Question 1

B, a construction company, has a policy of carrying out a post completion audit on every construction project undertaken where the value exceeds $1 million.

What is the role of the post completion audit?

Options :

A : To reward staff and celebrate success.

B : To signify the end of the project.

C : To highlight what can be done to improve similar future projects.

D : To apportion blame for things not done well.

Answer: C

Question 2

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?

Options :

A : 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

B : 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.

C : 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

D : 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.

Answer: A

Question 3

The management of U isreviewing internal controls throughout the company. Ithasnoted 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, astheyarethe only person with sufficient experience to do so. They usea very limited number of suppliers becausethey can rely on these suppliers to provide goods of the quality required at a competitive price. They donot 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?

Options :

A : The fact that the purchasing manager uses a very small number of suppliers is, in itself, a sign of poor internal controls.

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 : It is acceptable for clerks in the trade receivable section to make journal adjustments without authorisation, provided they have no access to cash receipts.

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 : Clerks making journal adjustments without reference to their supervisor is evidence of inadequate separation of duties.

F : The way the role of purchasing manager is carried out in U increases the chance that the company will fall victim to fraudulent activity.

Answer: A

Question 4

FGT is evaluating the political risks associated with its operations around the world.

Which of the following would indicate that a particular subsidiary has a high level ofpolitical risk?

Options :

A : Forthcoming elections in the subsidiary-s host country.

B : The subsidiary-s host country requires the active participation of local partners before the subsidiary can operate.

C : Company law in the subsidiary host country is lax.

D : The subsidiary islocated a considerable distance from FGT-s home country.

E : Thesubsidiary employs a large number of nationals from the host country.

Answer: A,B,C

Question 5

Which of the following is an ethical dilemma?

Options :

A : A company is considering giving poorly-paid staff a generous pay rise.

B : A company is deciding whether to issue debt or equity.

C : A company is deciding whether to make a substantial bonus payment to its directors by means of cash or shares.

D : A company must decide whether to settle a claim from an employee who appears to have fabricated a workplace injury. The company want to avoid the cost of defending the claim.

Answer: A

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