P3 CIMA Risk Management exact Exam Questions

Risk Management

Last Update 1 hour ago Total Questions : 339

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Question # 11

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?

The main shopping streets are no longer congested

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

Parking enforcement costs less than before

Revenues from parking have increased

Question # 12

Which TWO of the following are NOT methods used for risk identification?

Carrying out interviews on key members of staff

Designing a process to deal with complaints

Employing external advisors with specialist knowledge

Accounting for waste in a manufacturing process

Brainstorming ideas with colleagues from different disciplines within the business

Question # 13

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 $.

Question # 14

A publicly funded hospital has put various features in place in an attempt to improve strategic control and create an improved control environment.

Which TWO of the following features are most likely to meet this objective?

An Audit Committee consisting of five independent persons with expertise in finance, human resources, and medicine.

A strict policy of capping the maximum salary payable to any employee at 110% of the average earned by that category of employee in the country in which the hospital is located.

The setting up of a Risk Management Committee to examine the strategic risks applicable to the entity and to formally report on a quarterly basis.

Ensuring that all medical staff are aware that their first priority should be to discharge patients as quickly as possible at all times so as to minimise wasting hospital resources.

Ensuring that the Head of Internal Audit examines and authorises all expense claims by hospital staff.

Question # 15

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.

Question # 16

Move the category of risk to the box beside the risk description it best matches.

Question # 17

The shares of a company have a beta factor of 1.15. Therefore, which of the following must be true?

The shares have more unsystematic risk than the stock market average.

The shares have more systematic risk than the stock market average.

The shares have more total risk than the stock market average.

The shares have less unsystematic risk than the stock market average.

Question # 18

Which of the following statements concerning the use of balanced scorecards to measure divisional performance is correct?

Dysfunctional behaviour is more difficult than under traditional reporting because a wide range of factors will be measured and reported.

Dysfunctional behaviour is impossible because divisional managers are evaluated on so many different decisions.

Contradictory and inconsistent targets prevent balanced scorecards being a useful tool for performance evaluation.

The input for balanced scorecard reports comes from many sources so it is not possible to misrepresent performance.

Question # 19

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?

Do nothing, this is a good cause and the amount is insignificant.

Instigate disciplinary action, this is both theft and poor management.

Instigate a confidential, but documented, review with the Production Manager and tell him to stop.

Instigate a review of the production process to potentially reduce the amount of wastage.

Instigate a process whereby edible but unsellable items can be given to the charity officially.

Question # 20

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?

Internal controls are only suitable for large businesses.

Employees could ignore the internal controls.

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

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

Internal controls will usually mean hiring more staff.

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