[Feb 06, 2022] P3 Exam Dumps, P3 Practice Test Questions
Free P3 Study Guides Exam Questions and Answer
NEW QUESTION 89
GHJ makes large export sales to customers in Country A, whose currency fluctuates significantly against GHJ's home currency. GHJ also makes large purchases from suppliers in Country A.
All of these transactions are in Country A's currency.
GHJ's Treasurer does not actively hedge currency risks because there is a natural hedge in place due to the company making both sales and purchases in the same currency.
GHJ's Board has instructed the Treasurer to put active hedging measures in place because the Risk Report would otherwise have to disclose the fact that GHJ has a currency risk which is not actively hedged.
Which of the following statements are correct?
- A. The Board may be concerned it will be criticised if it does not hedge.
- B. Risk reporting drives the whole risk management process.
- C. The Board does not want to be blamed for ignoring a risk.
- D. Risk reporting is a bad thing.
- E. Risk reports can change behaviour.
Answer: A,C,E
NEW QUESTION 90
Company A's gross profit percentage has fallen from 70% to 61 % Which of the following possible explanations would most concern the internal auditors?
- A. The sales director decided to reduce the selling price to increase the market share
- B. There had been an omission of several items from the inventory records
- C. During the year the raw material price increased due to an international shortage of the material
- D. During the year direct wages had been misclassified as indirect manufacturing expenses
Answer: B
NEW QUESTION 91
V buys vegetables and fruit from three farms located in a different part of V's country and sells them to large supermarket chains.
A recent newspaper magazine had an article on these farms showing that the farms employ illegal immigrants whose status was used by the factory's owners to force them to work for low wages and in unpleasant conditions. They are forced to live in small overcrowded caravans with no running water. They are also given meals which are cold and poor quality. These farms are located in a developed country with strong labour laws.
Classify each of the following statements as true or false.
Answer:
Explanation:
NEW QUESTION 92
Match the descriptions shown in the boxes below with the method of quantifying risk exposure it best describes.
Answer:
Explanation:
NEW QUESTION 93
A project has been evaluated on the basis that it will cost $14 million and will have a net present value of $2.3 million.
The project has commenced and $3 million of the initial $14 million has been invested. A problem has been discovered that will cost an additional $2.5 million to rectify. The $2.5 million will be payable immediately.
What is the NPV of continuing with this project?
- A. -$0.2 million
- B. -$3 million
- C. $2.8 million
- D. $1.8 million
Answer: C
NEW QUESTION 94
B uses a balanced scorecard to monitor the performance of its divisions.
Classify each of the following decisions taken by a division's management team as either commercially sound or dysfunctional.
Answer:
Explanation:
NEW QUESTION 95
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 review and monitor the effectiveness of the company's internal audit function
- D. The audit committee should engage consultants to carry out business reviews
- E. The audit committee should provide arrangements for whistle blowing
- F. The audit committee should decide annually whether it needs an external audit function
Answer: C,D,E
NEW QUESTION 96
A government department is conducting a value for money audit on a school.
The school's pupils sit leaving exams. Classify each of the audit tests as either economy and efficiency or effectiveness.
Answer:
Explanation:
NEW QUESTION 97
Which of the following are threats to the control environment?
- A. Directors not producing receipts for their expenses.
- B. Internal auditors not following up on internal control problems.
- C. Regularly changing procedures to comply with legislation.
- D. Allowing staff to follow unwritten policies.
- E. Directors ignoring unethical practices that increase sales.
Answer: A,B,E
NEW QUESTION 98
ABC is a large supermarket chain which also has online shopping and home deliveries It has a 24/7 service which runs on a central server allowing all customers to enter new orders at any time This is a business critical service which, if not available, may lead to customers turning to alternative supermarket chains offering similar services, resulting in immediate turnover loss and possible long term customer loss.
ABC is contemplating the implementation of a hot standby facility, not only to cover for emergency disaster recovery, but also to allow for business continuity, allowing necessary maintenance and updates without service interruption.
Which of the following cybersecurity objectives is ABC concerned about in this scenario?
- A. Integrity of data
- B. Availability
- C. Confidentiality
- D. Integrity of processing
Answer: B
NEW QUESTION 99
There are many method for appraising capital projects.
Select ALL correct statements.
- A. Opportunity cost is only relevant when capital is scarce.
- B. Net Present Value evaluation considers a range of different discount rates considering different risk factors and finance methods.
- C. All projects should be evaluated using sensitivity analysis.
- D. No one method of capital appraisal taken alone is adequate to evaluate competing projects.
- E. Decisions should only consider the financial implications of the project.
- F. The time value of money should be the same for all similar competing projects.
Answer: B,D,F
NEW QUESTION 100
FGT is evaluating the political risks associated with its operations around the world.
Which of the following would indicate that a particular subsidiary has a high level of political risk?
- A. The subsidiary employs a large number of nationals from the host country.
- B. Forthcoming elections in the subsidiary's host country.
- C. The subsidiary's host country requires the active participation of local partners before the subsidiary can operate.
- D. Company law in the subsidiary host country is lax.
- E. The subsidiary is located a considerable distance from FGT's home country.
Answer: B,C,D
NEW QUESTION 101
YUI owns 18 factories, which are spread around the country. Each factory employs 500-700 production staff and has its own administrative and accounts departments.
It has recently been discovered that the manager in charge of YUI's Hightown factory has been overstating his personal expenses claims for the past five years. The total amount stolen in this manner has been estimated at
$10,000.
Why would it have been relatively difficult to have prevented this fraud?
- A. Managers are generally highly intelligent and are generally capable of designing ways to defeat control systems.
- B. Internal controls cannot address fraud, only error.
- C. Senior members of management can often override controls.
- D. It is impossible for anybody to check expenses claims submitted by a senior manager.
Answer: C
NEW QUESTION 102
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 pay USD 1million to a supplier and wishes to offset the premium from the call option against the cost of the put option.
- B. 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.
- C. 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.
- D. 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.
Answer: D
NEW QUESTION 103
The list below has duties performed by risk managers and internal auditors. Show who would carry out the duties assuming the company has both risk managers and internal auditors.
Answer:
Explanation:
NEW QUESTION 104
E purchases parts for one of the machines it manufactures from Country X Place the risk classification next to the risk it relates to:
Answer:
Explanation:
NEW QUESTION 105
Which of the following are true of interest rate swaps?
- A. Some companies use interest rate swaps to deliberately increase their risks because they believe that they are better at predicting future interest rates than the market.
- B. When interest rates are falling, the risk of default by the fixed interest rate payer is low.
- C. An interest rate swap is an internal hedging technique.
- D. Risk of default is high from the floating interest rate payer if interest rates rise.
- E. An interest rate swap is an external hedging technique.
Answer: A,D,E
NEW QUESTION 106
Z is a multinational pharmaceuticals company with operations across Europe, America and Asia.
It is currently investigating the possibility of setting up a chemical and specialist production facility in South America. This would be a multi $billion investment. What steps should Z take to manage the following risks in this long term venture.
Answer:
Explanation:
NEW QUESTION 107
DRF is a manufacturing company
The internal auditor is conducting an investigation into the operation of the payroll system and has discovered a compliance error The Head of Human Resources (HR) is required to add any new names to the payroll, using a specific computer password The Head of HR was absent for a month because of ill health During that period a senior member of the Wages Office, who is normally responsible only for organising wage payments, was issued a temporary password in order to add new names to the payroll The password was cancelled when the Head of HR returned to work Which TWO of the following statements are correct?
- A. The senior member of the Wages Office should be disciplined for being in breach of the rules
- B. The internal auditor should ignore the error because it only lasted for one month
- C. The senior member of the Wages Office could have committed fraud
- D. The payroll should be checked thoroughly to ensure that only authorised staff are present
- E. The compliance error should be overlooked because it was as a result of staff absence
Answer: A,D
NEW QUESTION 108
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Format of the CIMA P3: Risk Management Exam
- Length of Examination: 90 minutes
- Number of questions: 60
- Language: English
- Format: Numerous choices, multiple responses
- Passing score: 70 percent
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