Question 1

Company M has lost 25% of its revenue in the last three months due to bad debts. One of thereceivables written offwasfroma long standing customer and the other three werefromnew customers. The management accountant has warned the sales team that the company cannot survive any more substantial bad debts.
Which of the following internal controls should be put in place to try and prevent further bad debts?

Options :

A : A credit check should be carried out on each new customer.

B : Credit limits should be set for all customers. However, if the credit limit will cost a sale then sales staff can override this limit.

C : Two sales staff must authorise new customers and sign a form stating that they have done so.

D : An aged analysis of customer balances must be reviewed every month.

E : As soon as a customer payment is overdue they should not be allowed to purchase more until their balance has been reduced

Answer: A,D

Question 2

You have been assigned the role of lead internal auditor. Your task is to carryout the annual assessment of the production line maintenance department.
When planning for this audit, which of the following must be completed?

Options :

A : Prepare the report.

B : Establish whether the controls are adequate or not.

C : Decide how the controls will be tested.

D : Learn all about the systems and controls in the department.

E : Carefully consider any control weaknesses that are reported.

F : Review previous audit findings for the department.

Answer: A,C,D

Question 3

DFR is an online retailer that sells picture frames The software running on DFR's website enables customers to log in and make purchases by inputting an email address as a user name and a password that must contain at least eight characters, including upper and lower case letters, numbers and punctuation marks (e.g. , $ or!) Once logged in, customers can check previous orders that they have placed.
Customers can also use DFR's website to change personal details, including credit card numbers and delivery addresses Whenever they wish to use those facilities, the software sends a text message containing a six-digit number to their mobile phones They must input that number before the system will accept changes to their personal details
Which TWO of the following statements are correct?

Options :

A : It is illogical to have different security measures in place for orders and for access to personal details.

B : The software treats customers' personal details as being more sensitive than their ordering histories

C : The arrangement with the text message will have no effect on the security associated with changing personal details

D : Customers should be able to update the mobile phone numbers in their DFR accounts using only their email addresses and passwords for access

E : The software should never show the whole of a customer-s credit card number on screen, even if the customer has logged in and input the six-digit number.

Answer: A,C

Question 4

Which TWO of the following scenarios should be considered in strategic scenario planning by a publishing company that specialises in academic textbooks?

Options :

A : There could be a change in the technology used by consumers, such as smaller mobile phones with smaller screens

B : Budget changes could have an impact on the funding available to college and university libraries

C : The terms offered by media companies for film rights for books could change

D : The quality of output from printing presses might improve

E : Environmental concerns could lead to a decrease in the availability of trees to make paper

Answer: B,C

Question 5

With regard to the rote of the audit committee which of the following statements are correct? Select ALL that apply

Options :

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 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 provide arrangements for whistle blowing

F : The audit committee should engage consultants to carry out business reviews

Answer: A,D

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