Question 1

Which method of quantifying risk exposure can be used to calculate the maximum loss on a portfolio occurring within a period of time with a given probability?

Options :

A : Value at Risk

B : Regression analysis

C : Simulation

D : Expected value

Answer: D

Question 2

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 3

A capital investment project shows a NPV of 3,450 at a discounted rate of 8% and an NPV of 1,210 at a discounted rate of 9%.
Whatistheinternal rate ofreturn?

Options :

A : 11.85%

B : 10.85%

C : 10.54%

D : 9.54%

Answer: D

Question 4

GHY is a listed company. Tom isGHY'sCEO and Peter isitsnon-executive Chair of the Board. Tom and Peterbothhave substantial relevant business and industrial experience andboth are believed to have considerable integrity. Tom and Peter quickly developed a good working relationship after Peter's appointment. They have become close friends.
Tom briefs Peter on every aspect of the business. Tom and Peter jointlyagreethe agenda foreveryboard meetingandboth agree on the manner in which matterswill be presented to theboard.
Taking account of the principles of goodcorporategovernance, which of the following statements is correct?

Options :

A : It is entirely appropriate that Tom and Peter have this kind of relationship and both are acting in the best interests of the company

B : Non-contentious board meetings show how well Tom and Peter are running the company and shows that the management is cohesive.

C : The relationship between Peter and Tom may have a detrimental effect on company decision making as the Boardis not always being informed about matters in an unbiased manner.

D : Since the non-executive chair clearly has a significant role within this company there is little danger that any individual will become excessively dominant.

Answer: C

Question 5

The internal audit department has just completed an investigation into the HR department's procedures relating to new staff appointments The head of HR is unhappy with the draft report prepared by the lead internal auditor The report lists several cases in which appointments were made despite the fact that one or more of the entity's formal procedures were not followed
The head of HR has complained that the internal auditor's comments do not allow for the fact that the HR department's staff members are often very busy and do not always have time to conduct every check.
The internal auditor's comments also reflect a failure to complete documents None of the omissions have led to the appointment of an unsuitable member of staff
Which TWO of the following statements reflect an appropriate response by the board of directors to this report?

Options :

A : Ignoring a compliance error altogether may undermine the control environment

B : The procedures should be removed if the HR department staff believe that they are unnecessary

C : The board should be seen to support the internal audit

D : The errors are immaterial because they did not lead to an inappropriate appointment

E : The members of staff responsible for these omissions should be subjected to disciplinary action

Answer: A,C

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