Question 1

An electricity company owns and operates a nuclear power station located ten miles from a large city. A recent and very extensive engineering examination of the power station concludes with the estimate that the probability of a major nuclear disaster within the next 20 years is 0.2%.

Which of the following best explains the relevance of quantifying the risk in that way?

Options :

A : There is no acceptable level of risk for a major nuclear accident and so the probability has little information value in itself.

B : The probability is so low as to be ignored.

C : The directors will be able to argue that they were not negligent in the event of a major disaster within the 20 year period.

D : The calculation of a precise probability demonstrates that the engineers who conducted the inspection are experts in their field.

Answer: A

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

DFR is an online retailer that sells picture frames The software running on DFR's website enables customers to log in and make purchases by inputting an email address as a user name and a password that must contain at least eight characters, including upper and lower case letters, numbers and punctuation marks (e.g. , $ or!) Once logged in, customers can check previous orders that they have placed.

Customers can also use DFR's website to change personal details, including credit card numbers and delivery addresses Whenever they wish to use those facilities, the software sends a text message containing a six-digit number to their mobile phones They must input that number before the system will accept changes to their personal details

Which TWO of the following statements are correct?

Options :

A : It is illogical to have different security measures in place for orders and for access to personal details.

B : The software treats customers' personal details as being more sensitive than their ordering histories

C : The arrangement with the text message will have no effect on the security associated with changing personal details

D : Customers should be able to update the mobile phone numbers in their DFR accounts using only their email addresses and passwords for access

E : The software should never show the whole of a customer-s credit card number on screen, even if the customer has logged in and input the six-digit number.

Answer: A,C

Question 4

COM is a well established company in the construction industry The company was founded by the Mac family 30 years ago and several family members still serve on the Board The company obtained a listing five years ago The Board has an appropriate balance between executive and non-executive members It also has audit remuneration and nomination committees The average age of board members is 68

COM is profitable but profit margins have been falling steadily and this year's revenues are lower than it was achieved last year The Board recognis thai it does not have a long term strategy in place and has been losing business to newer, more aggressive competitors

Which THREE of the following statements are correct?

Options :

A : The remuneration committee should consider incentives such as share options to encourage the Board to focus on COM-s long term strategy

B : The nomination committee should have had a succession plan in place for directors.

C : The nomination committee should be operating for the benefit of the directors.

D : The audit committee should have alerted the Board to the impact of falling profit margins

E : The non-executive directors should have challenged the lack of long term strategic planning

Answer: A,B

Question 5

R is a company running gas-fired power stations in Western Europe. The Risk Committee hasjust received a reportthata power station built to the same design and specification in a developing country has recently collapsed. The causes of the collapse are unclear,but if something similiar were to happen in Europe the consequencesfor Rcould be catastrophic.

Which of the following actions being considered by the Risk Committee are ethical?

Options :

A : Commission a reputable firm of structural engineers to carry out a review of all power stations owned by R.

B : Decide that the information available to date is too uncertain to take any action for now.

C : Send experts employed by R to the site of the collapse so that they can gather information first hand on what happened.

D : Issue a press release confirming that all R-s power stations are 'entirely safe'.

E : Attempt to increase the level of insurance cover against this type of eventuality.

F : Draw up contingency plans in case some ofR-s power stations need to be shut down.

Answer: A,C

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