Hello Professional Students,


State 1
It’s late already. Let me try my luck.
Oh – you have few days to your exams and the best thing you can do now is to focus on areas of concertation or you go through the video lectures over and over again until you understand.
The science here is that you understand the principles before the attribute. This helps because without understanding the principles then you can’t know the attributes. So, it will be wise that you understand the compulsory principles and the attributes of each section.
Note: Overcrowding your mind will lead to forgetting things that you have already learnt. So, it’s advisable that you study 3 topics each day before your exams.
State 2
I am good to go with the principles but I do mix them up at times. Moreover, there are lots of principles in the syllabus!
If you are in this stage this implies that you have upper hand. However, you need to try as much as possible to cover the whole syllabus and while doing that have a revision note to jot down principles that you have leant which you really need to remember. Also study your revision note at least 10x before your exams. Moreover, this help you reinforce what you have learnt.

State 3
I understand the basics but some exam questions scare me!
Most of the serious students are in this category. You are in the last lap of the race. However, you need to solve more of past papers.
The science here is that we understand better when we see things in different scenarios like exam questions. If you are in this stage please don’t go through the video lectures anymore. All you need to do is to concentrate only on past papers which will surely double your chances of passing the exams.
I believe this is very helpful.
To your exam success
Tayo Stephen
P.S. I wish you all the best in your exams


ACCA statistic shows that the number of students who write the exam across Africa have dropped drastically. Since passing your exam is our major concern,  we did a survey to know why students are finding it difficult to write their exam and we realized that the major challenge is because of the poor economic situation in Africa. This means that our currency has lost value against pounds and is now expensive to register for the exam.

Sincerely speaking, I agree with you that the exam fee is now very expensive due to high exchange rate. However, there is always a good reason not to do the right thing and those who do pass their exam every diet also have a good reason not to write the exam. However, they find a way round their constrains to achieve their goals.

Looking from the other point of view, this is an opportunity for you to qualify on time and maximize opportunities like getting a better job; request for salary increase; in fact you can also start your own accounting firm because only few qualified accountant will be available in your society due to high exchange rate that have hindered students from writing their exam. So, only those who take the bold decision will stand out. After all, you decided to write ACCA exam so that you create more value to make more money.

Here is how you can write your ACCA exam despite the current economic situation.

1. Live below your means: spend only 70% of your income then save and invest 30%.

2. Don’t spend money on the things that you can do without: ceremonies, unimportant assets, accessories.

3. Start saving money for your exam registration: save atleast 10% of your income every month until you have saved enough to achieve your exam success.

To your success,

Tayo Stephen.

P.S.  Since, you have the option to write only the papers that you can fully prepare for then it’s advisable that you write at least a paper every diet just to keep the train moving. After all there are four diets in a year. Please don’t
give up because there is no good reason not to succeed in life and it’s very dangerous to sit on the fence without taking any action because in decision is also a decision.

That’s why we make our video lectures very cheap & affordable and you can study at your convenient time to suit your busy schedule. So, if you don’t have lecture centers in your society why not make use of our comprehensive video lectures that will double your chances of passing your exam? After all, our videos have helped lots of students across Africa to pass their exams and we have produced lots of qualified students.

Click here to download our free trial version videos now and if you are unable to download the videos, kindly send a personal WhatsApp message to +2348023428420 so that we can link you up with our country representative in your country while you get the trial version video CD.

Don’t give up. You can also be a qualified accountant only if you

Here is the link to download our comprehensive ACCA free trial version videos now.



Nelson Here,

According to Wikipedia Fire brigade is an organization that provides predominantly emergency fire fighting and rescue service for a particular district.

Recently, the state fire department helped prevent a fire incident in my estate but the tension it created was very overwhelm for everyone. So, this helped me see why using “fire brigade method” in studying for ACCA exam is the worst kind of study approach. However, many student do use this emergency method to study which has before and after exam effect that are psychological.

Below are 3 effects of studying with fire brigade method and how you can overcome it:

#1. Affects Your Health: health is wealth and also it is a very vital part of our lives. In the process of trying to study using the emergency method, you will stretch your body physically and psychologically. Besides, many student have fallen a victim. Some even became sick to the extent that the exam could not be written. However, this can be avoided by constantly studying for 1hr daily with the E-class video lectures.

#2. Reduces Retention Rate and cluster the mind: In the process of trying to read everything at once, it reduces the rate at which you remember what you have read because it is new to the body and according to research it takes 21 days to form a new habits. So when you use fire brigade method, you will just be studying and nothing will be assimilated and even if you assimilate, on the day of exam the probability of making mistakes is very high. Trust me I have been there.

#3. Exam procrastination: After studying hard via emergency method and health status seriously affected then still ended up failing the exam. This creates an effect either by expressing frustration in the exam or blaming others for your mistake. As a result, you will decide to abandon the exam to latter years. Also, it create a phobia of procrastination for the exam. Furthermore, you can procrastinate for years before you finally decide to write the exam and by then some of your colleague would have become chartered.

As a result, it will be wise that you start preparing for your ACCA June 2016 exam exams because early preparation matters a lot and is key factor to achieve any success in life.

Click here NOW to download our FREE ACCA trial version videos.

Please don’t procrastinate remember the universe reward action takers.

To your success

Alluh Nelson

P.S. Success cannot come from standstill men. Methods  change and men must change with them.

Click here NOW to download our FREE ACCA trial version videos.




This article outlines the approach that will be used to examine Paper P7, Advanced Audit and Assurance. The article should be read in conjunction with the Study Guide and Syllabus for the paper. On first glance, it may appear that there is little difference between the syllabuses for Paper 3.1, Audit and Assurance Services and Paper P7. However, with a new examiner comes a new approach to testing the syllabus.

Format of the exam

Section A will consist of two compulsory ‘case study’ style questions, worth a total of between 50 and 70 marks. The Pilot Paper contains two 30-mark questions, but it should be noted that this is not intended to set a strict precedent. The case study questions will provide detailed information, including extracts from financial statements and audit working papers, and strategic and operational details, for a client business.

A range of requirements will be set for each case study, covering different syllabus areas. For example, a case study question could contain requirements on planning, evidence, and ethics. The aim is to mix up requirements and place candidates in a ‘real world’ situation where they would be faced with several very different issues in relation to the same client.

Section B will contain three questions from which two should be attempted. This section will be worth a total of between 30 and 50 marks. Short scenarios will be provided as a basis for the Section B requirements.

The Pilot Paper includes three 20-mark questions covering (broadly) quality control, audit reports, and ethical and professional issues. It is imperative that candidates do not consider the Pilot Paper as indicative of the syllabus areas that will automatically be tested in this section of the paper. All of the above mentioned syllabus areas could be tested in Section A or Section B.

In contrast with Paper 3.1, there is no distinct ‘discussion’ or ‘current issues’ question in Paper P7. This is partly in response to the unwillingness of candidates in past Paper 3.1 sittings to choose the discussion question from the optional questions in Section B. Candidates must appreciate, however, that discussion and current issues requirements have not been removed from the exam – see below for more on current issues.

One of the features of the Professional level exam papers is the awarding of ‘professional marks’. These are marks allocated not for the content of an answer, but for the degree of professionalism with which certain parts of the answer are presented. They will usually be awarded in Section A (the compulsory part of the exam paper) and will total between four and six marks.

It may be, for example, that one requirement asks you to present your answer in the form of, say, a letter, a presentation, a memo, a report, briefing notes, or similar. Some marks may be awarded for the form of the answer in addition to the content of the answer.

This might be for the structure, content, style and layout, or the logical flow of arguments in your answer. You should assume that if the question asks for a specific format of answer that some marks may be awarded for an effective presentation of that format.

Key objectives of the syllabus

The building blocks of a successful audit or assurance engagement are thorough planning and risk assessment. Therefore, these areas will continue to be examined in every sitting, and are likely to form part of at least one of the compulsory questions. Candidates should be aware that ‘planning’ covers a wide variety of topics, and does not just mean ‘risk assessment’.

For more clarity in this area it is essential to read the Syllabus and Study Guide in order to appreciate the breadth of the syllabus in relation to ‘planning’. Also bear in mind that ‘planning’ is not restricted to the planning of an audit, but could relate to the planning of an assurance or non-audit engagement. It has become apparent that candidates learn a topic, such as planning, within the context of an audit engagement but are then often unable to apply their knowledge of that same topic to a different type of assignment.

The paper is called Advanced Audit and Assurance for a reason, and an inability to tackle scenarios involving assurance or non-audit work will adversely affect exam performance.

At each sitting, candidates should also expect to see – in the compulsory section of the paper – requirements relating to evidence gathering. Requirements are likely to focus on specific assertions, and specific financial statement balances or transactions, and could be set in the context of an audit or an assurance engagement.

For an example of the type of wording that is likely to be used, see Question 2(c) of the Pilot Paper. When asked to explain ‘matters to consider’ for an audit of financial statements, candidates should be aware that one of the key matters to consider is whether the relevant accounting standard has been adhered to.

Candidates often display a lack of financial reporting knowledge when answering questions of this type. Be warned – the Study Guide contains a list of 32 financial reporting areas that fall within the syllabus, and any of these areas could be part of a compulsory evidence question.

Reporting is another important area, likely to feature in every sitting, either in Section A or Section B. This is the second area where candidates should understand the crucial relationship between financial reporting and auditing. Candidates often attempt to justify an audit opinion without any apparent knowledge, or – even worse – incorrect knowledge, of the relevant financial reporting standards. How can one reach an opinion as to whether financial statements have been properly prepared if one doesn’t know the financial reporting rules that must be used in their preparation?

Ethics and professional issues are also important areas within the syllabus, likely to feature in every sitting, either in Section A or Section B. In today’s climate, auditors are often called upon to justify their ethical status and it is important that candidates are regularly tested in this area. Candidates may see the ethics question as an ‘easy pick’, but it is important to appreciate that ethics is not just about independence but also covers ethical issues such as conflicts of interest and confidentiality, as well as fraud and error, and professional liability.

More peripheral areas of the syllabus include the regulatory framework, money laundering, obtaining professional work, corporate governance, and transnational audit. These topics are best suited to be tested in Section B of the paper.

A note on current issues – there is likely to be at least one requirement per exam dealing with a current issues topic. It will not, however, be tested in isolation, and students should therefore be ready to discuss a current issues topic in the context of the client scenario provided.

This is exactly what ‘real world’ auditors have to deal with on a day to day basis, and it is essential that a high-level audit and assurance exam regularly tests the ability to discuss new developments in the profession. As current issues have an impact on the planning and execution of an audit or assurance engagement, a current issues requirement could feature as part of the case study scenario in Section A.

Candidates should appreciate that they are expected to read around current issues and not rely on manuals from tuition providers. Good quality newspapers, professional journals, as well as ACCA’s website, provide sources of information on current developments in audit and assurance.

Candidates must not rote learn a provided piece of information on a current issue and then proceed to regurgitate this information verbatim as an answer to an exam requirement. By the time candidates have reached this stage in their professional studies they should take responsibility for developing their own opinion on a current issue, and be able to reach their own conclusion.

Finally, candidates are reminded that forensic auditing is a new syllabus area, and an indication of how this syllabus area could be tested can be found in Question 2 in the Pilot Paper. However, it should be appreciated that forensic auditing is not considered a core competency, and is just one of many non-audit assignments included in the syllabus.

Specific competencies

Paper P7 is one of the Professional level Options papers. Candidates must consider carefully whether they have the required competencies when deciding whether to take Paper P7. The competencies I would expect to see in a candidate achieving a clear pass in Paper P7 include:

  • a thorough understanding of the relevant audit, assurance and financial reporting regulations that fall within the syllabus
  • the ability to apply knowledge to specific client scenarios
  • the ability to have an independent opinion, backed up by reasoned argument
  • an appreciation of commercial factors which influence practice management
  • an appreciation of the fast-moving developments in audit and assurance practices.

Candidates should appreciate that at the Professional Level, they will be expected to apply their technical knowledge to the question provided, especially in the Section A case study questions. It will not be possible to achieve a pass mark based purely on rote-learning with no demonstration of application skills.

Candidates would be ill-advised to choose Paper P7 as an Options paper if they:

  • have little or no practical audit experience
  • struggled with preceding audit exams
  • are unwilling to take responsibility for their own opinions by reading around current issues
  • are uncomfortable discussing arguments or reaching opinions.

Information sources

Candidates should ensure they are familiar with the wide range of materials available to help them with their studies. In addition to material provided by tuition providers, and ACCA’s website, students are encouraged, as discussed above, to regularly read up on current issues.

Despite the fact that the exam format and approach has changed with the introduction of the new syllabus, candidates are encouraged to practise past questions from Paper 3.1. Much of the syllabus content is unchanged and therefore past questions will provide a good basis for exam preparation.
Articles relevant to Paper P7 will be published in student accountant from time to time. Such articles should be considered essential reading, and will cover both exam approach and technical issues from the syllabus.

I want candidates to pass this paper. I want candidates who choose to attempt this paper to base their decision on an understanding of the core components of the syllabus and how they will be tested.

Candidates who have practised plenty of past exam questions, who have taken time to read around the syllabus, and who use sensible exam technique on the day of the exam are very likely to secure a pass.

This exam should not be approached as a rote learning exercise, but as a chance to show the ability to think logically and practically, reach an opinion, and demonstrate the application of technical issues to a real-world scenario.

The above examiner’s report was culled from http://www.accaglobal.com/

An Examiner’s outline of the aim of Paper P5, its structure and how the syllabus is tested

This article begins by considering the syllabus and overall aims of the paper, how it relates to previous papers and the format of the exam. It will then summarise advice about my approach to the paper using suitable example questions from recent exams to illustrate points.


There are six capabilities and most will feature to some extent in every diet:

  • use strategic planning and control models to plan and monitor organisational performance
    – These models emphasise the need to take a holistic view of the factors affecting the business and to consider them when giving strategic advice on performance. Good candidates at Paper P5 often distinguish themselves by being able to synthesise disparate detailed points into an overall, strategic approach for an organisation.
  • assess and identify relevant macroeconomic, fiscal and market factors and key external influences on organisational performance
    – This signifies an additional area of importance compared to the lower levels where the focus was more on the internal factors associated with traditional management accounting. It emphasises the need to consider the information needs of the strategic level of management rather than merely the operational and tactical levels.
  • identify and evaluate the design features of effective performance management information and monitoring systems
    – Candidates will not be required to have detailed technical knowledge of hardware and software but are expected to be conversant with the broad hardware and software trends and issues and how these interact with the provision of performance information throughout the organisation. It is the effect of these technologies on the performance management decision-making processes that is most significant.
  • apply appropriate strategic performance measurement techniques in evaluating and improving organisational performance
    – This capability requires the application of the techniques of Paper P5 and its assumed knowledge in specific scenarios.
  • advise clients and senior management on strategic business performance evaluation and on recognising vulnerability to corporate failure
    – This capability takes the performance measurement information and seeks to turn it into commercially valuable advice for strategic decision makers both to improvement performance and to improve performance management systems.
  • identify and assess the impact of current developments in management accounting and performance management on measuring, evaluating and improving organisational performance.
    – The final capability reflects the requirement that at the Professional level, candidates are expected to show the ability to gather new knowledge from the general technical press and so the articles in Student Accountant will be sources of topics for exam. These articles will also be the principal route by which the students will have new techniques and trends communicated outside of the slower cycle of revisions to the syllabus. Candidates should note that unlike in the compliance topics such as financial reporting and tax, changes are not regularly made to the syllabus areas so that older articles may well be as relevant to the upcoming exam as the most recent ones. Any additional reading beyond the ACCA-approved texts and Student Accountant articles should be viewed as advisory and not required. However, candidates are advised to broaden their general business knowledge by the regular reading of good quality business newspapers and magazines. This will provide additional background and examples of the techniques and issues of performance management.

The syllabus comes with a Study Guide of more detailed guidance about the specific topics to be examined. The syllabus has not changed significantly over the past few years. Except for a few additions and deletions, many of the changes have been attempts to make explicit certain tools and techniques that are applicable at Paper P5. Therefore, most past exam questions will be relevant to the current paper.

Links to other papers

Performance management systems are the systems in an organisation by which the performance of an organisation is measured, controlled and improved. The thrust of the paper will move towards the strategic level of considering different performance measurement techniques and management systems. Paper P5 builds on knowledge gained at other levels, for example, Paper P3 and especially from Paper F5. Paper F5 tests the candidate’s ability in application and analysis of core management accounting techniques.

Paper P5 develops key aspects introduced at the Paper F5 level with a greater focus on the synthesis and evaluation of the key topics and techniques. It will also introduce more specialised techniques and current issues in performance management. Therefore, candidates should not expect to be retested in a Paper F5 style on topics but need to be aware that all of Paper F5 knowledge is assumed to be known and will now be used in a more critical capacity.

Exam format

The paper is a three-hour test with 15 minutes of reading time at the beginning. There are two sections:

Section A (a single compulsory question)
There is only one question in Section A worth 50 marks. The purpose of this is to allow a detailed scenario to be given so that candidates can have the information and time to develop deeper answers to the question requirements. The Section A question ranges across various parts of the syllabus.

Section B (a choice of two from three questions)
Section B consists of three 25-mark questions from which two must be chosen. The Section B questions focus on specific issues in the Paper P5 syllabus (though not necessarily exclusively on only one topic).

Professional marks are a regular feature of the Section A questions (four marks in every paper) and it should be possible for a well-prepared student to score most of these easily. Efficient preparation involves the identification of appropriate formats and structures to use in answering questions and practising writing answers in order to improve clarity.

Approaching the Paper P5 exam

The best approach to the exam can be summarised as:

  1. cover the whole syllabus
  2. be prepared to apply all of this knowledge to a business scenario
  3. read and answer the question asked
  4. add value to the organisation that is being advised.

Cover the whole syllabus

Remember that, broadly, the exam tests the capabilities that are required of a candidate (listed above). The paper aims to address issues at both the strategic and operational levels and often requires a candidate to understand the connections between these levels. For example, the question of how strategic objectives flow through critical success factors to performance indicators as in Question 1 of the December 2010 paper or applying the performance pyramid in order to suggest additional KPIs (strategic level) and a set of operational performance measures as in Question 2 of December 2011 paper.

Another example of the type of question that arises is how does the choice of operational performance measures impact on the strategic performance of the organisation? A phrase that rings true in many situations is Drucker’s dictum ‘What gets measured gets done’. This phrase succinctly points to the impact that the choice of performance metrics have on the management activity of the firm, for an example, see Question 1 of June 2012 paper.

Now these points should illustrate why it is a misapprehension that the paper is predominantly about performance measurement, it is a performance management paper. This error often manifests in a candidate’s over-concentration on detailed elements of Section D (strategic performance measurement) of the syllabus. As indicated above, it is important to remember that the ideas contained in the various metrics need to be coherently applied to meet the strategic needs of an organisation and this is where other sections of the syllabus will connect to a question – for example, the choice of performance measures needs to fit with the planning and control structures (Section A) or whether chosen measures relate to external drivers of performance (Section B).

Finally, in thinking about syllabus issues remember that Paper P5 builds on Paper F5 knowledge applying it in more complex scenarios so you should ensure that this Paper F5 knowledge is available in the exam.

Apply your knowledge to the question scenario

The paper tests a candidate’s ability to assess different approaches to performance management from a variety of perspectives. This will entail the candidate knowing what the approaches are and more importantly being able to compare one with another in the context of a scenario – for example, profit and value approaches, financial and non-financial perspectives, short-term and long-term issues.

A good candidate will be able to tailor the approaches suitable to the organisation described in the scenario and justify this advice using the evidence given in the scenario.

The scenario describes the organisation, its objectives and its business environment. A good candidate will show how they have taken in this information and then applied it to the performance management of that organisation. For example, when assessing different performance management approaches, a useful question to ask is ‘Does this meet the objectives/needs of the organisation?’ so obviously, the candidate must have identified these from the scenario.

Candidates must make sure that they can:

  1. assess the current situation of the organisation (for example, its existing performance management systems) and then
  2. consider how to apply a new approach to performance management (for example, value-based or based on one of the many models mentioned in the syllabus such as the performance prism or the building block model) and
  3. assess whether this new approach will be an improvement (for example, by helping to meet the corporate objectives.

Lists of rote-learned advantages and disadvantages for different approaches will not produce a complete answer as a candidate will be expected to tailor this knowledge to the situation given in the question. Also, simply writing the appropriate jargon words or phrases associated with a model or method will not score heavily. It is essential that candidates demonstrate that they know how to apply these appropriately to the scenario. So for example, Question 2 of December 2010 asked for an evaluation of two costing systems within a laptop manufacturer. A good answer considered the advantages and disadvantages of the absorption costing and activity-based costing in a dynamic, competitive, bespoke-manufacturing environment.

Answer the question asked

The question requirement usually gets a great deal of attention from the examiner who first writes it and the team of reviewers who perform the more than five layers of review before the exam is finalised. My approach to this point is that candidates should be given credit where their answer is technically correct and relevant to the question asked. There has been a tendency by candidates to write good answers to questions that they wish had been asked by the examiner rather than the one actually set in the paper. This approach scores little if no credit.

Create information from data

As the business environment has been profoundly affected by the increased use of technology, there is less need at a strategic level to manually perform calculations. This is already tested heavily in earlier papers; therefore, there has been a reduction in the volume of computational work required for this paper compared to the lower levels. Occasionally, longer computations may appear but these will be used as a way of allowing the student to absorb the data in a question and become comfortable with the scenario. Large repetitious calculations are avoided but it should be noted that some repetition is inevitable as, for example, a trend can only be identified with at least two or more realistically three data points.

However, computational work has not totally disappeared from Paper P5 but features more in the interpretation and further analysis of data provided in the question. Candidates have to demonstrate the ability to add value to their advice by taking information already produced and identifying the important features. At the Professional level, comments should be helpfully quantified where possible and the commercial implications discussed. Candidates should be constantly on the lookout for ways to make their numbers more understandable, for example, by comparing them to increased activity of the business or to competitor performance.

A valuable management accountant will create information from the detailed data given in a question. It is often best to begin by considering the ‘big picture’ (what is the overall objective); next, break down the data into smaller but meaningful (and manageable) chunks; finally, discuss the individual lines of the data table and even then, a candidate should focus on the data that explains the overall picture of changes.

A good example of this was Question 4 Part (b) of the December 2010 paper.

  1. Consider the ‘big picture’ – whether the overall target for emission reduction is met.
  2. Break down the data into smaller but meaningful (and manageable) chunks – road, rail and air transport
  3. Discuss the individual lines of the data table focusing on the data that explains the overall picture of emission changes – the switch from petrol to diesel powered motor vehicles is complete in commercial vehicles and has led to large reductions in emissions but such a change may be more difficult in company cars as employees may resist such a change.


It is important to realise that, at the Paper P5 level, it is not enough to throw down all the ratios and measures that can be imagined. In doing this, the candidate is probably going to overload the report reader with unnecessary data. It is essential that candidates try to be selective in their choice of what to calculate. This is an important testing area in the exam as it shows that the candidate has appreciated the strategic goals or key drivers of performance and can focus on them. (Further examples of applying this skill are in Question 2 of December 2011 and Questions 2 and 4 of June 2012.)

Note specifically that in handling data heavy questions, the level required for Paper P5 is for answers to go beyond repeating, in sentence form, the data given in (say) a table in that question. In Question 4 of December 2010 for example, many candidates wasted their time by limiting their comments to only writing out statements such as ‘Commercial Fleet Diesel use has fallen from 105.4 to 70.1’ or even ‘Commercial Fleet Diesel use has gone down’. First, this is stating the obvious to anyone who read the table but also importantly, this was far too detailed for most reporting purposes in this scenario.

Candidates will be expected to analyse not merely calculate numerical data given from a scenario.


A candidate would be advised to ask him/herself if the answer they have produced would help the organisation to answer the question requirement. Remember, try to add value with your answers by way of comments relevant to the issue at hand.

The above report was culled from http://www.accaglobal.com/

An Examiner’s outline of the aim of Paper P4, its structure and how the syllabus is tested

Paper P4, Advanced Financial Management is one of the four papers in the Options module at the Professional level of the ACCA Qualification. This article highlights the overall aims of, and main capabilities required, for the paper and it recommends the study approach that candidates should adopt (and the bad habits to avoid) when preparing for the Paper P4 exam to increase their chances of success.

Aim and capabilities

The aim of Paper P4 is to enable candidates to demonstrate application of relevant knowledge, techniques and skills, and to exercise professional judgment, in recommending or taking decisions relating to the financial management of a business. The overarching aim of such recommendations and decisions is to add value to a business, paying due regard to the impact on the reputation of the business; and to ethical, environmental and stakeholder concerns.

The exercise of professional judgment in making sound decisions requires the need for careful weighing up of evidence that is often partial and incomplete. The right decision must often be made without the help of a simple algorithm, and in the face of an array of criteria – some technical and some ethical – which may be in conflict and not entirely clear cut. As such, candidates are required to display analytical and evaluative skills, skills of judgment where alternatives are considered, and discuss the limitations of techniques used. Presentation skills are also important and answers should be clear and well structured.

Analytical techniques and discussion should be applied in relation to the context of the scenario in the question and related to the real world where applicable. It is not sufficient to apply techniques or to conduct discussions without considering whether or not these apply to the question asked. It is also important that candidates are up-to-date in their knowledge and understanding of the current global economic and financial environment.

The principles underpinning Paper P4 are introduced and developed in Paper F9, Financial Management. In Paper F9, the following essential areas are introduced and developed: financial environment; investment appraisal; cost of capital; alternative ideas of, and impact of changes to, the capital structure; sources of finance; dividend policy; working capital management; risk management and business valuation.

Paper P4 explores these same areas, but at a more advanced level, and considers problems and issues (many derived from real situations) relevant to the highest-level financial management of an organisation. New areas specific to Paper P4 include responsibility towards stakeholders, acquisitions and mergers, corporate reconstruction and re‑organisation, the international business environment and multinational organisations, and emerging issues. Finance managers need more than a battery of theories and techniques to succeed – they also need a deep understanding of the context in which they work. As a consequence, candidates will be expected to demonstrate up-to-date understanding of the international macroeconomic environment and the operation of those international institutions that govern both trade and the operation of the financial markets. This is especially important in the current global economic climate of uncertainty.

To be successful at this level, candidates must be able to demonstrate an integrated understanding of the subject. Therefore, it is essential that candidates are able to draw upon the knowledge, techniques and skills gained in Paper F9, and apply these to Paper P4. Also knowledge gained from the other Fundamentals level papers and from Papers P1, P2 and P3 will be useful in helping candidates demonstrate an integrated approach.

Paper P4 syllabus

The relational diagram, Syllabus and Study Guide give a comprehensive detail of the Paper P4 syllabus. The intention is to test the entire range of the Paper P4 syllabus topic areas. It is important that candidates have a sound knowledge of all the parts of the Syllabus and Study Guide, and are able to apply the knowledge to a variety of different business situations. It is also important that candidates bring forward their knowledge of Paper F9 and understand how the Paper P4 syllabus develops these areas.

All the questions in the exam paper may require candidates to draw on knowledge and techniques from different parts of the syllabus. It is unlikely that questions will relate to only one part of the syllabus.

On the other hand, it is likely that exams will continue to contain questions which are substantive and analytically complex. The scenarios in questions are likely to be detailed and require in-depth analysis, evaluation and discussion. Candidates’ ability to relate their answers to the actual question scenario is vitally important.

In the main, the Syllabus and Study Guide areas are clarified, with sections being added as necessary. For example, Islamic finance has been included as a topic area in parts C and G of the syllabus. Some areas have been deleted such as portfolio theory calculations (although the discussion of portfolio theory and the impact on risk diversification will continue to be examinable), and money market products in part F of the syllabus.

Please refer to the relational diagram, Syllabus and Study Guide for the further detail on topic areas.

Structure and layout of the Paper P4 exam from June 2013

From June 2013 the structure and layout changed significantly.

Section A now contains one compulsory 50-mark question. This question is scenario-based and the requirements come from different areas of the syllabus. The question normally requires candidates to perform complex computations, evaluate and analyse information, discuss and assess various options, and make judgments, possibly based on explained and justified assumptions. The question is substantive and analytically complex. It requires candidates to structure at least part of the answer in a formal context for which four professional marks are allocated. These professional marks are awarded on the basis of the clarity and structure of the answer. They may also be awarded for answers that are presented in the required format. So, for example, if a report is required, in order to gain the professional marks, the answer should be in a report format and consist of a title, an introduction, other features as appropriate, a conclusion, and make appropriate use of appendices.

Section B consists of three 25-mark questions and candidates are required to choose two out of three questions. Although these questions and the requirements are not as substantive as the 50-mark question in Section A, it is nevertheless possible for the requirements of the questions to come from different parts of the syllabus. Unlike previous exams, there is not necessarily a wholly written question. Instead all questions in Section B may require candidates to perform computations, interpret and analyse information, discuss and assess various options, make judgments and explain assumptions, and provide reasoned recommendations, to varying degrees. It is possible for questions to range from being highly computational to wholly written. It is also possible for candidates to be provided with incomplete or incorrect data and information, for which they need to provide further computations and amendments, and then provide analysis and assessments. Additionally it is also possible that candidates are provided with numerical data and information, which they need to analyse and provide recommendations. It is likely that Section B questions will be scenario-based as well.

Given that candidates are asked to consider information-intensive scenario-based questions in both sections, it is imperative that they use their reading time at the start of the paper effectively.

Recommendations when preparing for and doing the Paper P4 exam: forming good habits

The Paper P4 exam is challenging. Adopting these recommendations and good habits will give you a good chance of being successful in the examination.

  • Develop a sound knowledge of the entire Paper P4 syllabus. Augment studying the manuals with wider reading of the financial press, finance textbooks, articles in Student Accountant and financial journals.
  • You should expect and be prepared for questions from a range of syllabus areas and more than one area may be tested in a single question. Be prepared for questions that require you to consider a number of areas of the syllabus within one question.
  • Use the 15 minutes of reading time at the beginning of the paper effectively. The questions may contain a substantial amount of information that you will need to sort out and apply properly. The reading time should also help you decide which optional questions to select.
  • It is very important that the optional questions in Section B are chosen with care. Ask yourself questions such as: Can you answer all the parts of the question? Are you able to attempt the whole question in the time allocated for it? Starting a question and then deciding you would like to do another wastes time needlessly.
  • In your exams, good time management techniques and habits are essential in ensuring success. Make sure that you are able to answer all parts of each question and manage your time effectively so that you make a reasonable attempt at each part of each question. Good time management skills are essential.
  • Often parts of a requirement may ask for more than one aspect. Make sure that you can answer, and do answer, everything each part of each requirement is asking for.
  • Make sure you answer the requirements correctly. For example, if the question asks you to explain, it is not enough just to list. If the question asks you to assess, it is not enough just to explain.
  • For the written parts of any question, remember it is generally a mark for each relevant point. Repeating a point does not get you any extra marks and it wastes time. Avoid repetition.
  • Your answer must relate to the scenario in question. Context is very important for higher-level papers. General answers will gain fewer or even no marks.
  • The presentation of your answers is critical. It is very important to pay regard to neatness, organisation and structure of your answers. Professional exams are extremely time-pressured but giving your answers a structure will help you organise your thoughts and work more effectively. Make sure that your answers are legible because markers cannot award marks for something that they cannot read.
  • Work through the past exam questions under exam conditions and to time. Doing past questions will help you build efficiency in answering questions and help you build knowledge of how to make your answer relevant to the scenario in the question.

Three things to avoid: do not form bad habits

  • Don’t use past exam questions to try to pick topic areas from the syllabus or rely on certain areas coming up, for three reasons: first, you may get it wrong; second, the question may be an option but a really difficult one; finally, the topic you picked is part of a question but the rest of the question relates to a topic you decided not to study. Trying to question/topic spot is not recommended.
  • Don’t disregard what you learnt in Paper F9 and other papers. You will probably need the knowledge (and techniques) from the other stages.
  • Don’t use incomplete sentences when making a point. Marks are awarded for complete points made in full sentences. However, you can use bullet points and numbered paragraphs, and headings when appropriate, to structure an answer to a question. But points made should be in complete sentences.

The above report was culled from http://accaglobal.com/

According to Examiner’s report, the relational diagram of main capabilities – as illustrated in the Syllabus – shows how the various parts of the syllabus for Paper P3, Business Analysis are interrelated. Each part of the relational diagram is annotated with the relevant syllabus section. For example, ‘Strategic position [A]’ refers to Section A of the Syllabus. Each section of the syllabus is expanded into a detailed syllabus, which is expanded further in the Study Guide. The Syllabus, Study Guide, and Pilot Paper can be downloaded from the ACCA website. The reading list is also included in the Study Guide.

Structure The ‘top layer’ of the relational diagram reflects the vocabulary of Exploring Corporate Strategy, by G Johnson, K Scholes, and R Whittington, (Prentice Hall 2005, seventh edition) – one of the primary reference texts. The syllabus begins with the assessment of the strategic position of an organisation, before moving on to consider the strategic choices available to it. Finally, strategic action concerns the implementation of strategic choices through appropriate organisational actions. Sections A, B and C of the syllabus generally follow the structure of Johnson, Scholes, and Whittington, and certainly use their vocabulary. Terms such as competencies, capabilities, strategic directions, and strategic methods are used in the Syllabus and Study Guide, as defined in their book. This ‘top layer’ is closely related to parts of the Paper 3.5 syllabus.

The ‘middle layer’ is an expansion of the implementation of strategy. Understanding the strategic position of an organisation, and considering the strategic choices open to it, are of little value unless the preferred strategies can be turned into organisational action. Johnson, Scholes, and Whittington acknowledge that ‘such action takes form in the day-to-day procedures and relationships that exist in organisations.’ Furthermore, strategies may emerge from these day-to-day activities, and the inclusion of this ‘middle layer’ (and indeed the ‘bottom layer’) should give candidates more opportunity to reflect on strategy as an emergent, rather than a designed, activity.

The focus of the ‘middle layer’ is on process redesign and automation, the e-business application of information technology, and the role of quality – both as a threshold value and a differentiator. It is perceived that these three elements are also interconnected. For example, many process redesign initiatives use information technology to achieve improvements in product or service quality. All three elements require effective project management. Finally, strategic position, choices, and implementation are all subject to financial benchmarks. Financial analysis explicitly recognises this, reminding candidates of the importance of focusing on the key ratios and measures that may be used to assess the position of an organisation, the viability of a selected strategy, and the monitoring and measuring of its success. This builds on capabilities defined in Paper F7, Financial Reporting and Paper F9, Financial Management.

The ‘bottom layer’ of the relational diagram recognises that successful strategic planning and implementation requires the effective recruitment, training, motivation, and organisation of people. This section picks up from material covered in Paper F1, Accountant in Business. Candidates preparing themselves for the Paper P3 exam should familiarise themselves with the contents of the Paper F1 syllabus – particularly Sections A, B, E, and F.

Exam format and Pilot Paper The syllabus is assessed by a three-hour exam, which comprises two sections. Section A contains one multi-part question based on a case study scenario. This question is worth 50 marks. Section B will consist of three discrete questions each worth 25 marks. Candidates must answer two questions from this section.

The case study for Section A of the Pilot Paper is based on the case study from the June 2004 Paper 3.5 exam. However, changes have been made to the text of the case study, and to the questions and model answers. This reflects a slight sharpening of the focus of questions in a paper where the explicitly strategic content of the syllabus has been reduced. The original question paper also contained further questions as part of a 60-mark compulsory question.


The case study scenario will always concern global industries, which should be familiar to candidates sitting this exam anywhere in the world. These industries are frequently the subject of articles in the business press, and so candidates are encouraged to continually read business supplements to help them prepare for this exam.

The exam will also include quantitative information, which might include financial data. Two points need to be made here:

 Specific marks will be available for interpreting financial ratios that can be calculated from the financial data. The scope of these ratios is defined in Section H3 of the Study Guide. The questions will never ask for specific ratios, but there will always be enough information to calculate and interpret – as far as possible in the context of a case study scenario – several financial ratios. These ratios will have been introduced in the Paper F7, Financial Reporting syllabus and the Paper F9, Financial Management syllabus.

 Non-financial information will also be provided in tables, and candidates will be expected to use and interpret this information. Such tables will supplement, and to some extent replace, information traditionally given in the narrative scenario. For example, if the scenario concerned competing exam providers, it could also now contain a table with information on fee rates, number of candidates, and pass rates.

Section B will include three discrete questions, each worth 25 marks. Candidates

syllabus. At most, one question in this section will be based on capabilities defined in Sections A, B, and C of the syllabus. Capabilities defined in Section H of the syllabus may be used to support questions in this section.

In the Pilot Paper, Question 2 was based on Section B of the syllabus, Question 3 on Section F, and Question 4 on Section E. It is likely that the scenarios for these questions will be longer than those in the current Paper 3.5, to reflect the fact that they are now worth 25 marks each. However, this will be compensated for by shorter scenarios in Question 1, and the introduction of 15 minutes reading time for the exam as a whole.

One of the features of the Professional level exam papers is the awarding of ‘professional marks’. These are marks allocated not for the content of an answer, but for the degree of professionalism with which certain parts of the answer are presented. They will usually be awarded in Section A (the compulsory part of the exam paper) and will total between four and six marks. It may be, for example, that one requirement asks you to present your answer in the form of, say, a letter, a presentation, a memo, a report, briefing notes, or similar. Some marks may be awarded for the form of the answer in addition to the content of the answer. This might be for the structure, content, style and layout, or the logical flow of arguments in your answer. You should assume that if the question asks for a specific format of answer that some marks may be awarded for an effective presentation of that format.

 Conclusion A considerable amount of documentation has been produced for this paper. Candidates, lecturers, and publishers are encouraged to download and read the Study Guide. The links within the syllabus are documented in the relational diagram and should be understood by candidates, and reinforced in teaching. The nine sections of the syllabus are interrelated and this interrelationship is particularly tested in the case study question.

The above message was culled from http://www.accaglobal.com/


According to the examiner’s report, the examination consisted of two sections. Section A contained one question for 50 marks and Section B contained three questions of 25 marks each, from which candidates had to answer two questions. The Corporate Reporting examination requires a deep understanding and knowledge of the Conceptual Framework, IFRSs and Code of Ethics. Questions at professional level will challenge the candidate to show this knowledge and then to apply it to a particular scenario, and this requires extensive preparation. Candidates learning are expected to extend beyond reliance on a single textbook or revision course. A well-prepared candidate would have reviewed relevant websites including those of the standard setters (IASB), the profession, and ACCA to maintain their knowledge and keep up to date with topical issues (it is normal for this exam to contain one question focusing on a topical issue, and this exam was no exception). Practice of past exam questions and exam-standard questions under timed conditions will better prepare candidates for allocating their time in the exam. Candidates with good

exam technique (such as allocating time according to marks available, making brief planning notes, and reading the scenario and requirements carefully before answering) are more likely to succeed.

As in previous examinations, this examination required candidates to display more than just a rote knowledge of accounting standards. Professional accountants are required to advise clients, and the Corporate Reporting examination tests the candidate’s ability to apply knowledge to a scenario: the ability to explain the correct accounting treatment, the principles that underpin the treatment, and the implications of this, in complex scenarios.


It was evident that some candidates at this sitting were not prepared to the level appropriate for Professional Level. In the optional questions, the key requirement is to discuss an accounting treatment. A well-prepared candidate would approach this requirement by first outlining their knowledge of the issue, referring to the Conceptual Framework and appropriate reporting standard(s), and secondly applying this knowledge to the given situation. Less-prepared candidates tended to omit one of these two aspects, limiting their response to a listing of reporting requirements, or jumping directly to the application element (the accounting treatment) without a clear explanation of why the method is appropriate. Professional accountants would be expected by their clients to provide advice which outlines both the correct accounting treatment and also the reasons for this treatment. Candidates who failed to display both knowledge and application limited their opportunities to gain marks.


Specific Comment

Question One

This question required the candidates to prepare a consolidated statement of profit or loss and other

comprehensive income. In this question candidates were required to deal with two subsidiaries, one of which was a step acquisition from an associate in the year, and the other a partial disposal to associate.

As in previous exams, more than half of the marks in question 1 were allocated to the group accounting part of the question. In the case of a consolidated profit or loss and other comprehensive income, candidates must be prepared to complete appropriate workings for the profit attributable to the owners and non-controlling interest, the share of profits of associates/joint ventures as well as goodwill calculations (required for impairment and disposal workings).

Of the other syllabus areas tested within the consolidation requirement, an impairment review, the conversion of a head office to an investment property and a share-based payment scheme were answered fairly well by many candidates. However the treatment of a cash flow hedge and a joint venture were less well answered.

Question 1b required candidates to discuss the expected dilutive impact of convertible bonds issued by an associate, with conversion likely to occur. Most candidates recognised the impact upon ownership, correctly calculating the new holding, which was below 20%. Many candidates then concluded that the investment would cease to be an associate, without outlining how this would impact the individual and consolidated financial statements (as required). Very few candidates noted that share ownership is not the only indication of significant influence, and so limited their opportunities for marks.

Question 1c required a discussion of the ethical and professional issues relating to an over-impairment on the basis of prudence, with the impairment being offset against revenue which would reduce the conversion of share based options dependent on revenue targets. This part of the question was well answered by candidates, with better answers commenting on each element of the scenario (e.g. impairment treatment, required qualitative characteristics, offsetting) before concluding on the ethical issues. There is a range of possible points which could be raised by candidates, and candidates were given due credit for relevant opinion on the subject matter of the question.


Question Two

This question required candidates to discuss the accounting treatment of three issues relating to: a non-current asset with components, the impairment of cash-generating units (with some issues over onerous contract provisions), and a defined benefit pension scheme (with issues over its identification compared to a defined contribution scheme).

The first issue examined candidate’s knowledge and application of IAS 16 Property, Plant and Equipment (PPE), specifically the treatment of an asset requiring overhaul costs with a shorter useful life than that of the asset, a subsequent change in the residual value of the asset, and a discussion of the appropriateness of a proposed change in depreciation to one based on revenue generation. Whilst most candidates identified and calculated the depreciation following a change in residual life (over the remaining useful life), many did not recognise the need to componentise under IAS 16. Comments on the proposed change in depreciation method tended to be limited to a yes/no decision, with minimal discussion of the published amendment to IAS 16 to which this item related.

Even without this knowledge, candidates should be able to explain that patterns of revenue generation may differ significantly from those of an asset’s consumption. Answers to the second issue on an impairment of cash-generating units (CGUs) were also quite weak. The question outlined that the business held retail outlets under operating leases, and weaker candidates spent considerable time explaining the differences between operating and finance leases, which was not relevant and earned no marks. Candidates must read the question carefully, and not jump into an answer. In this case the

question described how three CGUs were being wound down, including information on expected cash flows and carrying values prior to impairment. A well-prepared candidate should be aware of situations in which more than one accounting standard may apply. This question raised issues relating to IAS 36 Impairment of Assets and also IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Candidates should at this level recognise that the requirement is to discuss how an impairment review is undertaken (and most did), and also calculate any impairment (which a surprising number failed to do, limiting their workings to a net expected cash flow figure). Where an impairment was suggested, some incorrectly recommended impairment of a CGU beyond its carrying value, and most missed the point that where outflows exceed expected inflows, an onerous contract exists(limited to the unavoidable future costs) under IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Candidates answered the third issue on the treatment of a pension scheme well, with some good explanation of the differences between defined contribution and defined benefit; and application of this knowledge to the information given in the question relating to risks still faced by the employer.


Question Three

Question 3 was a case study question which required the application of the fundamental principles of several accounting standards. In part (a), candidates were required to discuss whether acquired know-how and technology should be capitalised, and the accounting treatment of an acquisition of a shell company. Marks were available for knowledge (of IAS 38 Intangible Assets and IFRS 3 Business Combinations) as well as application, and stronger answers outlined the requirements for recognition, and treatments if recognised, or not recognised, as an intangible asset. Candidates often discussed the recognition requirements for intangible assets, although some answers focused too long on issues relating to self-created intangible assets (not relevant in this case).

Better answers focused on the implications of acquiring know-how, outlining the fact that the probability

recognition criterion is always considered to be satisfied for intangible assets that are acquired separately or in a business combination. Very few candidates identified an acquisition of a shell company without employees (and hence without processes required to make it a ‘business’) as an asset acquisition as opposed to a business combination.

Part (b) also examined candidates’ knowledge of IFRS 3, Business Combinations. A subsidiary was acquired with inventory valued at fair value at acquisition. Candidates were required to comment on the proposed treatment of splitting the value of this inventory between cost of goods sold and a ‘non-recurring item’ (in operating income) in the consolidated income statement, on the basis of transparency, and to avoid a declining gross margin. Many candidates suggested inventory be valued at lower of cost or net realisable value, and incorrectly rejected the carrying value being at fair value after an acquisition (despite sometimes outlining IFRS3 issues). Many answers were limited to a rejection of the treatment in the question without explaining why. Very few candidates discussed the issue with respect to IAS1 Presentation of Financial Statements, which does not permit ‘extraordinary items’.

In part (c), candidates were required to discuss the accounting treatment of a net deferred tax asset where the business expects future profits, but based on general assumptions (and a history of inaccuracies in previous forecasting), impairment losses and going concern issues. This part was well-answered, with most candidates providing good explanations of why the deferred tax asset should be derecognised.

Question Four

This question is normally the current issues question, and on this occasion the issue related to IFRS 9 Financial Instruments. In Part (a), candidates were required to discuss the requirements of IFRS 9 concerning the classification and measurement of financial assets, and its implementation issues for entities. Where candidates were well-prepared, part (a) was well-answered, although it was surprising to see some candidates writing much less on the implementation issues: comments such as (and not limited to) judgement issues, new processes and resource requirements, and covenant requirement issues would have earned marks.

Part (b) required candidates to apply IFRS 9 to two situations. Answers for part (b) were weaker than part (a), possibly down to poor time management or lack of application practice. The first situation involved a debt instrument acquired in the year and measured at fair value through other comprehensive income, with an impairment loss at the reporting date, and subsequent disposal after the reporting date. Few candidates split the impairment between expected credit losses (given in the question) to profit or loss and the remainder to OCI. The disposal was better answered, including reclassification from OCI. Marks were also available for identifying investment income, although few candidates calculated this. The second situation, relating to a portfolio measured at amortised cost being reclassified to profit or loss category, was better answered.

The above message was culled from http://www.accaglobal.com/

According to the examiner’s report, Performance at the September 2015 diet was unsatisfactory. Too many candidates are under prepared for an examination in financial management, neither having studied the whole syllabus in enough depth, nor having worked enough examples of past paper standard.

General Paper Comments

The examination consisted of two sections. Section A contained twenty objective testing questions for a total of 40 marks and Section B contained three questions of 10 marks each, and two questions of 15 marks each (total 60 marks). In common with all of the ACCA examinations, for success to be achieved, there is a significant investment required in terms of time, discipline and energy in order to obtain the necessary level of knowledge and application.

Candidates need to have knowledge of the entire syllabus and will not be successful if they simply rely on ‘question spotting’ a few selected areas for study. Candidates should manage their own learning and not be totally reliant on a single textbook or revision course for their knowledge.

Candidates need to take greater care and be more precise in presenting answers to numerical questions in Section B. All workings should be shown and the requirement should be read more carefully. For example, where a company valuation is asked for in total and per share, relatively straightforward marks are not being gained when only one of the two is presented.

Furthermore, in response to requirements in Section B requiring a discussion or explanation, candidates should address the requirements of the question asked and not the one they’d have liked to have been asked (or were asked in questions in an earlier diet).

Section A

It was very pleasing to see that almost all candidates attempted all of the questions. Candidates preparing for the next examination of F9 are advised to work through the specimen exams, any published past exam papers and questions available from approved content providers and to carefully review how each of the correct answers were derived.

Section A questions aim to provide a broad coverage of the syllabus, and future candidates should aim to revise all areas of the F9 syllabus, rather than attempting to question spot.

The following questions are reviewed with the aim of giving future candidates an indication of the types of questions asked and guidance on dealing with such exam questions.

Example 1 is numerical and illustrates how both reading all of the question’s information and the question’s requirement are essential.

Example 2 is a question requiring knowledge of principles and illustrates how all parts of the F9 syllabus can be tested.

Example 1

Ling Co has annual credit sales of $4,500,000 and on average customers take 60 days to pay, assuming a 360-day year. As a result, Ling Co has a trade receivables balance of $750,000. Ling Co relies on an overdraft to finance this at an annual interest rate of 8%.

Ling Co is considering offering an early settlement discount to its customers of 0·5% for payment in 30 days. It expects that 25% of its customers (representing 35% of the annual credit sales figure) will pay on 30 days in order to obtain the discount.

If Ling Co introduces the proposed discount, what will be the NET saving?

A $2,625

B $1,875

C $7,500

D $10,500

The correct response is as follows:


Reduction in receivables = $4·5m x 30/360 x 0·35 = $131,250

Interest saved = $131,250 x 8% = $10,500

Cost of discount = $4·5m x 0·35 x 0·005 = $7,875

Net saving = $10,500 – $7,875 = $2,625

A significant minority incorrectly opted for B $1,875, arrived at where 25% has been used instead of 35%.


Reduction in receivables = $4.5m x 30/360 x 0.25 = $93,750

Interest saved = $93,750 x 8% = $7,500

Cost of discount = $4·5m x 0·25 x 0·005 = $5,625

Net saving = $7,500 – $5,625 = $1,875

The other incorrect responses, C $7,500 and D $10,500, were arrived at as follows:

C Receivables in total reduces to 30 days

Reduction in receivables = $4·5m x 30/360 = $375,000

Interest saved = $375,000 x 8% = $30,000

Cost of discount = $4·5m x 0·005 = $22,500

Net saving = $30,000 – $22,500 = $7,500

D Cost of discount not deducted

Reduction in receivables = $4·5m x 30/360 x 0·35 = $131,250

Interest saved = $131,250 x 8% = $10,500

Example 2

Which of the following statements describes the main objective of financial management?

A Efficient acquisition and deployment of financial resources to ensure achievement of objectives

B Providing information to management for day-to-day functions of control and decision-making

C Providing information to external users about the historical results of the organisation

D Maximisation of shareholder wealth

This is a seemingly straightforward question from Syllabus area A which appears within the opening lines of most financial management textbooks.

The accepted definition of financial management is that given in:

A, “Efficient acquisition and deployment of financial resources to ensure achievement of objectives”.

A number of candidates incorrectly gave D as their response. This is the overall, primary objective of a profit seeking organisation which would not be relevant to a not for profit organisation, but financial management is still relevant to a not for profit organisation.

B, “Providing information to management for day-to-day functions of control and decision-making”, is the definition of management accounting.

C, “Providing information to external users about the historical results of the organisation”, is the definition of financial accounting.

Question Two

Question 2a required candidates to perform a company valuation using three different techniques. Many candidates were let down by a fundamental lack of knowledge here. For example, when using an asset-based valuation model, the failure to deduct liabilities from total assets is an error of principle which shows a deficiency in financial management knowledge. Furthermore in 2a, there were a number of unsatisfactory attempts at income-based and cash-based valuation models and even an evident confusion between the two, with answers to one being applied to the other. Some candidates did accurate total valuations but even here, they did not pick up full marks due to a lack of calculating the per share value, which was clearly asked for.

2b asked candidates to discuss cash based valuation models. Overall, there were unsatisfactory responses to this part, which, in many cases, did not discuss the issues surrounding forecasting discount rates and cash flows, and drifted into non relevant areas of profit/earnings, asset valuation and even depreciation. There were also a significant number of no responses to this part. This, once again, demonstrated that candidates need to address the requirement set and study all parts of the syllabus.

Question Three

This was the most unsatisfactory question in terms of candidate responses, both in terms of numbers of ‘no responses’ to question parts and in terms of lack of knowledge when responses were offered.

There seemed to be a lack of clarity in the distinction between interest rate risk and exchange rate risk. Far too many candidates were confusing the two types of risk.

Question 3a clearly referred to managing interest rate risk. In too many cases the first calculation presented by candidates was a conversion from one currency into another, and then a discussion of spot versus forward rates. Unfortunately, this repeated a mistake made in a question in the June 2015, the examiner’s report for which stated; “In terms of examination technique, answers to this question reinforce the need for you to address the question requirement (interest rate risk) and avoid including irrelevant material (foreign currency risk, interest rate parity) in your answer.”

Likewise, when question 3b asked about analysing foreign currency risk, responses sometimes contained

discussion relevant to interest rate risk. Also, the requirement asked for candidates to ‘analyse’. If asked to analyse, candidates must consider the information in the scenario.

Candidates’ discussion of ways to hedge did often list alternative methods, but could have explained them more fully.

Question 3c required candidates to explain the four way equivalence model. Some candidates were able to recognise the need for an explanation of Interest Rate Parity and Purchasing Power Parity but needed to do more than reproduce the formulae given at the end of the question paper. Few responses properly explained the four way equivalence model.

Question Four

Question 4 presented a scenario whereby a company was financing a growth strategy via the issue of debt finance. 4a gave candidates an opportunity to display their knowledge of financial management performance indicators by assessing the impact of a debt issue on financial position, financial risk and shareholder wealth.

There were many good responses here in terms of the calculations with plentiful correct ratios based upon those suggested in the scenario and others. Amongst the common mistakes were the wrong inclusion of current liabilities as part of the debt total in the debt to equity ratios, the failure to recognise that new retained profit adds to the reserves of the company and that return on equity percentages use profit after tax. Discursive points often failed to recognise that a range of indicators needed to be considered before a definite conclusion could be reached. For example, some candidates seemed to think that because dividend per share rises then shareholder wealth has increased, ignoring how the share price may react to an increase in debt finance. Similarly, a firm conclusion about financial risk cannot be made based upon interest cover ratios alone; rather a range of suitable indicators should be examined.

Question 4b required a discussion about the weighted average cost of capital and the circumstances under which it could be used in investment appraisal. Lots of candidates made only a generic statement such as ‘when the business and financial risk remain unchanged’. A better discussion of each of the risks and, also, as to how a project specific discount rate could be found when business risk does change, would have scored more marks. Some candidates drifted into irrelevant discussion (e.g. M&M theory, time value of money) in 4b, which scored no marks, and they spent valuable time doing so.

Question Five

Question 5 presented a scenario where a company was looking to acquire a piece of machinery and wished to determine whether leasing or buying the machine would be financially preferable. Candidates, in general, were able to present many of the cash flows correctly. Under the buy option, most correctly inflated servicing costs (although often ignoring the tax relief upon it) and could calculate the tax saving

arising from claiming tax-allowable depreciation. As with the servicing costs above, under the leasing option, too many candidates failed to recognise the tax relief arising from the lease payments. These both illustrate a failure to apply a fundamental principle in financial management. Similarly, candidates who did not recognise that such an evaluation needed to work out net present values of each option using discounted cash flow techniques were displaying a lack of fundamental financial management knowledge which underpins much of what is done in the discipline. Only a minority of candidates recognised that the cost of the loan was at a before tax percentage and need to be adjusted to after tax, whilst some candidates even said that there was no cost of capital percentage given in the question!

Question 5b required candidates to explain the difference between a real terms and a nominal terms approach to investment appraisal.

Many candidates could take the Fisher Equation provided on the formulae sheet and define each of the variables. The common error seen here, and in previous diets, is the misconception that the real terms approach ignores inflation whilst the nominal terms approach includes inflation. This statement is not correct. They both ‘include’ inflation but do so in different ways. Good candidates recognised this via a discussion along the lines of “nominal cash flows which have been calculated by applying specific inflation to current price terms estimates can be turned into real cash flows by deflating them by the general rate of inflation”, and then moving into a discussion about how nominal and real cost of capital percentages are linked and when each is applied.

The above report was culled from http://www.accaglobal.com/

According to the examiner’s report, there were two sections to the examination paper and all the questions were compulsory. Section A consisted of 12 multiple-choice questions (one and two marks each), which covered a broad range of syllabus topics. Section B had four written questions worth 10 marks each and two longer written questions worth 20 marks each;

testing the candidates’ understanding and application of audit and assurance in more depth.

Specific Comments

Section A

It was pleasing to see that once again almost all candidates attempted all of the questions. Candidates preparing for the next F8 examination are advised to work through the pilot paper, past exam papers and sample questions discussed below, to carefully review how each of the correct answers were derived. Section A questions aim to provide a broad coverage of the syllabus, and future candidates should aim to revise all areas of the F8 syllabus, rather than attempting to question spot. The following two questions are reviewed with the aim of giving future candidates an indication of the types of questions asked, guidance on dealing with exam questions and to provide a technical debrief on the topics covered by the specific questions selected.

Sample Questions for Discussion

Example 1

Which of the following are appropriate audit procedures to test for COMPLETENESS of trade payables at the year end?

(1) Review outstanding invoices in the purchase ledger greater than three months old and enquire of management whether they are valid outstanding liabilities

(2) Perform supplier statement reconciliations for a sample of suppliers

(3) Review bank statements for payments made after the year end to identify those payments relating to pre year-end liabilities

(4) Select a sample of invoices in the purchase ledger at the year end and agree payments made to bank statements post year end

A 1, 2 and 3

B 3 and 4

C 1 and 4

D 2 and 3 only

This question tested candidates’ knowledge of audit procedures and their understanding of financial statement assertions. This question was incorrectly answered by the majority of candidates. When assessing audit procedures it is important that candidates are able to differentiate between the assertions being tested. The four audit procedures listed were all valid procedures for auditing payables, however only two focused on the assertion of completeness. Candidates are reminded that when testing for completeness the auditor is looking for instances of UNDERSTATEMENT. The key to passing this type of question was to identify what assertion each procedure was testing.

Procedure 1 focused on asking management whether old, outstanding purchase invoices already in the purchase ledger were valid; as the invoices were already included in the purchase ledger this test would not allow the auditor to identify understatement and hence this test addressed the assertion of existence. Similarly, procedure 4 vouching invoices, again already included in the purchase ledger, to post year-end payments also addressed the assertion of existence. Procedures 2 and 3 however both addressed the assertion of completeness. Procedure 2 performing supplier statement reconciliations allows the auditor to compare third party evidence to the purchase ledger to ascertain if all payables have been recorded at the year end. Procedure 3 reviewing post yearend payments and considering whether these relate to pre year-end liabilities allows the auditor to search for unrecorded year-end liabilities. Therefore the correct answer was D – 2 and 3 only. Future candidates should take note that they must be able to correctly connect the procedure with its related assertion.

Example 2

Amit & Co is finalising the audit of Triangle Co, which is the subject of a litigation claim. This will not be settled until after the audit report has been signed. If the claim is lost, this could cause doubt over the going concern status of the company. The directors have correctly disclosed this matter in the financial statements. The issue is considered material and pervasive.

Which audit opinion should be issued for Triangle Co?

A Unmodified opinion with an emphasis of matter paragraph

B Qualified opinion

C Adverse opinion

D Modified opinion with an emphasis of matter paragraph

This question tested candidates’ knowledge of the auditor’s report and its content when there is doubt over the company’s ability to continue as a going concern. This question was incorrectly answered by a significant number of candidates. When answering questions on possible modifications to the auditor’s report due to doubts over going concern, it is important that candidates consider two criteria: Firstly whether the matter is material only, or, whether it is material and pervasive. Secondly whether the disclosures on going concern have or have not been correctly made in the financial statements. The question clearly stated the conditions in relation to both of these criteria.

Answer B – qualified opinion: This does not meet the first criteria as a qualified opinion is given when a matter is material and not pervasive. The question states the matter is material and pervasive.

Answer C – adverse opinion: This correctly meets the first criteria as an adverse opinion is given when a matter is material and pervasive. However, it does not meet the second criteria as the question states than the directors have already correctly disclosed this matter.

Answer D – modified opinion with an emphasis of matter paragraph: A modified opinion would be given in this situation only if the auditor disagreed with whether adequate disclosure had been made of any material uncertainties affecting the going concern. The question states the directors have correctly disclosed the matter so therefore no modification to the audit opinion is necessary. Further, including an emphasis of matter paragraph does not constitute an opinion modification; it just draws the readers’ attention to an important area disclosed in a note to the financial statements.

The correct answer is A: the auditor would not modify the opinion as adequate disclosure has been made, however they would include an emphasis of matter paragraph to draw readers’ attention to this area of fundamental importance.

Section B

The six written questions in Section B tested in more depth candidates understanding of the audit and assurance syllabus, which is structured around the following areas:

– Audit framework and regulation

– Planning and risk assessment

– Internal control

– Audit evidence

– Review and reporting

Audit framework and regulation

This area of the syllabus requires an understanding of the purpose of an audit, being able to distinguish between the scope of internal and external audit, and, an understanding of both corporate governance and professional ethics.

Questions regarding the function of an audit and distinguishing between internal and external audits tend to be more factual, knowledge based questions. Whereas questions discussing corporate governance and professional ethics tend to be based on a scenario and candidates are required to identify and explain the areas of importance from the scenario and then give recommendations for each issue. The scenario-based ethics question in September 2015 was well answered by the majority of candidates and many proved able to identify and explain the requested number of ethical issues. As in previous sessions the best answers were those that identified the fact from the scenario which may affect independence and from that identify which category of ethical threat this created as set out in the ACCA Code of Ethics and Conduct. The explanation ½ marks were awarded if candidates then went on to explain how this may affect the auditor’s independence.

Many candidates planned their time appropriately and focused on providing the requested number of points insufficient detail. One mark was available for each well explained issue. While many candidates were able to identify relevant issues from the scenario, a significant number of candidates continue to not explain the issues correctly or in sufficient detail, therefore most candidates scored ½ marks rather than one mark for each issue. In addition, some candidates copied out large sections of the scenario without necessarily realising that there can be two issues in one sentence in the scenario and hence therefore did not go on to explain the consequences of and provide a recommendation for each individually. The recommendations to counter each issue were generally clear, however again candidates continue to provide recommendations that are too brief and impractical. The presentation of candidates’ answers was generally of an appropriate standard. The majority of candidates used a two-column format using the first column to identify and explain the threat and the second column to provide a safeguard to mitigate the threat. This enabled candidates who used this format to ensure they produced a full answer with an allocated safeguard for every identified threat and to ensure they had enough points to score the marks available.

Planning and risk assessment

This area of the syllabus requires an understanding of how the auditor obtains and accepts audit engagements, obtains an understanding of the entity and its environment, assesses the risk of material misstatement and plans an audit of financial statements.

As noted in previous Examiner’s Report; a fundamental factor in planning and assessing the risks of an audit of an entity is an assessment of audit risk, and this remains a highly examinable area. Audit risk questions typically require a number of audit risks to be identified (½ marks each), explained (½ marks each) and an auditor’s response to each risk (1 mark each). Performance in audit risk questions continues to be mixed.

Audit risk scenarios will always contain more issues than need to be discussed to score the marks available and there was evidence that candidates planning and exam technique in this area is improving with a majority of candidates generally focusing on identifying the required number of issues as noted in the question. However, as in previous sittings, candidates often did not explain how each issue could impact on the financial

statements and failed to explain why the issue identified was an audit risk. This resulted in many candidates not scoring the explanation ½ marks. To explain audit risk in sufficient detail, candidates need to state for each issue identified why it is a risk and the financial statement impact must be referred to. For example strong answers will explain how the issue could result in a balance being overstated, understated, misstated, misclassified, or, a going concern problem. Only by connecting the fact from the scenario to the relevant assertion and area of the financial statements will the candidate have adequately explained the audit risk.

The provision of relevant auditor’s responses continues to be a poorly attempted area of the syllabus. While an auditor’s response does not have to be a detailed audit procedure, rather it should set out an approach the audit team will take to address the identified risk, the responses given were often either too weak (eg “discuss with management”) or not always appropriate (eg “obtain written representations”). Candidates are again reminded that written representations are not a substitute for audit evidence. Candidates are reminded that audit risk questions may also require a calculation of relevant ratios that will allow the auditor to identify the key areas of risk in the financial statements. If this is required, as it was in September 2015, it is noted that candidates should only provide one ratio per area of the financial statements (eg either “inventory days” or “inventory turnover”), not include calculations of movements year on year (eg “revenue has increased by x%), as while relevant in the discussion of risk will not score the marks for calculating appropriate ratios, and also come equipped with a calculator for the F8 exam.

It was encouraging to note that few candidates discussed business risks, an issue in many previous sessions, and concentrated their answers on the risk of a misstatement in the financial statements. Further it was pleasing to note that many candidates presented their answers effectively using a two-column approach with audit risk in one column and the related response in the other column

Internal control

This section of the syllabus requires both an ability to describe and evaluate internal controls techniques and audit tests, and, also an ability to make appropriate control recommendations. Internal control questions typically require internal controls deficiencies to be identified (½ marks each), explained (½ marks each) and, often, to give a relevant recommendation to address the deficiency (1 mark each). Occasionally, as in September 2015, candidates may be asked to identify internal control strengths as well as deficiencies. Candidates continue to perform well on internal control questions Candidates were able to confidently identify internal controls deficiencies from the scenario, however some candidates did not clearly explain the deficiency in terms of how it affects the business. The scenario in them exam will always contain more issues than required to be discussed and it was therefore encouraging that candidates generally applied effective exam technique and focused on providing well explained answers which identified the required number of issues as noted in the question. A minority of candidates, rather than evaluating internal controls just formed a point of view as to how well the company was controlling it’s operations, and, also included more “social” factors such as “the motivational effect of having/not having a bonus system in force in a company” which was not required and does not answer the question. Recommendations to address control weaknesses were on the whole well explained. Most candidates were able to provide good recommendations to address the deficiencies. However occasionally some of the recommendations did not clearly address the specific control weakness identified and candidates are again reminded to ensure that their recommendation is specifically tailored to the requirements of the scenario.

Audit Evidence

This area of the syllabus requires a description of the work and evidence obtained by the auditor required to meet the objectives of audit engagements and the application of International Standards on Auditing (“ISA”). A key requirement of this part of the syllabus is an ability to describe relevant audit procedures for a particular class of transactions or event. Performance in this area continues to be unsatisfactory. Candidates continue to prove unable to tailor their knowledge of general substantive procedures to the specific issues in the question requirement. Candidates frequently described substantive procedures for a different class of transactions than had been specifically asked for in the question. As addressed in previous Examiner’s Reports candidates must strive to understand substantive procedures. Learning a generic list of tests will not translate to exam success – procedures must be tailored to the specific requirements of the question. This area of the syllabus can also include factual based questions in relation to the content of the ISAs. It was noted in the September exam that when definitions/terms, analytical procedures, reliance on internal audit and sampling were asked to be identified and explained, the majority of candidates identified them fairly well yet explanations were often unsatisfactory eg using the same word in their explanation as the term they are attempting to explain. Audit evidence continues to be an area that requires more study and question practice

Review and reporting

This area of the syllabus requires an understanding of how consideration of subsequent events and the going concern principle can inform the conclusions from audit work and may need reflected in different types of audit opinion, written representations and the final review and the content of the independent auditor’s report.

Performance in September 2015, identifying from a scenario the impact on the auditor’s report, showed a continued improvement by candidates compared with previous sittings. Questions historically in this area of the syllabus have required an assessment of materiality and the impact on the auditor’s report. In September 2015 candidates were required to address these two areas based on information in a scenario. Some past questions have also asked for audit procedures to address each issue, however this was not required in the September exam so it was disappointing therefore that some candidates spent valuable time describing audit procedures.

Candidates are again reminded to read the question carefully and to respond to the question that is presented. Most candidates attempted to calculate the materiality of the issues in the scenario. However a worrying number of candidates did not put the decimal point in the correct place for their materiality calculations and hence their calculations were incorrect. In addition some candidates calculated materiality without first discussing the issue and hence could not be awarded the available one mark in this area. Performance on the impact on the auditor’s report was satisfactory, most candidates were able to identify if the issue required a modification and, if so, the type of modification required. An area where candidates struggled was failing to take into account whether disclosures of an issue had already been made in the financial statements and the consequent effect on this had on the report

There was also some coverage of final review procedures at this sitting and candidates poorly understood the stages/types of final review procedures. Candidates need to be able to distinguish between completion procedures (such as going concern, subsequent events reviews) and overall review of financial statements procedures (such as a review of compliance with accounting standards and legislation).

The above report was culled from http://www.accaglobal.com/