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UIO sells mobile phones through a cham of 100 shops spread across the country Shop managers have considerable discretion over pncmg and the incentives offered to sales staff Shop managers are evaluated on the monthly contribution from completed sales. Those who exceed targets by more than 10% for three successive months are promoted Those who fail to achieve monthly targets in two successive months lose their jobs

Which of the following statements are true of the performance management of UIO's shop managers?

Select ALL that apply.

A.

UIO's shop managers have an incentive to offer excellent customer service

B.

UIO's shop managers are encouraged to take risks that may harm UIO

C.

UIO's shop managers have an incentive to develop attractive sates promotions for their shops

D.

UIO's shop managers are encouraged to sell phones at a loss

E.

UIO's shop managers may have very little sense of loyalty to the company

You have been assigned the role of lead internal auditor. Your task is to carry out the annual assessment of the production line maintenance department.

When planning for this audit, which of the following must be completed?

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.

RFD, a listed company, is considering making an investment in a risky new venture. RFD has a substantial cash surplus that will be used to acquire the necessary resources. It is unlikely that RFD would have been able to raise finance for this investment because the company is already highly geared.

Which of the following statements about stakeholders' conflicting interests are true?

A.

RFD's shareholders are exposed to the systematic risk from this project and the directors are exposed to total risk.

B.

RFD's lenders are likely to suffer a greater risk than RFD's equity investors.

C.

Neither RFD's shareholders or lenders are likely to have the means to prevent the directors from making this investment.

D.

RFD's existing employees are likely to enjoy a significant upside risk from this project.

E.

The diversification of RFD's interests will reduce the risks for all stakeholders.

SDF is a quoted company. Which of the following matters should normally be dealt with by SDF's audit committee?

A.

The external auditor has requested a higher fee than normal for the forthcoming financial year because new legislation will require additional audit work.

B.

The Head of Internal Audit is concerned that a recent internal audit investigation may have revealed serious compliance failures.

C.

The external auditor is concerned that an accounting policy selected by the Finance Director does not comply with the spirit of the relevant accounting standard.

D.

The external auditor has identified a material error, due to a clear miscalculation, in the draft financial statements.

E.

The Finance Director will be retiring within the next year and a replacement will have to be found.

C Ltd is a private, family-owned company which is hoping to become listed on a recognised Stock Exchange within the next two years. At the moment, the Board of Directors comprises five directors; four of whom are from the founding family and all of whom are involved in the day-to-day running of the business. The remaining director obtained a seat on the Board three years ago as a condition of an investment by a venture capital fund.

The Board meets in half-day sessions once a fortnight and the Board meetings are reasonably well run. All decisions are taken by the Board as a whole. There are no sub-committees.

Which of the following steps would it be appropriate for C Ltd to take in the light of the proposed listing?

A.

Appoint enough independent non-executive directors (NEDs) that they make up at least 50% of the Board.

B.

Appoint one of the NEDs as Chair of the Board.

C.

Insist that the venture capital company director be removed as he is not necessarily motivated to act in the best interests of C Ltd.

D.

Set up at least three sub-committees namely remuneration, nomination, and audit committees.

E.

Ensure that the current executive directors are given 10 year contracts starting on the day the company is floated, to ensure consistency and continuity in the management of the company.

F.

Set up an "agenda setting" sub-committee consisting of the current executive directors to decide the agenda for each Board meeting.

UJK manufactures garden machinery. The company is dependent upon another manufacturer for the motors that power its products.

One of the factors that is being considered in a stress test requested by UJK's Board is the possibility that the motor manufacturer increases its selling prices by 10% The motor accounts for a significant proportion of the overall manufacturing cost of UJK's products

Which of the following are correct?

A.

The motor manufacturer should be contacted and told that a substantial increase in selling prices would have a drastic impact on UJK

B.

The possibility of an increase in selling prices due to increased costs should be noted in the stress test report

C.

UJK should estimate the impact on demand of increasing selling prices to pass on the increased cost of the motors.

D.

The impact of absorbing the increased cost of motors on UJK's profits should be calculated.

E.

UJK should identify an alternative vendor of suitable motors as part of its stress test

Under the COSO Enterprise Risk Management Framework, who is responsible for risk management?

A.

Every member of the entity.

B.

The board of directors only.

C.

Managers and directors only.

D.

The shareholders.

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 unsystematic risk than the stock market average.

B.

The shares have more systematic risk than the stock market average.

C.

The shares have more total risk than the stock market average.

D.

The shares have less unsystematic risk than the stock market average.

M, a manufacturing company, has had some problems with defects in one of the main products it produces. This product has been made by the company for many years and is very profitable. Last month it had over 300 defects reported by customers which is more than 15% of products sold. This is a reputation risk for M and is also affecting profitability.

Which of the following controls could M introduce to reduce defects and also increase profitability?

A.

M could increase the number of quality control staff.

B.

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.

C.

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

D.

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

E.

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

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.

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.

B.

There is a risk that significant anomalies in the current system will be highlighted.

C.

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.

D.

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.

E.

The amount of data storage space required to run the system may not be available.

F.

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.