TARC ACCA 2005

BPP tips

ACCA Paper 2.4 - Financial Management & Control
Section A

The compulsory section A of the exam has focused on investment appraisal or working capital in the past. As Investment appraisal was the main topic of December 2004’s exam it is likely that working capital will come up in June.
• Stock management (EOQ and JIT systems) – Q95 FRANTIC, Q58 JIT and EOQ
• Cash flow forecasts – Q88 (a) JACK GEEP, Q92 AMBER PLC

Section B

In section B of the exam there will be two questions on Financial Management (one of which will be on investment appraisal). The other two questions will be on areas from the Management Accounting section of the syllabus.

Net present value (NPV) calculations - Q70, Q80 BENLAND, 87 WATER SUPPLIES LTD 93 SPENDER CONSTRUCTION

• Sensitivity analysis - Q77 BURLEY PLC
• Capital Rationing - Q82 Filtrex, Q83 PI
• Sources of equity - Q62 Burnsall, Q63 Newsam
• Mix and yield variances - Q20 Hairdressers


ACCA Paper 2.5 - Financial Reporting
Section A

Section A will comprise of one compulsory question that will examine group accounting. Group accounting is a core area and this question could ask you to produce a consolidated balance sheet and/or income statement (profit & loss account) and usually includes a related discussion element.

Section B

Section B will comprise four questions out of which candidates should select three questions. The examiner, Steve Scott has stated that the style of the paper would remain fairly static:

Question 1
The first question will be preparation/restatement of an income statement (profit & loss account) and balance sheet. It could also include a statement of changes in equity (reconciliation of movements in reserves note). This question normally requires adjustments for depreciation, tax and dividends. Others may relate to debt factoring or other substance over form issues, finance leases, financial instruments, share issues and inventory (stock) valuation. There may be further disclosure requirements re discontinued operations or an earnings per share calculation.

Question 2
The second question will be a written question examining theoretical/conceptual areas or accounting standards. This could be on tangible or intangible assets, impairments, accounting policies or leases with reference to the Framework for the Preparation and Presentation of Financial Statements (Statement of Principles).

Question 3
The third question is likely to examine interpretation and/or cash flow statements, and may include discussion of why, for example, related party or discontinued operations disclosures are useful.

Question 4
The fourth question has no specified format or content and will cover other areas of the syllabus. The examiner frequently includes a mixed bag question, which examines three or four different accounting standards. Possibilities this sitting are: IFRS 1, governments grants, substance over form issues, accounting policies or financial instruments.

Relevant Articles
First time adoption of International Financial Reporting Standards - Steve Scott


ACCA Paper 2.6 - Audit and Internal Review
Please note that there is a new examiner this sitting.

Internal audit/ Internal review – Following the new examiner’s recent article on how the internal audit department can assist in corporate governance and risk management, it is possible that this area could be tested, although articles are not frequently examined in this paper. Note that in addition to a specific question on internal audit or reviews conducted by internal or external staff, the question could be in the form of a report to management on control weaknesses with recommendations, very similar in substance to that produced by an external auditor (see Systems and Controls below)
(try out: Q7 Internal Auditors, Q8 Roxy Hotels)

Substantive testing – This will be in the exam, but what will be tested? In December 2004 substantive testing of payroll balances was tested (Q4). In June 2004 inventories (stock) (Q3) and payables (creditors) and accruals (Q4) came up. In December 2003 payroll audit was tested (Q2). In June 2003, Inventories (stock) (Q2) and provisions were tested (Q3). In the December 2002 exam, payables (creditors) (Q3) and inventories (stock) were tested (Q5). In June 2002 cash was tested (Q2) and in December 2001 receivables (debtors) were tested (Q4). That would appear to leave non-current (fixed) assets, bank/cash and receivables (debtors) as likely candidates for examination this time round. (P&R kit practice: Q38 Springfield Nurseries, Q43 Goodfoot & Q45 Villawood Computers)

Systems and controls – Again this topic will be included in the exam in some format. In December 2004 Q3 risks from a scenario had to be spotted, and controls recommended. In June 2004, they came up in the context of outsourced catering and payroll (Q5). In December 2003 controls over payroll were tested in Q2 and Q1 included controls over business risks in the areas of human resources, procurement and marketing. In June 2003, controls over non-current (fixed) assets were tested (Q6). In the December 2002 exam the sales system was tested (Q2). In June 2002 the cash system was tested (Q2) and in December 2001 Purchases/ capital expenditure were tested (Q3). Any of these could come up again: the purchases/payables and sales/receivables systems looking the most likely. (P&R kit practice: Q32 Cosmo & Q27 Internal Control Systems)

Planning and risk assessment (from a scenario) – risk in one form or another comes up at every sitting. It is one of the key stages of the audit, but can also be examined in the context of a company's business risk as it was in June 2004. In December 2004, Q2 was centred around planning and the information you require, and Q1 was about spotting the risks of fraud and error. (P&R kit practice: Q17 EWheels & Q18 Nepco)

Professional ethics – This is a core area not examined at the last 2 sittings. It is still a topical issue with all of the recent corporate collapses bringing the independence and professionalism of their advisors into question. Recently, confidentiality came up in December 2003 (Q6), conflicts of interest in June 2003 (Q3) and objectivity in December 2002 (Q1). Any independence issues would be ripe for examination again at this sitting. (P&R kit practice: Q10 Billington Travel & Q11 Manly).

Audit/ Assurance Reports – This is a very important area of the syllabus, it is deliverable from the end of all assurance engagements. You also need to be aware of the differences between internal audit reports/ external audit reports and other assurance reports such as review reports. It has been tested in December 2003 (Q3 b and c), June 2003 (Q3c and Q5), June 2002 (Q3b) and December 2001 (Q5), but not in the last few sittings. (P&R kit practice: Q54 Audit and Review Reports, Q55 Cremorne)

Parts of questions – The following topics could form discrete parts of questions at this sitting: fraud, management representations, audit regulation, materiality, e-technology (see article below) so make sure you are up to speed on these areas.
Relevant Articles
The following articles can be found in the Student Accountant magazine (or ACCA website)

The regulatory environment, Alan Lewin, 4 January 2005
Audit risk in a brave new world, Namasiku Liandu, 30 September 2004
Confirmation as audit evidence, Graham Cosserat and Katherine Bagshaw, 28 October 2003
Electronic technology and the auditor, Katherine Bagshaw, 25 June 2003
Service organisations, Katherine Bagshaw, 26 March 2003
Internal audit and review reports, Katherine Bagshaw, 29 January 2003
Corporate governance in the 21st century, Namasiku Liandu, 30 September 2002
The independence of accountants, Namasiku Liandu, 10 June 2002.
The role of internal audit in risk management, Katherine Bagshaw, 1 March 2002.
Technique in auditing questions, Kim Smith, 4 September 2001
Audit and internal review, Katherine Bagshaw, 1 June 2001


Health Warning! The examiners deliberately try to avoid question spotting. Just because a
question featured last time, doesn’t mean it won’t feature this time. Use the tips as areas to
have a good look at, but remember that no one knows what is in the exam, apart from the
examiner. Your safest bet is to achieve good syllabus coverage in your revision, as the
examiner aims to do in the exam.

posted by Unknown @ 12:04 PM