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Have you read the ACCA Examiners' Reports?

26 May 2017

THE DECEMBER 2016 OPTIONAL PAPER EXAMINER REPORTS (see the study zone for our feedback on all the reports)...


P4 Advanced Financial Management
P4 sitters need to show they can read and quickly digest comprehensive and detailed questions, apply relevant knowledge and skills, and exercise professional judgment expected of a senior financial adviser, in recommending or making financial management decisions that are likely to affect the entire business. The section A Q1 in this exam tested a candidate’s ability to provide sound advice supported by relevant workings, in a coherent report, on the impact of divestment and further investment on a company’s costs of equity and capital, and on its financial statements.
For Q2 candidates were required to calculate the impact of hedging a currency exposure using futures markets and over-the-counter options. A comparison with exchange-traded options was also asked for. Finally daily mark-to-market price movements needed to be calculated.
Q3 looked at agency theory, free cash flows, PE ratios, and annual synergy benefits.
Q4 asked candidates to look at net present value calculations and their consequences.


P5 Advanced Performance Management
The first big piece of advice from the examiner and the team is for candidates to spend sufficient time reading the requirements to ensure they fully understand what is being asked. In December many students wrote long answers based on the question they though had been asked but was not in line with the requirements.
There is a rising concern about the about the quality of P5 answer. Sitters need to pay attention to the requirements ‘analysed’, ‘evaluated’ and ‘assessed’ rather than trying to provide a mere description. The examiner points out that the difference is fundamental, and a key to achieving success with the scenarios.
The examiner is also not after a history lesson! Getting a history lesson on models and their development, although interesting, adds little benefit to the advice given.
And, if you come to the exam expecting to repeat memorised material then expect to get between 20% and 30% come results day!
Many sitters last December showed a basic lack of knowledge. They couldn’t adjust a budget by an applicable percentage or failed to recognise the difference between profitability and liquidity. So do you?
A real worry is that many candidates can’t back up their figure work with comments – surely a key requirement of any professional accountant!
Q1 was based around performance management and the use of reports and metrics to improve performance.
Q2 covered preparation of budgets & evaluating the relative benefits of introducing a new budget system in a food manufacturing business.
Q3 looked at the application and usefulness of a performance management model in a manufacturing company.
Q4’s 25-marker was based around corporate failure and liquidity indicators in a service business.


P6 Advanced Taxation (UK)
The examiner feels that those performing poorly in this exam did not spend sufficient time carefully reading the question and thinking before they started writing! Too many answers were unstructured and did not include sufficient relevant points or candidates wasted to much time providing information that had not been asked for.
Those candidates obtaining marks in the 40s should ensure that they read the various non-technical articles aimed at improving performance in the P6 (UK) exam, which are available on the website.
Q1 concerned an unincorporated sole trader who was considering incorporating his business. Tax computations were needed here.
Q2 looked at CGT and IHT implications of making gifts of shares and other assets.
Q3 asked about various group aspects of corporation tax.
Q4 concerned various tax implications of being self-employed, including the basis of assessment, business property relief and VAT.


P7 Advanced Audit and Assurance
The P7 examiner stressed that candidates must consider at which stage of the audit process a scenario is occurring. At the planning stage phase of an audit the report outcome is unlikely to be a discussion point, at completion there may be a requirement for additional procedures to occur, but this is not generally something that occurs at the reporting stage when candidates are told the testing is complete and concluded on correctly.
The Exam Report emphases that on top of a strong ‘appreciation’ of the syllabus candidates need to be aware of current developments in the field, and should take note of the inclusion of new exam documents and updates to the syllabus.
The December exam covered:
Q1 was set at the planning stage of an audit and looked at risk. Part (b) asked for a RoMM.
Q2 was a completion question and focused on the accounting treatment and audit evidence obtained on three issues.
Q3 covered prospective financial information in the form of a cash flow forecast and a related party transaction.
Q4 examined the concept of skepticism in the context of a group audit.
For Q5 candidates were asked to discuss the newly introduced key audit matters section of auditor’s reports for listed companies.

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