S, a qualified and experienced professional accountant, has been appointed as a non-executive member of the Audit Committee of X X has recently obtained a listing on the second tier of a reputable Stock Exchange B, the Finance Director, is only worried about the maintenance of proper financial controls and is less concerned with operational controls S has asked A. the Production Director, to produce regular reports for the Audit Committee on production specification compliance and related issues A is concerned that this means S does not think he is doing his job properly and doubts his integrity In relation to this scenario, which of the following statements are valid?
Select ALL that apply.

• A. There is no benefit for X of A producing reports for the Audit Committee unless there are some members on the Audit Committee who have expertise in the production area
• B. The appointment of an independent professionally qualified and experienced accountant will help strengthen the Audit Committee.
• C. The Audit Committee should plan for the receipt of regular reports on production specification compliance and related issues
• D. A is correct in believing that being asked to report to the Audit Committee in the manner described above suggests a lack of trust in his ability or integrity
• E. If X is not seen to have an effective Audit Committee it will be exposed to increased market risk
• F. B is correct to be more concerned about the maintenance of financial controls because they are inevitably more important than operational controls.

A firewall in a computer suite is designed to

• A. prevent viruses from infecting the network
• B. prevent a disaster from occurring by limiting the spread of any fire
• C. prevent unauthorised traffic into defined areas of the network
• D. prevent the overloading of the network by unauthorised traffic

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?

• A. $62,000 gain
• B. $95,000 gain
• C. $88,000 gain
• D. $16,000 loss

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?

• A. The remaining traffic wardens are less stressed because they no longer receive abuse by motorists.
• B. The main shopping streets are no longer congested
• C. Revenues from parking have increased
• D. Parking enforcement costs less than before

Which TWO of the following are NOT methods used for risk identification?

• A. Designing a process to deal with complaints
• B. Brainstorming ideas with colleagues from different disciplines within the business
• C. Carrying out interviews on key members of staff
• D. Employing external advisors with specialist knowledge
• E. Accounting for waste in a manufacturing process