional competence and due care

D.

Confidentiality

E.

Professional behaviour

UIO sells mobile phones through a cham of 100 shops spread across the country Shop managers have considerable discretion over pncmg and the incentives offered to sales staff Shop managers are evaluated on the monthly contribution from completed sales. Those who exceed targets by more than 10% for three successive months are promoted Those who fail to achieve monthly targets in two successive months lose their jobs

Which of the following statements are true of the performance management of UIO's shop managers?

Select ALL that apply.

A.

UIO's shop managers have an incentive to offer excellent customer service

B.

UIO's shop managers are encouraged to take risks that may harm UIO

C.

UIO's shop managers have an incentive to develop attractive sates promotions for their shops

D.

UIO's shop managers are encouraged to sell phones at a loss

E.

UIO's shop managers may have very little sense of loyalty to the company

Which TWO of the following are benefits of carrying out a post-completion audit of capital projects?

A.

A post-completion audit can help find out who was to blame for a project exceeding the budget.

B.

A post-completion audit can help management understand what went wrong with a project in order to try and prevent the same problem occurring in the future.

C.

A post-completion audit can help find out where a project went wrong so it can be fixed immediately.

D.

A post-completion audit can investigate variances from the budget on completed projects.

In terms of Cyber Security, which THREE of the following represent Personally Identifiable Information (Pll)?

A.

Old phone number

B.

First pet's name

C.

Position held in a charity.

D.

Sports club membership number

E.

Model of first car.

F.

Football team affiliation

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.

Company N is considering opening another production plant in Northland, a country 2000 km from its current production plant location N would also sell its products in Northland

Which TWO of the following are business risks'

A.

The risk that it may be difficult to sell its products in Northland.

B.

The risk that Northland may not be able to support N's technology requirements.

C.

The risk that the Northland currency may strengthen making it expensive.

D.

The risk that interest rates may rise making N's loans expensive.

E.

The risk that Northland's government may introduce policies that would be unfavorable to N.

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.