Free P3 – Risk Management Practice Test Question

Answer is in the explanation below.

Answer is in the explanation below.

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  Establishing an Internal Audit department.

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  Purchase invoices are now approved for payment at branches and a list of approved invoices are sent to head office for payment. The invoices supporting documentation and suppliers' statements are retained at the branches.

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  Excess funds are now invested by the Finance Director in short-term securities. The Finance Director initiates buy and sell transactions and she also receives and retains all correspondence relating to the investments.

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  A policy has been initiated to complete a physical inventory of all non-current assets at least annually. This is then reconciled with the non-current asset register.

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  N has just opened a bank account in the currency in which the newly opened branch is now operating.
  

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  Economic risk is easy to measure

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  Economic risk may be caused by international trade

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  Economic risk is something which cannot be avoided

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  Economic risk is influenced by many factors
  

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  Integrity

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  Objectivity

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  Professional competence and due care

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  Confidentiality

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  Professional behaviour
  

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  Customers' disposable income may change.

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  TYU's competitors may have variable rate borrowings.

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  TYU's suppliers may have borrowings.

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  TYU's cost of capital will vary with interest rates.

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  TYU's competitors may have fixed rate borrowings.
  

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  M could increase the number of quality control staff.

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  M could introduce a procedure where quality control staff sign a form at the end of each day to say they have examined 1 in 10 products for defects and they are satisfied with the quality.

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  The production director could examine one in every 10 products and sign a form to say they are satisfactory.

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  M could service machinery at least once a month as recommended by the machinery supplier.

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  M could check all employees qualifications to ensure they are qualified for their jobs.
  

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  The audit should consider the initial survey report when the land was purchased to see if the survey mentioned the unstable soil.

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  The audit should look at documentation to ensure proper procedures were followed at all stages of the project.

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  The audit should consider what lessons could be learned for future projects.

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  The audit should find out who was to blame for the project being over budget.

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  The audit should consider whether it should have built the factory without underpinning and sold it on quickly.
  

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  K plc is in line with best practice as it only has NEDs on its Risk Committee.

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  There is no possible conflict of interest in relation to T's position as a NED and as Managing Director of a supplier company since in both roles he would clearly want K plc to prosper.

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  The Risk Committee should have rejected the proposal to enter the Asian market merely because it exposed K to greater risk than the other markets in which it operates.

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  The absence of a Nominations Committee exposes K plc to the risk that the Chief Executive may have unfettered power.
  

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  H would pay 6.2%

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  H would pay 6%

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  H would pay Libor + 1%

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  H would pay 6.4%
  

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  Every member of the entity.

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  The board of directors only.

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  Managers and directors only.

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  The shareholders.
  

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  YGH should consider introducing more detailed checking of the assumptions underlying the costs of future projects.

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  The production department should not be granted funding for future projects unless there are compelling reasons to proceed.

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  G should be held accountable for the overspend on the project.

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  H should be held accountable for the overspend on the project.
  

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  When it asks its agents to buy product and marketing material up front.

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  When it offers returns on its agents' investments that seem remarkable.

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  When it offers its agents more reward for recruiting other agents than for selling its product.

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  When its training programmes promise to unlock the secret of selling its product.
  

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  It is entirely appropriate that Tom and Peter have this kind of relationship and both are acting in the best interests of the company.

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  Non-contentious board meetings show how well Tom and Peter are running the company and shows that the management is cohesive.

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  The relationship between Peter and Tom may have a detrimental effect on company decision making as the Board is not always being informed about matters in an unbiased manner.

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  Since the non-executive chair clearly has a significant role within this company there is little danger that any individual will become excessively dominant.
  

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  Investing in projects with the shortest payback period.

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  Investing in projects with positive net present value.

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  Investing in projects with the greatest level of risk.

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  Not paying a dividend for several years in order to invest in new projects.