ACCA exam guide for December 2007 (BPP & FTC)
NOTE: These exam guide should only be used in conjunction with proper studying. We cannot guarantee that these tips will appear in the actual exam as we have not seen the exam papers. The tips are based on Kaplan’s experience and understanding of the ACCA exams.F5 – Performance Management
ABC
Variance analysis, including mix and yield and interpretation
Learning curves
Performance measurement, including NFIs, the balanced scorecard and Fitzgerald et al
Decision making
F7 – Financial Reporting
CBS or, slightly more likely, CPLA
Published Accounts with mixed standards
Interpretations or CFS, with latter more likely, maybe with bits of Interpretation
Standards with concepts, such as Leasing, DT, Construction contracts, Impairment, Depreciation with Revaluation, etc
Standards with concepts (other standards, standard setting, human assets, conceptual framework, etc)
ACCA PAPER F7 (GLOBAL) TIPS DEC 2007
The whole exam is compulsory
• Q1 (25 marks): Consolidated income statement (P&L) and/or balance sheet with one subsidiary plus associate (including adjustments for fair values, unrealised profit, intragroup trading, goods/cash in transit. Discursive part (b) on fair values or other group topic.
• Q2 (25 marks): Accounts preparation/restatement with adjustments e.g. current/deferred tax, depreciation, inventory (stock) valuation, leases, construction contracts, substance over form issues, financial instruments (amortised cost), revaluations, share issues or government grants. May include disclosure of discontinued operations, movement in reserves/ statement of recognised income & expense (gains & losses) or EPS calculation.
• Q3 (25 marks): Interpretation and/or cash flow statement
• Q4 (15 marks): Theoretical/Conceptual question – possibly on provisions, inflation, accounting policies, leases or substance over form issues with reference to the conceptual framework
• Q5 (10 marks): Mixed bag question (e.g. tangible/intangible assets, impairment, deferred tax, governments grants, financial instruments, substance over form issues or EPS)
F8 – Audit and Assurance
Ethics – objectivity, conflicts of interest
Planning – identifying and explaining/addressing risks in a scenario
Internal controls – weaknesses and recommendations
Audit evidence – substantive tests, sales and debtors
Completion – overall review
Internal audit – role, reliance by external auditors
ACCA Paper F8
Audit & Assurance
December 2007 Exam Tips
All of the questions in this exam are compulsory and the examiner aims to test the syllabus widely at each sitting so it is very dangerous to rely on question spotting as you revise for this paper. The following outline aims to indicate the type of questions that may come up in the exam. Only the examiner knows what has been put into the paper, so these suggestions have been based on the content of the pilot paper, comments made and articles written by the examiner and the content of the old syllabus paper 2.6. The paper F8 examiner, Alan Lewin, set the old syllabus paper 2.6 from June 2005 to June 2007.
Question 1 (30 marks)
This will take the form of a case study with four or five separate requirements. The main requirements are likely to focus on audit procedures on a core area of the financial statements, such as revenue and receivables, purchases and payables or inventory.
Other parts of the question may look at internal controls in the same areas of the accounting system, or the auditor’s use of computer-assisted techniques.
Question 2 (10 marks)
This will be a 10 mark factual question and likely to cover at least three separate topic areas. The requirements are likely to test basic knowledge of ISAs. The examiner’s aim in this question is to broaden his coverage of the syllabus, so these could be drawn from any area.
Questions 3, 4 and 5 (20 marks each)
The examiner has said that these will be very similar in style to the questions he used to set in the old syllabus paper 2.6. This means that they will tend to have three or four separate requirements, and be based on short scenarios and syllabus areas as listed below. (Relevant questions from the 2007 P & R kit are listed separately after each topic.)
• Audit ethics
• Audit risk
• Corporate governance and its links with either internal or external audit
• Internal controls, possibly with requirements in the style of a “report to management”
• Audit completion and areas such as going concern, management representations, events after the balance sheet date and audit reporting
Relevant Articles
The following articles can be found in the Student Accountant magazine (or ACCA website)
• Audit working papers, Namasiku Liandu, February 2007
• Examiner’s approach to paper F8, Alan Lewin, February 2007
• Audit risk in a brave new world, Namasiku Liandu, 30 September 2004
• Internal audit and review reports, Katherine Bagshaw, January 2003
• The role of internal audit in risk management, Katherine Bagshaw, April 2002
• Directional testing – a methodology, Kim Smith, May 2001
F9 – Financial Management
Investment appraisal – especially NPV with tax and inflation. Additionally make sure you know the advantages and disadvantages of each appraisal method.
Working capital management – especially cash operating cycle and associated calculations.
Finance – especially financial and operating gearing and financial and business risk.
ACCA Paper F9
Financial Management
December 2007 Exam Tips and Useful Articles
This exam consists entirely of compulsory questions; this makes question spotting particularly dangerous. The purpose of this analysis is to highlight areas the major syllabus areas that we would expect to be regularly tested based on the pilot paper and the sittings of the old syllabus 2.4 paper which was also examined by your examiner Anthony Head (since 2003).
Use the following tips as important areas to cover 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.
Financial management function:
Key ratios such as return on capital employed, return on equity, earnings per share and dividend per share and total shareholder return can be used to evaluate an organisation’s performance from the point of view of its shareholders. Don’t forget value for money as a useful framework for assessing the performance of not for profit organisations.
Working capital management:
Ratios, including inventory days, average collection period and average payment period & average payable period can be used to calculate the operating ratio. This is often tested with numbers and a discussion of how to improve working capital management. This discussion could include debt factors and invoice discounting.
The sales revenue/ net working capital ratio has been specifically mentioned and can be used to forecast finance needs.
Investment appraisal:
NPV with tax is commonly tested with a discussion either of alternative methods of appraisal (e.g. ROCE, IRR or payback) or an analysis of risk or uncertainty.
Business finance:
You may be asked to assess the impact of sources of finance using ratios such as operational and financial gearing and interest coverage.
Cost of capital:
Questions are likely to focus on the calculation of the weighted average cost of capital and a discussion of strategies to reduce the weighted average cost of capital in the style of the pilot paper question on this area.
Business valuations:
This was not tested in the pilot paper but is a major syllabus area. Questions are likely to focus on the use of the share valuation models (asset, dividend, earnings) and a discussion of their limitations.
Risk management:
A risk management question is likely to focus on currency hedging using forwards and money market hedging. Other topics that are likely to be tested here include interest rate parity theory and the purpose of currency futures and options (without numbers).
Useful Articles:
If you want to read around the subject or improve your understanding there are a number of articles on the ACCA website. Scott Goddard (the examiner) has not written anything recently although the following articles are still relevant to the syllabus.
P1 – Professional Accountant
Director Remuneration Packages
Roles / Problems with NEDs
Unitary v 2-Tier Boards
Criticism of a company's current Governance
How/whether companies should deal with stakeholders
Board - Performance Evaluation
Role of internal Audit + Audit Committees
Different Ethics Models in business
Identification + Management of risks in a company
ACCA Paper P1
Professional Accountant
December 2007 Exam Tips and Useful Articles
Tipping is not a precise science at the best of time, and for the first sitting of a brand new paper it is little more than a ‘shot in the dark’. It would be inappropriate to guess what is likely to appear in the first exam, so the following tips suggest important areas to cover. However please 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.
The following is a guide to areas that you should include as part of your revision:
Section A:
Application of corporate governance principles:
A deep understanding of the purpose and aims of good corporate governance, together with an appreciation of the relevance of different approaches (rules or principles) that could be utilised is key. Questions are likely to require the application of corporate governance to address organisational control deficiencies described in the scenario is quite likely.
Identification and assessment of all aspects of business risk:
The use of a methodical approach to identify, categorise and assess the array of risks facing an organisation will be a common feature of scenario questions. From this position the examiner can than then ask candidates to propose and recommend remedies.
Internal control mechanisms and their review:
Internal management control systems are a key feature of any successful organisation. Indeed corporate governance mechanism could in themselves be viewed as of the internal control framework. The questions are likely to either identify deficiencies in internal controls or ask students to suggest enhanced controls to manage risks identified.
Corporate social responsibility and environmental management:
The need to act appropriately in terms of social and environmental responsibilities is key feature of the modern business world, and could be an element of a scenario question. This being the ethical stance that an organisation takes allows for many theories and frameworks to be incorporated into answers.
Section B:
Although likely to be based on small scenarios, Section B questions are likely to test specific areas of the syllabus in more detail.
Corporate Governance:
This could require detailed discussion of aspects of the Combined Code or Sarbanes Oxley, or even a comparison between the two. Specific areas relating to the role of non-executive directors, remuneration and disclosure requirements could also be tested, which requires the recollection of detailed syllabus knowledge to secure a good mark.
Risk assessment and management:
Describing the frameworks used in assessing and controlling risk any organisation either in a holistic view in specific detail (e.g. risk profiling) could be on the paper. However there will be no computation of the value of risk required.
Internal control (inc. internal audit):
Approaches to enterprise risk management together with embedded /cultural risk awareness would appear to be prime topic worthy of revision.
Professional values and ethics:
An array ethical theories and frameworks could be specified and tested in detail. Emphasis is likely to be on the role of the professional accountant and the possible conflicts and threats to independence that can arise and need to be resolved.
Useful Articles:
If you want to read around the subject or improve your understanding there are a number of articles on the ACCA website.
‘Big Brother’ by George Bakehouse studies ethics and how advances in information technology have changed the way businesses work
Effective report writing by Mustafa Muchhala explains the key points of effective report writing
‘Examiner's approach to Paper P1, Professional Accountant’ by David Campbell, examiner for Paper P1offers his approach to the Professional Accountant paper
P2 – Corporate Reporting
Group accounts - foreign currency or cash flow
Accounting standards set in a case study environment including - impairment, financial instruments, pension, retirement benefits
Discussion - conceptual framework
P3 – Business Analysis
A fundamental appreciation of the key activities associated with strategic analysis, choice and implementation will always be required in interpreting the scenario.
The relevance of ethics and corporate governance to strategic decision making
Issues related to globalization and international business management
Be able to comment in general on how things like HR and IT can help underpin a strategic plan
Also review the pilot paper and make sure you know what CMMI is
P4 – Advanced Financial Management
Business Valuation through acquisitions
Foreign exchange hedging
Investment Appraisal and risk
Cost of capital and sources of finance
Advantages and disadvantages of listing and corporate objectives
P5 – Advanced Performance Management
Corporate failure.
Performance improvement strategies.
Value based management approaches.
Environmental management accounting.
The changing role of the management account in today's business environment
P7 – Advanced Audit and Assurance
Audit Risk Assessment and Management
Matters and evidence
Professional conduct and ethics
Reporting
Assurance Services - CDD
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