A UK based company is considering an investment of GB£1,000,000 in a project in the USA. It is anticipated that the following cash flows will arise from this project.

The cash flows will be either US$400,000 with a probability of 40% or US$700,000 with a probability of 60% for each of the next three years; remitted to the UK at the end of each year.

Currently GB£1.00 is worth US$1.30.

The expected inflation rates in the two countries over the next four years are 2% in the UK and 4% in the US.

Applying the Purchasing Power Parity Theory, which of the following represents the expected net present value of the project in GP£ (to the nearest whole pound)?

K Ltd is an on-line travel agency specialising in budget package holidays to a small number of popular locations. The holidays that it sells are made up of a "package" of flights, hotel accommodation and food. K Ltd's Finance Director is concerned that the company's scope of operation is too narrow and wishes to diversify.

Identify TWO actions that K Ltd should take immediately.

When a new computer system is being implemented there are several possible methods for managing the changeover from the old system to the new system.

Which THREE of the following are true?

YUI owns 18 factories, which are spread around the country. Each factory employs 500-700 production staff and has its own administrative and accounts departments.

It has recently been discovered that the manager in charge of YUI's Hightown factory has been overstating his personal expenses claims for the past five years. The total amount stolen in this manner has been estimated at $10,000.

Why would it have been relatively difficult to have prevented this fraud?

JHU is a retail chain that has 20 shops JHU's Internal Audit Department has just completed an investigation into the operation of controls over credit card payments by shop customers In 12 cases, the shops were complying with JHU's standard procedures The other 8 shops had serious deficiencies that differed between shops.

The Internal Audit Department has drafted a detailed report on the outcome of the audit visit carried out at each shop, but has not yet submitted them to senior management.

Which TWO of the following statements are correct?

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?

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?

B is a horticultural retailer with limited funds available to acquire new retail property.

B's Finance Manager has analysed two potential property investments. Investing in property P shows an IRR of 21% while the IRR on property Q is 17%.

The Finance Manager has also advised that the NPV for property P is $750K, while the NPV of property Q is $850K.

The Board needs to choose between the two properties as it has insufficient funds for both. Based purely on the Finance Manager's analysis, which of the following is true?

The managers of a company are agents for the shareholders tasked with increasing shareholders' wealth. Which of the following will usually increase shareholders' wealth?

The Board of Directors of VCX, a state-owned electricity company, includes four executive directors the Chief Executive Officer, the Finance Director the Operation Director and the Technical Director

All of the shares in the company vest in the Office of the Minister for Energy, who is entitled to appoint two non-executive directors to the Board It has been alleged that the Minister appoints political "insiders" who have no particular knowledge of. or interest in. the electricity industry

There are three further non-executive directors

• L, who spent seven years as Chief Executive of VCX, but retired from that role two years ago,

• M, who spent several years on the Board of a state electricity company in a different country to VCX but who resigned from it before accepting the position with VCX: and

• N, who is a qualified and experienced professional accountant

In relation to best practice in respect of Corporate Governance, which of the following statements are valid? Select ALL that apply

JHG manufactures inexpensive cars that compete largely on price Its cars have very basic equipment and small but economical engines JHG's Board is considering launching a luxury brand of cars that will be far better equipped, more comfortable and have much better performance

Which THREE of the following would be relevant factors to incorporate into the stress testing of this new strategy to create a luxury brand?

P Ltd, a manufacturing company, is considering a new capital investment project to set up a new production line. The initial appraisal shows a healthy net present value of $6,465 million at a discount rate of 10% as shown in the table below:

However, management is unsure about the demand for the product which will be produced and has insisted that the future revenues should be reduced to certainity equivalents by taking 70%, 65% and 60% of the years 1,2, and 3 cash inflows respectively.

What should P do?

GHJ makes large export sales to customers in Country A, whose currency fluctuates significantly against GHJ's home currency. GHJ also makes large purchases from suppliers in Country A. All of these transactions are in Country A's currency.

GHJ's Treasurer does not actively hedge currency risks because there is a natural hedge in place due to the company making both sales and purchases in the same currency.

GHJ's Board has instructed the Treasurer to put active hedging measures in place because the Risk Report would otherwise have to disclose the fact that GHJ has a currency risk which is not actively hedged.

Which of the following statements are correct?

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?

AB is a manufacturing company which relies heavily on its computerised systems for customer management

Which of the following is the most important factor which will enable AB to continue to operate after an incident which destroys its central computer*?

BCD has recently experienced a cyber security breach which fortunately was carried out by someone more interested in demonstrating the weakness in its defence than by someone malicious

This has made BCD realise that its cyber defence is inadequate BCD has engaged a cyber security consultant who has advised BCD to set up a Computer Incident Response Team (GIRT)

What THREE of the following activities would this CIRT have responsibility for?

Recruit specialist security staff to avoid an incident

Which of the following statements concerning the role of the Audit Committee is correct?

DFG's home currency is the D$.

DFG is heavily exposed to the exchange rate between the D$ and the L$, country L's currency. DFG's treasurer has noted the following:

   • Inflation has been running at 5% in DFG's home country and 8% in country L

   • Interest rates are 7% in DFG's home country and 11% in country L

   • The spot rate is D$1.0000 = L$2.1000 and the three month forward rate is D$1.0 = L$2.1196

Which of the following statements is consistent with these figures?

Jo is a well known entrepreneur who founded JIS. a global producer or high technology equipment JIS has grown rapidly and was listed two years ago JIS's share price has grown steadily since its listing Jo serves as both CEO and Chair A recent newspaper article has suggested that JIS would benefit from having a separate CEO and Chair

Which TWO of the following arguments are valid?

V buys vegetables and fruit from three farms located in a different part of V's country and sells them to large supermarket chains.

A recent newspaper magazine had an article on these farms showing that the farms employ illegal immigrants whose status was used by the factory's owners to force them to work for low wages and in unpleasant conditions. They are forced to live in small overcrowded caravans with no running water. They are also given meals which are cold and poor quality. These farms are located in a developed country with strong labour laws.

Classify each of the following statements as true or false.

Which of the following statements are correct?

The long-term prospects for interest rates in the UK and the USA are 2% and 6% per annum respectively.

The GBP/USD spot rate is currently GBP/USD1.71.

Using interest rate parity theory, what GBP/USD spot rate would you expect to see in six months' time?

A junior sales clerk at BCD, a wholesale jewellers, received an email which appeared to be from a well known parcel delivery company informing her that a delivery had been attempted outside office hours and had consequently failed She was asked to click on a link and complete some seemingly innocent but logical questions to effect the delivery on the next day She thought no more about it but was very surprised the next month to be awarded salesperson of the month as her sales had doubled

Unfortunately, on investigation it was found that this was as a result of several fraudulent orders for high-value items that had seemingly been placed by an existing customer but delivered to a new address, which turned out to be a temporary box number The existing customer's credit card had been fraudulently charged for these orders

Which of the following types of cyber-attack had the sales clerk been a victim of?

An internal audit investigation involved conducting compliance tests on the processing of purchase invoices.

The purchase ledger clerk compares invoices against purchase orders and passes them for payment The invoices are then input into a computerised purchase ledger system The system checks that the supplier has a valid purchase ledger account, as authorised by the chief buyer, before crediting the supplier's account with the value of the invoice.

The internal auditor checked a sample of recorded purchase invoices against their corresponding purchase orders The internal auditor found four cases where invoices could not be agreed to corresponding purchase orders.

What is the potential significance of this compliance error?

NLC, a retail chain, is considering moving its information systems which support its point of sale infrastructure into the cloud.

Which TWO factors should it consider in choosing its supplier?

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?

Smalltown had a problem with people parking cars on the town's mam shopping streets instead of in the nearby car parks The parked cars created congestion and made it difficult for delivery vehicles to unload Smalltown's local government had employed traffic wardens to enforce parking regulations by issuing parking fines to motorists who parked for more than the permitted 30 minutes.

The local government took further action to deal with this problem It banned parking on the busiest streets, it introduced parking charges in the remaining streets and it made it free to park m the town's car parks for up to two hours Fewer people now park cars on the streets because of the charges, but those who do generate significant revenues for the local government Fewer traffic wardens are required and so wage costs have reduced

The local goverment auditors have decided to carry out a value for money audit of the parking system

Which of the following is a measure of effectiveness?

University B has several departments. Each department at times obtains funding from different sources such as government grants and industry sponsorships. The central management of the university has decided to develop a module within its current Information System to track these funds centrally.

The central management of the University has decided to utilise in-house expertise in order to build this module.

Which THREE of the following represent advantages of developing this module and doing so using in-house expertise?

JNH is a major corporation that stores its customer database in the Cloud JNH has suffered a data breach that has led to customer credit card details being made available for sale on the internet JNH's Head of Security wishes to analyse network traffic at the cloud-based server in order to gain a better understanding of the manner in which the data was intercepted, but has been refused access.

Which of the following is the most likely explanation for the third-party owner's refusal to assist JNH's Head of Security?

Which of the following is the major advantage of Cloud storage for an enterprise?

CH makes a popular type of chocolate bar The bars are made on a production line and are scanned for size and shape as they move along the line Wrong sized and misshapen bars are rejected as being poor quality. The scanner detects 90% of poor quality bars. If CH wants to reduce the risk of poor quality bars being sold to the public it can add a further check by a person scanning the production line as well. this check would detect 80% of poor quality bars

If the further check was implemented what percentage of poor quality bars would still get through the checking process?

In terms of Cyber Security, which THREE of the following represent Personally Identifiable Information (Pll)?

P Ltd manufactures and sells electrical goods through retail outlets.

N is P Ltd's Sales Director. He has been recently promoted from a senior sales position with P Ltd. He has been forced to spend the first six months as Sales Director on dealing with an administrative mess left behind by the previous sales director.

You are a Senior Management Accountant at P Ltd. You have worked with N for many years.

N has worked hard and has made many changes that have brought significant benefit to the business.

N has asked you to postpone the recording of some purchase invoices so that he will meet his quarterly targets on profit margin.

What should you do?

You have just been appointed Financial Controller of Y, a marketing consultancy.

You are in a meeting with the Chief Executive Officer (CEO) of Y, and have been discussing the need for a major upgrade of all the information systems throughout Y, as they are all very old.

Knowing that major change should be managed effectively, you have suggested that Y should have a 'systems steering committee'.

Advise the CEO which of the following should be included in the terms of reference of the steering committee.

ERT is choosing between two maintenance policies for its vehicles. The outcomes of these policies are difficult to predict and so ERT has run a simu-lation of both.

Policy 1 has an expected annual cost of $400,000 per year, with a standard deviation of $80,000.

Policy 2 has an expected value of $350,000, with a standard deviation of $150,000.

Which of the following statements are correct?

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?

The senior manager in the accounts department is going on annual leave for three weeks and Jo, a supervisor is being put in charge of the department for that time.

Which TWO of the following statements are correct?

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 US company has to pay £500,000 for a new machine.

You have the following information on currencies.

EUR 1 = £1.2300

EUR 1 = USD 1.6200

What is the cost of the machine in USD?

Give your answer to the nearest $.

M is a multinational IT company with headquarters in Asia and with operations in all continents.

It is now trying to expand its operations in Europe. This is seen as a major challenge as the European market is very well developed with established players in fierce competition against each other.

As well as developing and producing its own products, it sources products across Asia, America and Europe as part of infrastructure deals which have to include as much of its own equipment as possible. In doing this, transfer prices can be set in YEN, USD, EURO, GBP. Transfer prices are revised every month in line with production times as most goods are made on short order times with sales cycles running at 3-4 months.

The longer sales cycle against committed transfer pricing presents problems as customers expect quotes to be valid for 90 days whereas M's suppliers reserve the right to revise pricing at the end of every month with quotes only valid for 8 days in the following month.

How should M deal with this problem?

TRF is conducting a post completion audit on an investment in a pollution control machine that has reached the end of its five year useful life.

TRF could have been heavily fined if the machine had failed to keep pace with the output of emissions, measured in units. TRF's cost of capital is 10%. When the machine was purchased, there was a choice of three machines on the market:

TRF purchased the Big machine, but annual requirements only exceeded 600,000 once, in year 3, when 720,000 units of emissions were emitted.

Calculate the amount that the post completion audit shows TRF overpaid for the ownership costs associated with this machine.

Give your answer to the nearest whole $ (in $'000s).

FBK produces motorbikes for the high end sports market. The company has recently developed a bike that uses a powerful electric motor instead of a petrol engine.

Which of the following are product risks?

Select ALL that apply.

James owns a small company which sometimes suffers from credit risk.

Which of the following measures should he put in place to help reduce this risk?

D has decided to invest in a new factory at a cost of $6,000,000. The discount rate of the project is 22% and the PV of tax shield is $80,000.

What is the IRR?

Give your answer to two decimal places.

ABC has recently appointed a Chief Information Officer who has announced that he wants to start a major clean up starting with all desktop and laptop equipment.

Which THREE of the following measures should be adopted to help enhance security'?

VBN's home currency is the V$. On 1 January, VBN must make a payment of C$2 million on 31 March of that same year.

On 1 January the spot exchange rate was V$1 = C$0.4.

On 1 January VBN paid $180,000 for a call option to buy C$2 million for V$5.5 million on 31 March. VBN's cost of borrowing was 8% per year.

On 31 March the spot rate was V$1 = C$0.45.

What was the total cost, including the cost of the option, of settling the payable?

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?