L4M3 Exam Questions and Answers | Exam-Dumps (Page: 4)

QUESTION: 16

To check whether supplier actually complies with the labour standards set out in the contract, the purchaser should have...?

Right to penalise the supplier
Right to terminate the contract
Right of audit
Right to rescind the contract

Answer(s): C

Explanation:

Many firms have compliance policies for suppliers in place. To ensure that the supplier actually comply with the standards set out, the purchaser can employ the right to audit. The buyer usually obtains the right to examine records of a vendor to determine if a fraud or a violation of company policy has occurred through the following methods:
- Right-to-audit agreement The agreement can be printed on the back of a purchase order, contract, or other procurement form.
- A simple request If the right-to-audit agreement wasn't included on the procurement form, and the buyer suspects irregularities, he may have to beg the vendor to allow an audit to be performed. If the buyer is a major customer of the vendor, the buyer may be able to wield a big enough stick to obtain permission to look at the records.
- Right-to-audit Pitfalls

Reference:

- CIPS study guide page 160
- Reserving the Right to Audit the Suspicious Vendor: Right-to-audit clauses in vendor contracts help control fraud and abuse by affording discovery devices in examinations. LO 3, AC 3.2

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QUESTION: 17

Is the government only source of industrial standards within a country?

No, the government can only adopt standards regarding security and defence
Yes, while ISO make standards for international trade, the government standardises other facets of their country
No, an organisation can also generate its own internal standards
Yes, the standards must be made by legislative branch of the country

Answer(s): C

Explanation:

A standard is a document that sets out requirements for a specific item, material, component, system or service, or describes in detail a particular method or procedure. Standards are established by consensus and approved by recognized standardization bodies. There are several different types of standards. Some of the most commonly-used standards set out the requirements that a particular kind of product, service or process must fulfil, in order to establish that it is `fit for purpose'. Other types of standard relate to methods of testing, terminology and definitions, information requirements, or the compatibility of connections. Standards provide individuals, businesses and all kinds of organizations with a common basis for mutual understanding. They are especially useful for communication, measurement, commerce and manufacturing.
Standards make trade easier by ensuring compatibility and interoperability of components, products and services. They bring benefits to businesses and consumers in terms of reducing costs, enhancing performance and improving safety.
Standards are voluntary, which means that businesses and other organizations are not legally obliged to apply them. However, in certain cases standards may facilitate compliance with legal requirements, such as those contained in European directives and regulations. Standards can be made by a company, a standard organisation (such as ISO or BSI) or regulatory bodies.

Reference:

- CIPS study guide page 93-94
- Standards and your business LO 2, AC 2.1

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QUESTION: 18

Which of the following is used to detail the complex matter that may be verbiage to the main document?

Contract variation
Schedule
Subcontracting
Standard terms and conditions

Answer(s): B

Explanation:

Without further explanation, a schedule may be deemed to form an integral part of the obligations of either or both parties. Obviously, the scope or binding nature of such schedule depends on the way it is referred to in the obligatory language of the main agreement. Accordingly, merely attaching the general terms and conditions of sale without explaining to which part of the sale they apply or which provisions apply does not subject a sale pursuant to the body text of the agreement to those general terms and conditions.
Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.

Reference:

- Schedules, annexes and exhibits
- CIPS study guide page 22-26 LO 1, AC 1.1

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QUESTION: 19

Which of the following indicates the ratio between profit and costs?

Gearing
Margin
Mark-up
Liquidity

Answer(s): C

Explanation:

Mark up is the profit as a percentage of total costs. LO 3, AC 3.3

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QUESTION: 20

A company is considering entering a new market.
Which of the following are the external factors that influence the difference between cost and price of this company? Select THREE that apply

Procurement policy
Process efficiency
Business strategy
Threat of substitution
Competitiveness of the market
Relative bargaining power of supplier and purchaser

Answer(s): D,E,F

Explanation:

The difference between cost and price is profit. According to Michael E. Porter, the profitability of an industry is shaped by five forces:
1. Competition in the industry
2. Potential of new entrants into the industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products
The

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CIPS L4M3 Exam (page: 4) CIPS Commercial Contracting Updated on: 12-Feb-2026

QUESTION: 16

Explanation:

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QUESTION: 17

Explanation:

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QUESTION: 18

Explanation:

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QUESTION: 19

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QUESTION: 20

Explanation:

CIPS L4M3 Exam (page: 4)
CIPS Commercial Contracting
Updated on: 12-Feb-2026