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P3 exam torrent CIMA study guide
Passing the CIMA P3 exam requires a strong foundation in management accounting, as well as a comprehensive understanding of risk management principles and practices. Candidates must be able to analyze and interpret financial data, evaluate risk exposure, and develop strategies to manage and mitigate risk. With the CIMA P3 certification, individuals can demonstrate their expertise in risk management and gain a competitive edge in the job market.
NEW QUESTION # 96
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 now has a negative NPV.
- B. The project actually has a higher NPV than before.
- C. Abandoning the project will have an adverse effect on shareholder confidence.
- D. There may be other unexpected costs to be met if the project continues.
- E. There will be abandonment costs to restore the site.
Answer: B,E
NEW QUESTION # 97
Jo is a well known entrepreneur who founded JIS. a global producer or high technology equipment JIS has grown rapidly and was listed two years ago JIS's share price has grown steadily since its listing Jo serves as both CEO and Chair A recent newspaper article has suggested that JIS would benefit from having a separate CEO and Chair Which TWO of the following arguments are valid?
- A. Without a Chair to report to, Jo might pressurise the other directors into action that could damage JIS.
- B. If Jo remains as CEO and a new Chair is appointed then Jo should still attend alt meetings between non-executive directors and the Chair.
- C. There should be a division of responsibilities between the CEO running the Board and the Chair running the company's business
- D. If Jo remains as Chair and a new CEO is appointed then Jo will remain responsible for implementing policies to execute the Board's strategy
- E. Jo's setving as both Chair and CEO gives clarity of leadership and means JIS benefits from Jo's skills and knowledge of the company
Answer: A,C
NEW QUESTION # 98
Company M has lost 25% of its revenue in the last three months due to bad debts. One of the receivables written off was from a long standing customer and the other three were from new customers. The management accountant has warned the sales team that the company cannot survive any more substantial bad debts.
Which of the following internal controls should be put in place to try and prevent further bad debts?
- A. Credit limits should be set for all customers. However, if the credit limit will cost a sale then sales staff can override this limit.
- B. A credit check should be carried out on each new customer.
- C. As soon as a customer payment is overdue they should not be allowed to purchase more until their balance has been reduced.
- D. Two sales staff must authorise new customers and sign a form stating that they have done so.
- E. An aged analysis of customer balances must be reviewed every month.
Answer: B,C,E
NEW QUESTION # 99
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 one of the NEDs as Chair of the Board.
- B. Insist that the venture capital company director be removed as he is not necessarily motivated to act in the best interests of C Ltd.
- C. Set up an "agenda setting" sub-committee consisting of the current executive directors to decide the agenda for each Board meeting.
- 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. Appoint enough independent non-executive directors (NEDs) that they make up at least 50% of the Board.
Answer: A,D,F
NEW QUESTION # 100
M is a listed company. It is hoping to invest in a risky new venture. M has a substantial amount of cash to invest in the venture. M would have found it difficult to raise new finance as it has a high level of gearing.
Which of the following statements about stakeholders' conflicting interests are true?
- A. M's shareholders would only be exposed to the systematic risk from the investment in the new venture.
- B. M's credit rating is likely to fall as a result of this new venture.
- C. The directors would only be exposed to the systematic risk from the investment in the new venture.
- D. M's diversification will mean less risk for the shareholders.
Answer: A,B
NEW QUESTION # 101
G plc has decided to move its production plant to overseas Country A.
This would make the product cheaper to produce. The technology used to make the product is very advanced and some of the staff would have to move to Country A.
The Production Director has identified that there are some political risks in moving to Country A.
Match the methods of reducing the political risks associated with the move to Country A with the corresponding risks.
Answer:
Explanation:
NEW QUESTION # 102
An internal audit investigation involved conducting compliance tests on the processing of purchase invoices.
The purchase ledger clerk compares invoices against purchase orders and passes them for payment The invoices are then input into a computerised purchase ledger system The system checks that the supplier has a valid purchase ledger account, as authorised by the chief buyer, before crediting the supplier's account with the value of the invoice.
The internal auditor checked a sample of recorded purchase invoices against their corresponding purchase orders The internal auditor found four cases where invoices could not be agreed to corresponding purchase orders.
What is the potential significance of this compliance error?
- A. Payments could be made to non-existent suppliers
- B. The purchase ledger clerk could have ordered goods for her own personal use.
- C. The purchase ledger clerk could make fraudulent payments to herself.
- D. The discrepancy is a minor one and should be ignored
Answer: C
NEW QUESTION # 103
R is a manufacturer of biscuits. The market for biscuits is extremely competitive with many companies competing for contracts with large supermarkets. The intensity of the competition means that prices are kept low; and the buyers can demand higher levels of quality, and greater flexibility in supply arrangements.
Which of the following represent ways that the use of an Information System could help R to win and retain supermarket contracts in such a competitive market?
- A. It could be used to facilitate more timely and accurate delivery which would minimising waste.
- B. It would mean that R's products would be more prominently displayed on the supermarket shelves.
- C. If R's system is integrated with that of a particular supermarket, then this will make it more expensive for the supermarket to change to a different supplier.
- D. If R's system is integrated to that of a particular supermarket then other supplier's systems cannot also be integrated to that supermarket system.
- E. It could facilitate product ordering and selection by the use of Electronic Data Interchange.
Answer: A,C,E
NEW QUESTION # 104
Physical access controls can greatly enhance the security of company assets.
Select THREE methods by which physical access security can be significantly enhanced.
- A. Use of one way mirrors, so people can be observed undetected.
- B. Use of CCTV cameras monitoring all access points, with security guards monitoring images and a secured system making a recording.
- C. Visitors to be logged in by security staff and to be accompanied by a member of staff at all times until they leave.
- D. Use of access control pads with numerical keys on every door, which is otherwise locked.
- E. Use of USB sticks and removable media should be prohibited.
- F. Personal individual ID card access, logging individual person movement through every door, which is otherwise locked.
Answer: B,C,F
NEW QUESTION # 105
Select the most appropriate level of responsibility for managing each of the following risks.
Answer:
Explanation:
NEW QUESTION # 106
HGY is a major global corporation that has decided to implement the COSO Enterprise Risk Management Framework and integrate management practices throughout the organisation Which THREE of the following would be appropriate for HGY?
- A. Authorise managers and supervisors to respond immediately to any risks that emerge
- B. Train staff at all levels to identify and report risks to their superiors
- C. Create a risk management team that will take responsibility for identifying and mitigating risk
- D. Identify risk as an element of HGY's overall strategy.
- E. Make risk management an element of everyone's responsibility
- F. Recruit a Director of Risk, who will lead risk management procedures.
Answer: C,D,E
NEW QUESTION # 107
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.
Answer:
Explanation:
$27
NEW QUESTION # 108
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 signify the end of the project.
- B. To apportion blame for things not done well.
- C. To highlight what can be done to improve similar future projects.
- D. To reward staff and celebrate success.
Answer: C
NEW QUESTION # 109
A hospital is part of a government provided health service which is free to patients. The management of the hospital is concerned with the need to minimise the risks to which the hospital is exposed from patient litigation.
In this context, which TWO of the following are appropriate steps to manage this risk?
- A. Allocating a risk score to patients depending on age, general heath and similar consideration and refusing to admit patients whose risk score exceeds a certain threshold.
- B. The management refuses to allow the hospital to participate in the Major Accident Plan for the city in which it is located. It believes the Plan could expose the hospital to excessive risk.
- C. Ensure that proper documentation is in place for all patients showing such details as symptoms, treatments, and test results.
- D. Ensuring that a policy is in place to transfer or discharge critically ill patients so as to minimise fatalities in the hospital.
- E. Ensuring that patients undergoing procedures sign documentation to confirm that the risks have been explained to them and that they understand.
Answer: C,E
NEW QUESTION # 110
Which THREE of the following form part of the role of Internal Audit?
- A. Providing training to operational management on the identification of risk
- B. Monitoring the effectiveness of controls implemented by operational management
- C. Carrying out special investigations of risk.
- D. Implementing internal controls which address the key business risks identified by the risk management team
- E. Working with operational management teams to devise new controls to help minimise risk to the business.
- F. Working with operational management teams to help identify risks to the business.
Answer: A,B,F
NEW QUESTION # 111
L's risk register currently states the likelihood of risks m terms of their estimated percentage probabilities. The risk committee cs considering classifying risks using a three point scale high, medium and low.
Which TWO of the following are true?
- A. Quantifying probabilities as percentages gives greater scope for describing risks
- B. High, medium and low will be easier to use
- C. Everyone will agree the meaning of high, medium and low
- D. High, medium, low will eliminate subjectivity
- E. Using percentages will be more scientific
Answer: A,E
NEW QUESTION # 112
J is a manager in charge of a section in GDD's Buying department. J has eight staff who report to her.
Including M, who has worked for GDD for seven months.
One afternoon, while J was absent on sick leave, M was asked to place an urgent order for plastic pellets that are vital for GDD's production process. The usual supplier could not supply the pellets on time to avoid a shortage and so M telephoned a new supplier and placed an order. When the supplier invoiced for the delivery, GDD's Accounts Payable Department rejected the invoice because the supplier did not have a valid account.
On investigation, it was revealed that M did not have the authority to place an order with a new supplier. Only J can authorise new accounts. M claimed that he had been unaware of the need to seek approval because he had never found it necessary to place an order with a new supplier before Which TWO of the following statements ate correct?
- A. M should be disciplined for exceeding his authority
- B. GDD's Internal Audit Department should have cancelled the order.
- C. should have made certain that M knew and understood the limits of his responsibility
- D. The investigation of this matter was a waste of time because the pellets were urgently required
- E. GDD's directors are ultimately responsible for M's error
Answer: A,D
NEW QUESTION # 113
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).
Answer:
Explanation:
$12582000
NEW QUESTION # 114
You are a member of the Chartered Institute of Management Accountants (CIMA) and you have recently taken up the position of Sales Manager with a company that is facing financial difficulties. The company's terms include a commitment to maintain specified profitability, liquidity and solvency measures; failure to do so would render bank loans immediately repayable. The draft financial statements show that the company has not succeeded in complying with all of these requirements.
The financial results are very dependent on various estimates such as receivables impairments. The Chief Executive Officer (CEO) has suggested that these be recalculated so as to bring the financial results within the requirements of the bank. He has asked you to sign pre-dated internal documentation which would imply that, as Sales Manager, you initiated these changes in the belief that they would enhance the accuracy of the Financial Statements.
Which TWO of the following courses of action available to you would be ethically acceptable according to the CIMA Code of Ethics?
- A. Refuse to actually sign the documentation but make clear to the CEO that you will raise no objection if he amends the Financial Statements as if you had signed.
- B. Seek legal advice on the matter because you feel you are being placed in a very difficult position.
- C. Agree to sign the documentation on the grounds that these matters are highly subjective anyway and the proposed changes are, at least, plausible.
- D. Refuse to sign the documentation on the grounds that you did not initiate this action, and to give the impression that you did would be unethical.
Answer: B,D
NEW QUESTION # 115
You are the Management Accountant for P, a food manufacturing company with an annual sales revenue of $5 million.
You discover that the Production Manager's records are inconsistent. Raw materials purchased do not agree to the total recorded for transfers to production plus wastage. There is an average shortfall of 2% of purchases.
You investigated and discovered that there are often mistakes made during manufacturing that results in food that is safe to eat, but cannot be sold because of visual flaws. The Production Manager is supposed to scrap all such damaged product and write all such losses off as waste, but you discovered that he has been giving the damaged food to a charity that assists homeless people. No records are made of such gifts in order to conceal the losses due to manufacturing errors.
What should you do?
- A. Instigate a confidential, but documented, review with the Production Manager and tell him to stop.
- B. Do nothing, this is a good cause and the amount is insignificant.
- C. Instigate disciplinary action, this is both theft and poor management.
- D. Instigate a process whereby edible but unsellable items can be given to the charity officially.
- E. Instigate a review of the production process to potentially reduce the amount of wastage.
Answer: A,D,E
NEW QUESTION # 116
Zia is an accountant and wishes to take out a Forward Rate Agreement (FRA) as a hedging instrument. The company treasurer has advised that a short-term interest rate (STIR) future would be better.
Which of the following is true of an STIR?
- A. If interest rates have gone down the price of the future will have fallen.
- B. A STIR must be kept for the whole duration of the contract.
- C. A STIR can be tailored to the exact needs of the company.
- D. A STIR is flexible and the position can be closed quickly and easily.
Answer: D
NEW QUESTION # 117
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CIMA P3 certification exam is divided into four main sections: risk management concepts, risk management process, risk management application, and risk management tools and techniques. Each section covers a specific set of concepts and skills related to risk management, and candidates must demonstrate their understanding and ability to apply these concepts in real-world scenarios.
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