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Question 36

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?

Options:

M could increase the number of quality control staff.

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.

The production director could examine one in every 10 products and sign a form to say they are satisfactory.

M could service machinery at least once a month as recommended by the machinery supplier.

M could check all employees qualifications to ensure they are qualified for their jobs.

Question 37

An oil company has entered into a joint venture with a competing oil company to develop a new oil field. The joint venture arrangement is intended to mitigate the risks associated with developing the oil field.

The following disclosure appears in the oil company's risk report:

"Many of our large projects and operations are conducted through joint ventures. These arrangements involve complex risk allocation and indemnification arrangements and we have less control over these activities than we would have if we had full ownership and control. Our partners may have economic or business interests that are opposed to ours, and may exercise the right to block key decisions or actions. We believe the joint arrangement is in our best interest."

Which of the following statements are correct?

Options:

The risk report means that the shareholders know exactly how bad the risk is.

The risk report says nothing useful about the risk.

Now the shareholders know the directors are aware of the risk.

If the risk report had not reported the risk the shareholders might not have been aware of the risk.

The shareholders now have more useful information.

Question 38

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.

Options:

Plan for new systems

Develop new systems

Manage the project

Consider the competitive issues raised by the new system

Ensure the new system will meet the company's goals

Question 39

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?