[Apr 14, 2023] 100% Latest Most updated P3 Questions and Answers [Q151-Q172]

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[Apr 14, 2023] 100% Latest Most updated P3 Questions and Answers

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The importance of risk management cannot be overstated in today’s business environment. Organizations face a wide range of risks, from financial and operational risks to strategic and reputational risks. Effective risk management is essential for businesses to succeed, and the CIMA P3 exam is designed to ensure that candidates have the skills and knowledge necessary to manage risks effectively. By passing this exam, candidates demonstrate their ability to contribute to the success of their organization by identifying and mitigating risks that could impact its performance.

The exam covers a range of topics related to risk management, including risk identification, analysis, evaluation, and response. Candidates will need to demonstrate their understanding of the principles of risk management and how to apply them in practical scenarios. The exam also covers topics such as risk appetite, risk culture, and risk reporting, which are essential for effective risk management. Passing the P3 exam is an achievement that demonstrates a candidate’s ability to manage risks in a complex business environment, and it is highly valued by employers in the finance and accounting industries.

QUESTION 151
The senior manager in the accounts department is going on annual leave for three weeks and Jo, a supervisor is being put in charge of the department for that time.
Which TWO of the following statements are correct?

Authorisation of exceptional overtime due to the year end which takes place while the senior manager is on leave should be postponed until the senior manager returns

The annual staff appraisals should be postponed until the senior manager returns

Authorisation of expenses should wait until the senior manager returns.

Jo should not have all of the same authority as the senior manager

Job interviews for an office junior should be cancelled until the senior manager returns.

QUESTION 152
Identify, from the list provided, which category of business risk most accurately describes the events detailed below.

QUESTION 153
P sells mobile phones and accessories The directors of P are concerned that there is a high risk of fraud being carried out by employees in the retail stores. There is a high turnover of employees in the shops as the sales targets are difficult to meet Which TWO of the following controls would reduce this risk?

Ensure employees work with the same staff all the time to build team spirit

References should be obtained for all new employees from their last two employers

Introduce a policy that all new employees must undertake a three month trial period

Carry out a criminal record check for all new employees.

Only employ people who have been employed in the retail mobile phone industry for two years

QUESTION 154
MNB is a multinational IT company with headquarters in Asia and with operations in all continents.
MNB is attempting to expand its operations in Europe. This is seen as a major challenge as the European market is very well developed and highly competitive.
MNB develops and manufactures its own products. Parts and assemblies are sourced across Asia, America and Europe. These are sometimes purchased locally as a condition of a contract, but MNB aims to include as much of its own equipment as possible. Transfer prices between MNB’s subsidiaries can be set in YEN, USD, EURO, GBP. Transfer prices are revised every month in line with production times as most goods are made on short order with sales cycles running at 3-4 months.
What types of risk are being presented here?

Political risk

Currency risk

Economic risk

Environmental risk

Fraud risk

Legal risk

QUESTION 155
A UK based company is considering an investment of GB£1,000,000 in a project in the USA. It is anticipated that the following cash flows will arise from this project.
The cash flows will be either US$400,000 with a probability of 40% or US$700,000 with a probability of 60% for each of the next three years; remitted to the UK at the end of each year.
Currently GB£1.00 is worth US$1.30.
The expected inflation rates in the two countries over the next four years are 2% in the UK and 4% in the US.
Applying the Purchasing Power Parity Theory, which of the following represents the expected net present value of the project in GP£ (to the nearest whole pound)?

GB£287,639

GB£391,640

GB£(111,973)

GB£554,047

QUESTION 156
E purchases parts for one of the machines it manufactures from Country X Place the risk classification next to the risk it relates to:

QUESTION 157
S, a qualified and experienced professional accountant, has been appointed as a non-executive member of the Audit Committee of X X has recently obtained a listing on the second tier of a reputable Stock Exchange B, the Finance Director, is only worried about the maintenance of proper financial controls and is less concerned with operational controls S has asked A.
The Production Director, to produce regular reports for the Audit Committee on production specification compliance and related issues A is concerned that this means S does not think he is doing his job properly and doubts his integrity In relation to this scenario, which of the following statements are valid?
Select ALL that apply.

The appointment of an independent professionally qualified and experienced accountant will help strengthen the Audit Committee.

A is correct in believing that being asked to report to the Audit Committee in the manner described above suggests a lack of trust in his ability or integrity

The Audit Committee should plan for the receipt of regular reports on production specification compliance and related issues

B is correct to be more concerned about the maintenance of financial controls because they are inevitably more important than operational controls.

If X is not seen to have an effective Audit Committee it will be exposed to increased market risk

There is no benefit for X of A producing reports for the Audit Committee unless there are some members on the Audit Committee who have expertise in the production area

QUESTION 158
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?

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.

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.

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.

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.

QUESTION 159
VBN’s home currency is the V$. On 1 January, VBN must make a payment of C$2 million on 31 March of that same year.
On 1 January the spot exchange rate was V$1 = C$0.4.
On 1 January VBN paid $180,000 for a call option to buy C$2 million for V$5.5 million on 31 March. VBN’s cost of borrowing was 8% per year.
On 31 March the spot rate was V$1 = C$0.45.
What was the total cost, including the cost of the option, of settling the payable?

V$4.628 million

V$5.684 million

V$4.444 million

V$5.5 million

QUESTION 160
ABC has recently appointed a Chief Information Officer who has announced that he wants to start a major clean up starting with all desktop and laptop equipment.
Which THREE of the following measures should be adopted to help enhance security’?

Make an employee of the month award for whoever spots the most bogus emails.

Issue a corporate policy on email use

Make security training available to anyone who wants it.

Set up a hot line in the service desk for any security queries.

Automate anti-virus update processes so they cannot be avoided

instruct all staff not to click on any links in emails from anyone outside the company

QUESTION 161
P Ltd manufactures and sells electrical goods through retail outlets.
N is P Ltd’s Sales Director. He has been recently promoted from a senior sales position with P Ltd. He has been forced to spend the first six months as Sales Director on dealing with an administrative mess left behind by the previous sales director.
You are a Senior Management Accountant at P Ltd. You have worked with N for many years.
N has worked hard and has made many changes that have brought significant benefit to the business.
N has asked you to postpone the recording of some purchase invoices so that he will meet his quarterly targets on profit margin.
What should you do?

Collect all the facts, distance yourself from the situation but say nothing.

Write up the facts of the issue and put it on your files.

Document the situation and present the facts to your manager.

Do nothing, no rules have been broken, tell N that you cannot do as he asks and that he needs to abide by the professional codes.

QUESTION 162
Select the most appropriate level of responsibility for managing each of the following risks.

QUESTION 163
WTW is a global company which produces high-tech equipment such as smart televisions and mobile phones The CFO has just resigned, having been offered a post at a competitor The CFO was well regarded and WTWs share price has fallen in response to the announcement At a board meeting the production director commented that the share price fall is the fault of the nomination committee Which THREE of the following statements are correct?

The nomination committee should prepare a description of the role and capabilities required for the CFO’s replacement

If the nomination committee had been working effectively the CFO would not have resigned

When planning the CFO’s replacement the nominations committee should consider the diversity of the board

The nomination committee should have considered succession planning for directors before the CFO resigned

Most of the members of the nomination committee should be executive directors as they are responsible for ensuring the share price recovers quickly.

QUESTION 164
The safety guard on a piece of equipment was broken. The factory manager suspended an operator who refused to operate the equipment until it was repaired. The factory manager paid another operator a bonus for operating the damaged equipment until the safety guard could be repaired.
What does this incident say about the control environment within that factory?

Management is not particularly concerned with managing risks.

Employees will perceive that management does not care about health and safety risks.

This factory’s safety record is likely to be poor.

Employees are motivated to maintain productivity.

Management has a proportionate and considered attitude towards risk.

QUESTION 165
University B has several departments. Each department at times obtains funding from different sources such as government grants and industry sponsorships. The central management of the university has decided to develop a module within its current Information System to track these funds centrally.
The central management of the University has decided to utilise in-house expertise in order to build this module.
Which THREE of the following represent advantages of developing this module and doing so using in-house expertise?

Time will be saved because there will be no need to explain the basic structure and operations of the University to an outside contractor.

In-house experts will be more easily able to integrate the module into the existing system.

There is a better chance that in-house experts will spot long-standing inefficiencies or anomalies in the existing system.

The system may limit the freedom of heads of department to act with autonomy.

The system will make it easier for central management in the University to access the performance of individuals, departments and groups.

QUESTION 166
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?

Integrity

Objectivity

Professional competence and due care

Confidentiality

Professional behaviour

QUESTION 167
A’s directors do not believe that they always get value for money from their investment in capital projects.
Over the past decade the company has invested in 55 projects that have cost more than $1m. They are considering introducing a system of post completion audit to see if this will help them to understand any problems they have had with projects in the past. They hope to use the results of the post completion audits to significantly improve the results of their capital investments State whether you agree or disagree with the points raised by A’s directors.

QUESTION 168
XYZ is unhappy with the way it decides on the likelihood and impact of risks when it completes the TARA matrix XYZ has decided to try other ways to get more consensus over the evaluation of risks as high, medium and low impact and likelihood Which of the following methods is likely to be most successful?

Searching online to see how the risks are evaluated in other companies

Sending questionaires to all employees

Using the Delphi method

Allowing the risk manager to decide.

QUESTION 169
Which of the following statements best explains why a corporate treasury department should be established as a cost centre rather than a profit centre?

The Treasury Department should not be encouraged to speculate.

The Treasurer should not have a great deal of responsibility.

There is no way for the Treasury Department to generate revenue.

The Treasurer has the ability to manipulate the Department’s reported profit.

QUESTION 170
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?

M’s shareholders would only be exposed to the systematic risk from the investment in the new venture.

M’s credit rating is likely to fall as a result of this new venture.

The directors would only be exposed to the systematic risk from the investment in the new venture.

M’s diversification will mean less risk for the shareholders.

QUESTION 171
YGH has recently completed a post completion audit on a five year contract that has only recently come to a conclusion. The main finding was that the project delivered most of the expected benefits, but that it cost significantly more to implement than had been anticipated at the project appraisal stage. YGH would not have proceeded if the true cost had been known at that stage.
The project was the responsibility of the production department, which is presently managed by G.
When the project was proposed, the production department was managed by H.
H is now YGH’s Director of Operations.
How should the finding from this post completion audit be interpreted?

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

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

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

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

QUESTION 172
Match the descriptions shown in the boxes below with the method of quantifying risk exposure it best describes.