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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.

Move the category of risk to the box beside the risk description it best matches.

Which THREE of the following are true with regard to managing the changeover from an old to a new computer system?

A.

Pilot changeover moves the simplest part of the business to the new system first

B.

Parallel running involves keeping the old system running normally until certain data retention criteria are met or confidence is gained, while the new system deals with the new workload Data input is usually earned out on both systems

C.

All methods of changeover carry high risk and it is the preparation consideration of data compatibility and data cleansing before the changeover which has the biggest impact on the smoothness of the transition

D.

Phased changeover moves individual portions of the business to the new system one at a time

E.

Direct changeover, or big bang, is only used when the systems are significantly different such that comparing the outputs of the two systems is largely irrelevant

F.

Phased changeover is the safest and slowest method of changeover

JKL is a retailer with more than 45 shops around the country. The directors suspect that a serious fraud has occurred at one of the branches and a team of internal auditors has been sent to investigate

An analytical review investigation shows that sales revenue is in line with budget, but overtime payments to shop staff exceed budget by 20%.

How should the internal audit team proceed?

A.

Increase the evaluation of control risk

B.

Conduct additional detailed testing on overtime payments

C.

Increase the evaluation of inherent risk

D.

Conduct additional detailed testing of all figures.

SDF has a variable rate loan of $100 million on which it is paying interest of LIBOR + 2%.

SDF entered into a swap with CV bank to convert this to a fixed rate 7% loan. CV bank charges an annual commission of 0.3% for making this arrangement.

Calculate the net payment from SDF to CV bank at the end of the first year if LIBOR was 3% throughout the year.

Give your answer in $ million, to one decimal place.

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 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.

A project has an NPV of £1,200,000. The present value of material costs which are included in the NPV calculation are £8,000,000.

What is the sensitivity of the project to changes in material costs?

Give your answer to the nearest whole percentage.

Company N is considering opening another production plant in Northland, a country 2000 km from its current production plant location N would also sell its products in Northland

Which TWO of the following are business risks'

A.

The risk that it may be difficult to sell its products in Northland.

B.

The risk that Northland may not be able to support N's technology requirements.

C.

The risk that the Northland currency may strengthen making it expensive.

D.

The risk that interest rates may rise making N's loans expensive.

E.

The risk that Northland's government may introduce policies that would be unfavorable to N.

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.

Which of the following are true of interest rate swaps?

A.

Risk of default is high from the floating interest rate payer if interest rates rise.

B.

An interest rate swap is an external hedging technique.

C.

When interest rates are falling, the risk of default by the fixed interest rate payer is low.

D.

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.

E.

An interest rate swap is an internal hedging technique.