Question 1

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 2

Company W produces mobile phone components and has recently tendered for a substantial contract. The results of the tendering process will not become available until three months from now. If the company is successful it will require 2,000 units of a commodity which is currently traded in an open commodity market for $740 per unit. However, there has been speculation that this commodity could increase substantially in price over the next three months and so the company is considering purchasing the commodity now and storing it for three months.
The funds to buy the commodity would be borrowed at an annual interest rate of 7% and the storage cost of the product would be $5.40 per unit per month. The storage costs would be paid at the end of the three month storage period.
Which of the following represents the gain or loss (to the nearest thousand dollars) that will accrue to Company W assuming that the price of the commodity rises to $800 in three months' time?

Options :

A : $62,000 gain

B : $95,000 gain

C : $88,000 gain

D : $16,000 loss

Answer: A

Question 3

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

Options :

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.

Answer: A,B,C

Question 4

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

Question 5

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, whichwould not be the firm that conducts D plc's external audit.
Identify THREE advantages to D plc of outsourcing internal audit in this way.

Options :

A : Doing so may improve independence.

B : Decisions relating to internal audit can be based solely on cost.

C : Internal audit will have a better understanding of D plc-s objectives and culture.

D : Specialist skills may be more readily available.

E : Risk of staff turnover is passed to the outsource company.

Answer: A,D

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