CIPS L4M4 Practice Exam Questions & Answers
CIPS L4M4 Exam Details
Key details for this exam, checked against the published exam outline
- Exam Code
- L4M4
- Full Name
- Ethical and Responsible Sourcing
- Issuing Body
- CIPS
- Question Format (Our Bank)
- Multiple Choice
- Official Exam Fee
- GBP 44.50 (objective response diploma exam fee, plus exam centre fees which vary by location)
- Delivery
- Online proctored (remote invigilation) or at an exam centre
- Full Question Set
- 302 questions Get All Questions
Free L4M4 Practice Questions
Each question shows the correct answer and an explanation of why it is right
Question 1 Domain 2 Understand the key processes applied to the analysis of potential external suppliers
A Bill of Exchange is an important document used when importing goods into a country from abroad. What is the purpose of this document?
A Bill of Exchange is a payment instruction - it says who will pay whom and when.
Bill of Exchange Definition: Examples and How It Works (investopedia.com)
Question 2 Domain 3 Understand compliance issues when sourcing from suppliers
For what type of purchase would you use a Futures Exchange?
Futures exchanges are used to trade commodities. It's when a buyer and supplier agree a price and deal for something in the future. For example a carrot farmer may agree to sell his carrots to Gary in 3 months time when they're finished growing. It's used when the product / commodity isn't ready yet.
It's also used for hedging and other complex financial stuff- but you don't need to know that yet. Commodities and Future contracts are a big part of L5M4 to warn you though. Futures Contract Definition: Types, Mechanics, and Uses in Trading (investopedia.com)
Question 3 Domain 3 Understand compliance issues when sourcing from suppliers
Sourcing aims to achieve the best value for money by taking into account several factors. Freddy issourcing a new component for his company which manufactures tractors. Should Freddy take into consideration ethics and sustainability?
'yes- ethics and sustainability form part of 'value for money' ' is the correct answer.
There are several factors that represent value for money and these are listed on p.3. These include; price, delivery, quality, ethics, sustainability and availability.
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Question 4 Domain 2 Understand the key processes applied to the analysis of potential external suppliers
Intra-company trading allows business units within a large enterprise to supply goods or services to another. What are the likely objectives of intra-company trading?
Enhances production capacity utilisation
Offsets some of the fixed costs of the supplying entity
Compensates the supplying unit for the less effective technology applied
Ensures internal technology always out-performs that of external suppliers
Intra-company trading aims to optimize internal resources by enhancing production capacity utilization and offsetting fixed costs. By supplying goods or services internally, organizations can achieve economies of scale and better allocate resources. However, compensating for less effective technology or ensuring superior internal technology over external suppliers are not primary objectives of intra-company trading.
CIPS Level 4 Diploma in Procurement and Supply, L4M4 Study Guide, Section 1.1.2: Make or buy decisions and the role of intra-company trading
Question 5 Domain 2 Understand the key processes applied to the analysis of potential external suppliers
What type of ratio is used to measure a company's ability to meet its short-term financial obligations, specifically focusing on its ability to convert assets into cash to cover current liabilities?
Liquidity ratios assess a company's capacity to meet its short-term obligations using its most liquid assets. These ratios, such as the current ratio and quick ratio, provide insight into the financial health of a company by indicating whether it has sufficient resources to pay off its immediate liabilities without raising external capital.
Exact Extract from Study Guide:
'Liquidity ratios: Typical ratios: current ratio, quick ratio, cash flow ratio, etc. Formulae of those ratios Implications of liquidity ratios
Question 6 Domain 1 Understand options for sourcing requirements from suppliers
''Phishing'' occurs when an employee receives a false email that appears genuine, exposing the organisation to cybercrime. Which crime category does this fall under?
Phishing is a form of fraud, where deception is used to gain financial advantage or access to sensitive data. It is not corruption (misuse of power), bribery (offering inducements), or a human rights issue. Procurement professionals must be alert to fraud risks in supply chains, including cyber-enabled risks such as phishing and invoice fraud. Responsible sourcing extends to protecting organisational data and finances against such attacks, often through robust controls, training, and supplier verification procedures.
Question 7 Domain 2 Understand the key processes applied to the analysis of potential external suppliers
When would a procurement professional use the Pareto principle?
The Pareto Principle can be used when considering changing a supplier. It helps to categories suppliers by how strategically important the item is that they provide to the business.
What the CIPS L4M4 Exam Covers
Exam domains verified against the Official CIPS L4M4 exam guide, last checked October 2026.
Domain 1 Understand options for sourcing requirements from suppliers
Identify the sourcing process in relation to procurement and differentiate between approaches to sourcing requirements from suppliers. Learn selection criteria commonly applied when sourcing from external suppliers and award criteria used in supplier selection decisions.
Sample question from this domain above Q6
Domain 2 Understand the key processes applied to the analysis of potential external suppliers
Evaluate commonly used sources of market data that impact supplier sourcing decisions. Master processes for obtaining quotations and tenders, assess their quality, and analyse electronic systems that support sourcing requirements from external suppliers.
Domain 3 Understand compliance issues when sourcing from suppliers
Contrast vital legislative, regulatory, and organisational requirements when sourcing in the not-for-profit, private, and public sectors. Compare major requirements for international supplier sourcing across different jurisdictions and regulatory environments.
Domain 4 Understand ethical and responsible sourcing
Define the impact of international ethical standards on procurement and supply, including fraud, modern slavery, and human rights. Identify practices that support ethical procurement and compare audits and feedback mechanisms to evaluate ethical standards in the workplace.
Domain 5 Understanding Ethical Sourcing
Explore fundamental principles and importance of ethical sourcing practices, including human rights, labour standards, environmental impact, and supply chain transparency in procurement decisions.
Domain 6 Implementing Ethical Standards
Apply ethical frameworks, due diligence processes, and best practices to ensure responsible sourcing throughout the supply chain and across all supplier relationships.
Domain 7 Supply Chain Management
Develop strategies to identify and manage risks related to forced labour, child labour, ethical procurement, and sustainable practices in the supply chain and supplier operations.
Domain 8 Responsible Procurement
Apply practices such as fair trade, ethical sourcing of raw materials, and responsible contracting to promote sustainability and social responsibility in supplier relationships and sourcing decisions.
Domain 9 Labor Rights and Welfare
Understand labour laws, workers' rights, and ethical labour practices, including freedom of association, fair wages, and safe and healthy working conditions in supplier operations.
Domain 10 Ethical Auditing and Certification
Master ethical auditing processes, third-party certifications, and social compliance programmes to ensure ethical standards are met and maintained across the supply chain.
L4M4 Exam FAQ
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