2010年12月ACCA考试考官报告(P7)|ACCA考试

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General Comments
　　The December 2010 P7 paper covered many important syllabus areas,mostof which had been tested in some capacity at previous sittings.It was thereforeunsatisfactory to see very little improvement in candidates’ performance as awhole.Of course,some candidates did very well,and there were some scriptsdisplaying first-rate analytical and application skills.But the majority ofscripts unfortunately failed to demonstrate sufficient knowledge or higherprofessional skills to achieve a pass mark.
　　The examination comprised two compulsory questions in Section A,andthree questions in Section B of which two should be attempted.Both Section Aquestions were based on detailed scenarios,and contained several requirementscovering different syllabus areas.
　　Each optional 20 mark question in Section B included a shortscenario,and several requirements.Of the section B questions,question 4 was byfar the most popular,and question 5 the least popular.
　　The same factors as detailed in previous examiner’s reports continueto contribute to the disappointing pass rate:
　　•Failing to answer the specific questionrequirements
　　•Not applying knowledge to question scenarios
　　•Making too few comments given the mark allocation of arequirement
　　•Lack of knowledge on certain syllabus areas
　　•Illegible handwriting
　　The rest of this report contains a discussion of eachquestion,highlighting the requirements that were answered well,and the areasthat need improvement.
Specific Comments
Question One
　　This question was for 32 marks,and involved a new auditengagement,with the candidate placed in the position of the auditmanager.Requirements involved a business risk evaluation,identification andexplanation of relevant financial statement risks,and audit procedures relatingto a brand name.
　　On the whole,candidates seemed to like this question,especially thebusiness risk evaluation.However,many candidates failed to answer the specificquestion requirements,thereby denying themselves of marks.
　　Requirement (a) asked for an evaluation of business risks,for 15marks.The audit client operated in the retail industry and had recentlyinitiated several strategies aimed at expansion,including e-commerce.It wasclear that most candidates were prepared for this type of requirement,and on thewhole performed well.Answers tended to display reasonable applicationskills,with some candidates prioritising the risks identified,and reaching anoverall conclusion.There was much less evidence here of ‘knowledge-dumping’ thanin answers to other requirements.Some answers worked through the scenario,andfor each risk identified explained the potential impact on the business.Someanswers also made connections between different aspects of the client’sbusiness,for example,that joining the Fair Trade Initiative would have costrepercussions at a time when profit margins were reducing.
　　However,answers still left a lot of room for improvement.Commonweaknesses in answers to the requirement included:
　　•Repeating large chunks of text from the scenario with no explanationprovided
　　•Not actually explaining or evaluating a risk identified – justsaying ‘this is a risk’
　　•Providing detailed definitions of business risk,which was not askedfor
　　•Providing audit procedures for risks,again not askedfor
　　There was far too much emphasis on going concern risk,often raisedindiscriminately for every risk area identified.
　　In addition,it is worth noting that very few candidates used thefigures provided in the scenario to identify risk exposure.The client’s revenueand profit had fallen from the previous year,and some simple financial analysiscould have revealed falling profit margins and worsening interest cover.Thistype of analysis is not difficult or time consuming,and is something thatdemonstrates mark-generating application skills.
　　Finally,some candidates simply failed to answer the questionrequirement.A minority of candidates took the opportunity to provide many pagesof answer which just described how you would plan an audit in general,includingdescriptions of contacting the previous auditor,determining materialitylevels,and meeting the client to discuss the engagement.All of this was totallyirrelevant,and failed to generate any marks..Candidates are reminded that theymust answer the specific question requirement,and not the requirement they wouldlike to have been asked.
　　There were 2 professional marks available in connection withrequirement (a).Most candidates attempted the briefing notes format by includingan appropriate heading and introduction.It seemed that by the end of theiranswer however,candidates had forgotten about the professional marks,as it wasrare to see a conclusion provided on the business risk evaluation.Candidates arereminded that resources are available on ACCA’s website providing guidance onthe importance of professional marks.
　　Requirement (b) was for 10 marks,and asked candidates to identify andexplain five financial statement risks from the scenario.The quality of answersto this requirement was unsatisfactory.The minority of candidates who scoredwell on this requirement provided a succinct explanation of the financialstatement risk,clearly stating the potential impact of the risk identified onthe financial statements.Some answers,which were by far the majority,tended tojust outline an accounting treatment with no mention of the actual riskitself.Another common weakness was to discuss the detection risk which may arisewith a new audit client,which is not a financial statement risk.Given thatfinancial statement risks have featured in several previous examinations it wassomewhat surprising that the majority of candidates could not provide asatisfactory answer,especially when requirement (a) had asked for a businessrisk evaluation,which should then lead into the identification of financialstatement risks as part of audit methodology.
　　Some candidates used the financial information provided to identifyfinancial statement risks,rarely with any success.Common statements of this typewere along the lines of ‘revenue is reduced,so there is a risk ofunderstatement’.
　　Finally,there was a tendency for candidates to provide more than therequired number of financial statement risks,which is clearly a waste oftime.
　　Requirement (c) asked candidates to recommend principal auditprocedures in relation to the valuation of a purchased brand name,which wasrecognised at cost in the financial statements.Some candidates scored wellhere,providing well written procedures specific to the valuation of anintangible asset.Some answers recognised that procedures should focus ondetermining whether or not the brand was impaired and whether thenon-amortisation policy was appropriate.The most common errors hereincluded:
　　•Mis-reading the scenario and thinking the brand was internallygenerated (the scenario clearly stated that the brand had been purchased severalyears ago).
　　•Mis-reading the scenario and thinking the brand was amortised (thescenario clearly states it is not amortised).
　　•Providing detailed explanations of the requirements of IAS 38Intangible Assets (not asked for).
　　There were a lot of standard tests provided which did not fit thescenario,like checking management calculations on amortisation,and checking thequalifications of the valuer.
　　Candidates are reminded that audit procedures must be tailored to thefacts of the scenario provided and must be sufficiently detailed to makesense.‘Get management rep’,'discuss with management’ and ‘review cost’ areexamples of meaningless ‘procedures’ which earn no credit without furtherdevelopment.In addition there were many instances where candidates wereobviously trying to generate procedures using a list of words as a prompt.Forexample 'observe the asset’ or ‘inquire about the asset’.Candidates must thinkcarefully and not just use words as a prompt if they make no sense.Candidatesare encouraged to read the examiner’s article on exam technique in answeringquestions on audit procedures,published in September 2009 and available onACCA’s website.
　　Overall,question one and requirement (a) in particular was reasonablyanswered by a large proportion of candidates.However,answers to requirement (b)were unsatisfactory.
Question Two
　　Question two was for 28 marks,and featured an assurance engagementfor an existing audit client.Both the audit firm and the client were globalenterprises,and the client was listed on several stock exchanges.Candidatesresponded reasonably well to parts of this question,though many answers did notreach their full potential by not being applied to the questionscenario.
　　Requirement (a),for 12 marks,asked candidates to identify and explainthe matters that should be considered in evaluating whether the audit firmshould perform an assurance engagement on the client’s Sustainability Report.Itwas clear that most candidates knew the matters that should be considered(ethical constraints,resources,knowledge,timescale,fees etc),and most candidatestook the right approach to the question,by working through the various ‘matters’and applying them to the question.The fact that this was not an audit engagementdid not seem to faze candidates,and there were many sound answers to thisrequirement.Some answers evaluated the many ethical problems with taking on theassurance engagement as well as providing the audit for ‘a major client’,andappreciated that with only four weeks to complete the work,it would probably beimpossible to ensure quality work could be performed on a global scale to such atight deadline by an inexperienced team.
　　Some answers also picked up on the fact that the client’s listedstatus would probably prevent the audit firm from conducting the assuranceengagement,and certainly the situation would need to be discussed with,andapproved by the audit committee.
　　However,some answers were much too brief for the 12 marksavailable,amounting to little more than a bullet point list of matters to beconsidered but with no application to the scenario.Without application it wasnot possible to pass this requirement.Other common mistakesincluded:
　　•Ignoring the fact that the client was already an existing auditclient,so discussing the need to contact its auditors forinformation.
　　•Not reading the question and thinking that you had been approachedto perform the audit.
　　•Only discussing the potential problems and not identifying thebenefits of providing the service (e.g.it would provide experience for the newlyestablished assurance team).
　　•Ignoring information given in the question (e.g.saying that the firmwould need to ask about the use of the assurance report–when the questionclearly states that it would be published in the annual report with thefinancial statements).
　　Requirement (b) asked for procedures that could be used to verify twoKey Performance Indicators (KPIs)–the number of serious accidents in theworkplace,and the average annual spend on training per employee.A fairproportion of answers were sound,with precise proceduresrecommended.
　　But,many recommended procedures relied too much on observation andenquiry,and ignored the fact that the client was a global company with 300,000employees which led to some bizarre and meaningless procedures being given,suchas ‘observe a serious accident’,'inspect the location of a seriousaccident’,'ask how much is spent on training’,and ‘look at the training room tosee how many chairs are there’.None of these could verify the KPIs and arepointless.
　　Requirement (c) focussed on other information published withfinancial statements.In the scenario an inconsistency had been discoveredbetween a figure relating to charitable donations which had been stated at $9million in a note to the financial statements,and $10.5 million in theChairman’s Statement and Sustainability Report.The requirement,for 8 marks,wasto explain the auditor’s responsibility,and to recommend actions to betaken.
　　This requirement was inadequately attempted overall.Answers wereusually extremely brief,and it was clear that most candidates did not know therequirements of ISA 720 The Auditor’s Responsibilities in Relation to OtherInformation in Documents Containing Audited Financial Statements.Most answerstook a guess that the matter would need to be discussed with management,and thatif unresolved there would be some kind of impact on the auditor’s report (an'except for’ opinion was the usual recommendation).But few could say more thanthis about the issue.Some candidates assumed that some kind of money launderingwas taking place,leading to irrelevant discussions of reporting the situation tooutside authorities.Very few candidates recognised that if uncorrected,the issueshould be included in an Other Matter paragraph,as required by ISA 720.Thiscould imply a lack of knowledge,or that some candidates are studying from out ofdate learning materials.
　　Finally,there were 2 professional marks available for requirement(c).The majority of candidates attempted to achieve these marks by using anappropriate format.However a significant minority incorrectly thought that theprofessional marks were attached to requirement (a).
Question Three
　　This was a ‘traditional’ question asking candidates for the mattersthat they would consider,and the evidence they should expect to find whenreviewing working papers in relation to three separate issues relating to thesame audit client.The client was a leading leisure travel provider with 10million customers per annum.It was pleasing to see many candidates perform wellon this question,with requirement (a) producing a number of sound answers.On thewhole,candidates performed better on the evidence part of the question than seenin previous sittings,which is obviously encouraging.
　　Requirement (a),for 8 marks,described a legal claim which had beenmade against the client by a group of customers.No provision had been made,andthe client’s management justified this on the grounds that the amount would becovered by insurance.Almost all candidates were able to generate marks bycalculating the materiality of the amount,and describing the basic accountingtreatment for provisions.Fewer went on to discuss the potential impact of theinsurance cover,and some answers drifted into a discussion of going concern andother business risks.
　　Some candidates mistakenly thought that the event happened after theyear-end,and others thought that the airline 'belonged’ to theclient.Surprisingly,only a minority of candidates picked up on the fact thatmanagement would not want to recognise the provision due to a bonus being basedon profit before tax of the company.
　　Audit procedures were often inadequately focused,with no regard tothe scale of the issue.Although most suggested looking at legaldocuments,candidates rarely mentioned looking at the group claim document.Somecandidates proposed lots of very detailed tests on the validity of individualclaims,such as checking hotel bills and airline tickets.
　　Requirement (b),for 7 marks,dealt with a business segment which hadseen significant reductions in revenue and profit.This part of the question wasnot dealt with well.Very few candidates recognised that the business segmentrepresented a cash generating unit that required an impairment test.Most pickedup a mark by calculating materiality,but then could only discuss the fact thatthe internally generated brand name was correctly not recognised in thefinancial statements.Even those candidates that did pick up on the impairmentissue could rarely provide evidence points other than ‘check the value of theassets’ (too vague) or ‘inspect the assets’ (irrelevant,and ignoring the factthat the assets in question are cruise liners in operation so very unlikely tobe conveniently located near the auditor).Many candidates could only provideevidence points on the brand name,even though was not recognised in thefinancial statements at all,leading to pointless procedures such as ‘inspect thebrand name in the register’,'observe the operation of the brand name’ and ‘checkthe value of the brand name’.
　　Requirement (c),for 5 marks,concerned a post year-endacquisition,which should have been disclosed in the notes to the financialstatements.Many candidates correctly discussed the issue,and provided sensibleevidence points concerning the verification of the date that control of the newsubsidiary passed to the client,and the scale of itsoperations.
　　Unfortunately,many candidates wanted to see the new subsidiaryconsolidated,even though it had clearly been purchased after the end of thereporting period.At the other end of the spectrum,some candidates suggested thatas the event happened after the year end,the auditor need not perform anyprocedures at all.Both of these approaches totally missed the point of thescenario,and indicate that candidates must take time to think about theinformation that has been presented to them before rushing to write theiranswer.
Question Four
　　This was the most popular of the optional questions,and focussed onethics and practice management.It was very pleasing to see many candidatesachieve a clear pass on both (a) and (b).
　　Requirement (ai) asked candidates to critically evaluate a proposedadvertisement to be placed in a national newspaper,for 8 marks.This was probablythe best answered requirement of the whole paper,with many achieving a clearpass,and quite a few maximum marks were awarded.The few unsatisfactory answerstended to simply repeat extracts from the advertisement and say ‘this isunprofessional’.
　　Requirement (aii) asked candidates to evaluate whether a corporatefinance service could be offered to clients,for 5 marks.This was not wellanswered.While most candidates could state obvious issues,like whether oneperson would be enough to provide the service,unfortunately very few clearlydistinguished between audit and non-audit clients,which was a key issue,as thescenario clearly stated that only one third of the audit firm’s clients wereaudit clients.Few dealt with the issue of the contingent fee in enoughdetail,with answers usually saying that it was 'unprofessional’ but notelaborating further.
　　Requirement (b) dealt with the ethical problems raised by longassociation of audit firms and their clients.For 7 marks,candidates were askedto explain the ethical threats,and to evaluate the advantages and disadvantagesof compulsory firm rotation.On the whole,this was well answered.Most candidatescould identify and explain to some extent the various ethical threats posed bylong association,with the familiarity threat being the most common to bediscussed.The advantages and disadvantages were often dealt with reasonablywell,though a lot of answers were just bullet point lists with no realevaluation provided at all.For many candidates this was the last requirementattempted,so the brevity of answers was probably linked to time management inthe exam.
Question Five
　　This was by far the least popular of the optional questions,focussingon audit reports,and reporting on internal controldeficiencies.
　　Requirement (ai),for 10 marks,asked for a critical appraisal of adraft audit report,in which a disclaimer of opinion had been given,following amanagement imposed limitation in scope resulting in a lack of evidence withregard to research and development costs.Some answers were sound,and workedthrough the audit report,explaining its deficiencies in a logical manner.Someanswers appreciated that the disclaimer of opinion may be an over-reaction,andthat a qualification may be more suitable.Other points raised in some answersconcerned the inappropriate wording of the audit report,the reference tomanagement lack of integrity,and the fact that the matter had not beenquantified,making it difficult for users of the report to gauge the significanceof the matter.Almost all candidates correctly determined the materiality of thematter.
　　Unsatisfactory answers,which were by far the majority,tended not toappraise the audit report at all,and instead provided lengthy explanations ofthe accounting treatment for research and development,but completely missed thepoint that the auditor was unable to verify if the correct accounting treatmenthad been applied.Some blamed the audit team,rather than the client,for the lackof evidence,and suggested that the whole audit bereperformed.
　　Requirement (aii) continued the theme of (ai),asking for matters thatshould be considered and further actions that should be taken by the auditor,inlight of the limitation in scope.Most candidates suggested that the limitationin scope and its potential impact on the audit report be taken to auditcommittee or those charged with governance for discussion,and many also raisedmanagement integrity as an issue.Some candidates tended to repeat what they hadwritten for (ai) without further development.
　　Requirement (b) focussed on the new requirements of the ClarifiedISAs in relation to reporting internal control deficiencies to management andthose charged with governance.A brief scenario was provided,outlining internalcontrol deficiencies discovered during the audit of trade payables,andcandidates were asked the further actions they would take,and to outline anyreporting requirements.This was reasonably well attempted,with most answersreferring to management letter points,and making recommendations for improvingcontrols to the client.However,there were very few references to ISA 265,andonly a handful of answers discussed the importance of determining whether adeficiency is significant or not.
　　Overall,answers to question 5 were unsatisfactory,given that auditreports is a regularly examined syllabus area.
　　Conclusion
　　As seen in previous sittings,what makes the difference between a passand a fail script is usually the level of application skills which have beendemonstrated.Candidates who answer the specific question requirement,and tailortheir answers to the scenarios provided are likely to dowell.
　　A significant proportion of candidates continue to produce answersthat are simply too vague or too brief,do not actually answer the questionrequirements,and display inadequate technical knowledge of the ClarifiedISAs.These candidates are encouraged to improve their examination technique aswell as knowledge of the syllabus by practicing as many past exam questions aspossible,using up to date study materials,and by taking on board the commentsmade in examiner’s articles and reports.