P3 Exam Study Guide Free Practice Test LAST UPDATED DATE Jun 05, 2023

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NEW QUESTION # 153
The managers of a company are agents for the shareholders tasked with increasing shareholders' wealth.
Which of the following will usually increase shareholders' wealth?

• A. Investing in projects with positive net present value.
• B. Investing in projects with the greatest level of risk.
• C. Not paying a dividend for several years in order to invest in new projects.
• D. Investing in projects with the shortest payback period.

Answer: A

NEW QUESTION # 154
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 # 155
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.

Answer:

Explanation:

NEW QUESTION # 156
The management of U is reviewing internal controls throughout the company. It has noted the following:-
1. In the trade receivables section, journal adjustments are made by the clerks, without any reference to their supervisor. Journal adjustments may relate to sales returns, discounts allowed, or transfers between accounts.
2. In the purchasing department, the purchasing manager selects and approves all suppliers, as they are the only person with sufficient experience to do so. They use a very limited number of suppliers because they can rely on these suppliers to provide goods of the quality required at a competitive price. They do not keep any documents in relation to negotiations with other potential suppliers or other quotes obtained.
In relation to the above, which of the following statements are valid?

• A. The way the role of purchasing manager is carried out in U increases the chance that the company will fall victim to fraudulent activity.
• B. It is acceptable for clerks in the trade receivables section to make journal adjustments without authorisation provided the amounts involved are not material to U's financial statements.
• C. Clerks making journal adjustments without reference to their supervisor is evidence of inadequate separation of duties.
• D. The fact that the purchasing manager does not keep documentation relating to negotiations with suppliers, or potential suppliers, is evidence that they are involved in fraudulent activity.
• E. It is acceptable for clerks in the trade receivable section to make journal adjustments without authorisation, provided they have no access to cash receipts.
• F. The fact that the purchasing manager uses a very small number of suppliers is, in itself, a sign of poor internal controls.

Answer: A,C

NEW QUESTION # 157
UIO designs clothes and pays third parties to manufacture them A recent television programme showed that two of the factories used by UIO were employing illegal immigrants whose status was used by the factory's owners to force them to work for low wages and in unpleasant and dangerous conditions. These factories were located in a developed country with strong labour laws Classify each of the following statements as true or false:

Answer:

Explanation:

NEW QUESTION # 158
D plc is a public relations company. Shares in D plc have recently been listed on the UK stock exchange.
D plc has an internal audit department that reports to the Chief Executive Officer (CEO). The CEO is considering outsourcing internal audit to an audit firm, which would not be the firm that conducts D plc's external audit.
Identify THREE advantages to D plc of outsourcing internal audit in this way.

• A. Specialist skills may be more readily available.
• B. Doing so may improve independence.
• C. Decisions relating to internal audit can be based solely on cost.
• D. Internal audit will have a better understanding of D plc's objectives and culture.
• E. Risk of staff turnover is passed to the outsource company.

Answer: A,B,E

NEW QUESTION # 159
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 # 160
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 # 161
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. An interest rate swap is an external hedging technique.
• E. Risk of default is high from the floating interest rate payer if interest rates rise.

Answer: A,D,E

NEW QUESTION # 162
In relation to the use of the adjusted present value (APV) technique, which of the following statements are correct?

• A. The interest tax shield on the project's debt must be known, or at least estimated.
• B. To apply APV the actual amounts of debt and equity in the capital structure must be known.
• C. The weighted average cost of capital - net present value technique and the APV technique will, if applied correctly, give the same answer.
• D. To apply APV, the proportions of debt and equity in the capital structure must be known.

Answer: A,C

NEW 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?

• A. When planning the CFO's replacement the nominations committee should consider the diversity of the board
• B. The nomination committee should prepare a description of the role and capabilities required for the CFO's replacement
• C. Most of the members of the nomination committee should be executive directors as they are responsible for ensuring the share price recovers quickly.
• D. If the nomination committee had been working effectively the CFO would not have resigned
• E. The nomination committee should have considered succession planning for directors before the CFO resigned

Answer: A,B,E

NEW QUESTION # 164
The government health service in country H employs well over 100,000 staff in various locations throughout the country. Traditionally, local management has had high levels of autonomy in relation to personnel issues and there are several different human resources (HR) managers located across various regions.
The government has decided to introduce a completely new HR/payroll information system to have just one database containing all relevant information about every staff member on the payroll (start date, job title, salary and all other details) and to use this information to begin streamlining recruitment and HR policies.
The government has outsourced the system's development to a reputable company.
Which of the following are disadvantages associated with this IT project?

• A. Any initial problems in running the system could have serious repercussions as it could lead to, for example, staff not being paid, payroll tax not being properly collected, and similar difficulties.
• B. There is a risk that the system will not capture all of the existing terms and conditions of staff, thus leading to industrial relations problems later.
• C. The system could make it more difficult to employ specialist medical staff on terms and conditions which are different from the normal terms and conditions available.
• D. The amount of data storage space required to run the system may not be available.
• E. The government is very heavily dependent on the contractor to whom this assignment is outsourced and if they do not to perform as required this could have serious consequences.
• F. There is a risk that significant anomalies in the current system will be highlighted.

Answer: A,B,E

NEW QUESTION # 165
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.

Answer:

Explanation:

NEW QUESTION # 166
Move the category of risk to the box beside the risk description it best matches.

Answer:

Explanation:

NEW QUESTION # 167
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 # 168
NLC, a retail chain, is considering moving its information systems which support its point of sale infrastructure into the cloud.
Which TWO factors should it consider in choosing its supplier?

• A. Certified security
• B. Proximity of facilities to head office
• C. Robust service level agreement
• D. Cheapest option offered

Answer: A,C

NEW QUESTION # 169
Which of the following statements concerning the role of the Audit Committee is correct?

• A. The Audit Committee should decide annually whether it needs an internal audit function.
• B. The Audit Committee should engage consultants to carry out business reviews.
• C. The Audit Committee should decide annually whether it needs an external audit function.
• D. The Audit Committee should review and monitor the effectiveness of the company's internal audit function.
• E. The Audit Committee should design the system of internal controls.
• F. The Audit Committee should provide arrangements for whistle blowing.

Answer: A,D,F

NEW QUESTION # 170
Laura is an accounts clerk. She is supposed to sign each invoice as evidence that she has conducted checks against supporting documents. Sometimes Laura signs invoices without making these checks.
Terry is a member of the internal audit team. Terry has been told to conduct compliance tests on whether Laura is checking the invoices properly.
Which of the following would give Terry a false sense of assurance that Laura's checks have been operating?

• A. Terry examined a sample of invoices to make sure that they had been signed by Laura. All had been signed.
• B. Terry asked Laura a series of open-ended questions about the operation of the purchases system. She did not mention anything about detailed checks of invoices against documents.
• C. Terry selected a sample of purchase invoices and compared each to the supporting documents that Laura is supposed to review. Every one of Terry's invoices was supported by the related documents.
• D. Terry worked at a spare desk in the accounts department and quietly watched Laura without telling her.
  She checked every invoice carefully while Terry was present.
• E. Terry reviewed a sample of invoices for purchases of plant and equipment and found that Laura had not signed them. Laura explained that she believed that those were authorised by someone else, although the accounts manual indicates that it was her responsibility.

Answer: A,C,D

NEW QUESTION # 171
S is a senior production manager for LK, which is about to set up a new production line requiring S4 million of new specialist equipment.
S's daughter goes to school and is friends with the daughter of R.
the sales manager in GG. GG is a potential supplier of the specialist equipment that LK requires.
R owns a holiday home. S's daughter regularly accompanies R's daughter on family vacations at this holiday home, all at R's expense.
S is the only person working for LK who is qualified to select the specialist equipment. GG will definitely bid for the sale.
What should S do?

• A. S should declare an interest and withdraw from the assessment process.
• B. S should permit GG to bid, but should insist that R should not be involved.
• C. S should declare an interest, giving details of his daughter's friendship with R's daughter, but should participate fully in the assessment process
• D. S should exclude GG from the bidding process.

Answer: C

NEW QUESTION # 172
The shares of a company have a beta factor of 1.15. Therefore, which of the following must be true?

• A. The shares have more systematic risk than the stock market average.
• B. The shares have more total risk than the stock market average.
• C. The shares have less unsystematic risk than the stock market average.
• D. The shares have more unsystematic risk than the stock market average.

Answer: A

NEW QUESTION # 173
Why do businesses take risks?
Select the TWO correct answers.

• A. Risk taking provides businesses with opportunities to make better returns.
• B. Risk taking allows businesses to save time by not having to find out all the facts before they embark on new projects.
• C. Risk taking can assist businesses to gain an advantage on their competitors.
• D. Risk taking can give the impression that senior management roles are very dynamic.
• E. Risk taking allows for multiple random outcomes, some of which may be worth chasing.

Answer: A,C

NEW QUESTION # 174
An oil company has entered into a joint venture with a competing oil company to develop a new oil field. The joint venture arrangement is intended to mitigate the risks associated with developing the oil field.
The following disclosure appears in the oil company's risk report:
"Many of our large projects and operations are conducted through joint ventures. These arrangements involve complex risk allocation and indemnification arrangements and we have less control over these activities than we would have if we had full ownership and control. Our partners may have economic or business interests that are opposed to ours, and may exercise the right to block key decisions or actions. We believe the joint arrangement is in our best interest." Which of the following statements are correct?

• A. If the risk report had not reported the risk the shareholders might not have been aware of the risk.
• B. Now the shareholders know the directors are aware of the risk.
• C. The shareholders now have more useful information.
• D. The risk report says nothing useful about the risk.
• E. The risk report means that the shareholders know exactly how bad the risk is.

Answer: A,B,C

NEW QUESTION # 175
UIO designs clothes and pays third parties to manufacture them A recent television programme showed that two of the factories used by UIO were employing illegal immigrants whose status was used by the factory's owners to force them to work for low wages and in unpleasant and dangerous conditions. These factories were located in a developed country with strong labour laws Classify each of the following statements as true or false:

Answer:

Explanation:

NEW QUESTION # 176
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