Page 263 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Exam style questions and answers

16 H Co is a large supermarket chain which due to competitive pressure, recently
signed a contract with an overseas supplier of meat in Country Y. Previously all
meat sold in H’s shops had been sourced from farms in its’ home country.

Unfortunately several cases of food poisoning have been reported by customers
who purchased and ate the meat from the new supplier and the directors of H
are now trying to establish just how the tainted meat ended up for sale in their
shops.

Since government inspections of farms were non-existent in Country Y, H Co
employed a local inspector to carry out food hygiene audits. This inspector has
since disappeared and cannot be traced. The supplier has explained that due to
the low prices paid by H for their meat, they were forced to cut veterinary
attention to their herds. In addition, supermarket managers have admitted that
as part of routine goods inspection they threw away meat that looked
discoloured but most of the deliveries went on sale.

Which of the following represent failures in H’s control activities which
have led to the situation at H Co? Select all that apply.

A Inadequate supplier selection processes and criteria

B Poor goods receipt process

C Insufficient food hygiene inspections

D Low prices paid to suppliers

E Lack of veterinary attention to the herds

17 P is the operations manager at HH and has recently had his work laptop stolen
from the front seat of his parked car. The laptop contained confidential
information. On authorising the purchase of a new machine the CEO said that
the theft was due to a lack of security awareness amongst management.

Q is the purchasing manager and has been fiercely critical of P and the
operations of HH. In his view P is careless and the increases in machine
breakdowns in the factory prove this. Q is often placing raw materials orders
which he then needs to cancel because the factory is not ready to use further
supplies and storage space is limited.

Both the operations and the purchasing department have been under severe
pressure because of budget cuts imposed by the CEO. High staff turnover and
liquidity risk have both been given as reasons why the internal control system
has not been updated for several years.

253