Exam technique: you have a VESTED interest in good answers

The approach you should adopt

To maximize the marks that can be obtained by good technique, I suggest you use the mnemonic VeSTeD, where the consonants stand for:

1. Verbs

2. Scenario

3. Time 

4. Detail

1 Verbs

The verbs in the requirements must be noted, especially where there are several e.g.:

1. Explain …

2. Identify … and explain … 

3. Describe …

4. Describe… and explain

Marks are lost if the verb requirements are not addressed in the answer. I suggest that you underline the verbs to ensure that none is overlooked. You might also think about the requirements in terms of ‘I will …’ So that requirement (b) would become:

“I will identify SIX … and I will explain the reason …”

This can help you to concentrate on the verbs and it expresses your determination to address the requirements positively and properly. 

The most commonly used verbs in AA requirements are: identify, explain, describe and discuss. Verbs are chosen carefully by the examiner. Broadly, the meanings of these and other verbs use in AA are:

• Identify: Find the key points (e.g. risks or control weaknesses) in the scenario and state in a few words. The requirement will almost invariably be combined with an additional verb – describe. explain or provide. 

• Describe: Give key features, characteristics, parts or qualities .You need to give detail to ‘paint the picture’ in words; identification is not sufficient.

• Explain: Make an idea clear. Show logically how a concept is developed. Give the reason for an event. This is more than a description. Write one sentence that describes, then write at least one other to explain why the first sentence is so, or the consequences of the first sentence. Use examples to help your explanations (especially when specifically required to provide).

• Discuss: Debate/argue the pros and cons of an issue or for and against a course of action. Write about any conflict. There needs to be an exchange of ideas between two or more points of view. Ideally a discussion should end with a conclusion. Think about: positives/negatives – advantages/disadvantages or reasons why/reasons why not. 

• Recommend: Advise the appropriate action(s) in terms that the audience (e.g. management) will understand Tell our audience what to do. This is usually the last requirement in a question because you first need to identify and describe or explain before you can recommend a way forward.

• Provide: Give/include in your answer an example(s) or recommendation(s) as prompted. 

• Calculate: Perform a mathematical process. Typically in AA this will be ratios. Remember to show your workings and not just the answer.

2 Scenario

The scenario is very important in the constructed response questions. The careful editorial process that ACCA uses to produce questions means that you should assume that no word gets into a question accidentally. Therefore, students should be suspicious – very suspicious – of every detail and description.

For example, in a question the following details (amongst many others) could be considered potentially relevant to the answer:

When a scenario is provided you will have to use the detail there. This allows the examiner to test your ability to apply auditing knowledge to specific settings. So:

“(a) Describe substantive procedures the auditor should perform to obtain sufficient and appropriate audit evidence in relation to the valuation of Hyacinth Co’s inventory.          

(6 marks)”

You are not being asked about general audit procedures: you have to think which ones are relevant to Hyacinth Co’s inventory and the specific financial statement assertion – valuation.

3 Time

The time for each part is indicated by the marks. 1 mark gives 1.8 minutes, therefore about 10 minutes (not more than 11 minutes) needs to spent writing the answer to a 6-mark requirement. You must fully use the time available and plan the number of points you need to make. Time implies a length of answer. The marker will expect an answer which should have taken 20 minutes (i.e. 12 marks) to be twice as long as an answer which should have taken 10 minutes. 

The examiner helps you make more efficient use of time by prompting the answer format. For example, two columns for audit risk questions – headed Audit risk and Auditor’s response respectively.

4 Detail

Finally detail. This is implied by the verb and the time (i.e. marks) and often a specified number of issues to be addressed. For example:

“In respect of the internal controls of Freesia Co:

(i) Identify and explain SIX deficiencies;

(ii) Recommend a control to address each of these deficiencies; and

(iii) Describe a test of control …. (18 marks)”

Clearly each deficiency identified and explained with a recommendation and test of control is worth 3 marks. And, as shown by any exam marking scheme and as explained in every examiners report (i), (ii) and (iii) are each worth 6 marks:

“Internal control deficiency questions typically require internal control deficiencies to be identified (½ mark each), explained (½ mark each), a relevant recommendation (1 mark), and a test of control (1 mark).”

However, the guidance is less precise when requirements do not specify a number of issues (e.g. the Hyacinth requirement above). Two suggestions to try to get down to the detail required:

1. Imagine you are there, doing the job. Write down exactly what you would do when valuing Hyacinth Co’s inventory. Note that per the scenario the quantities and stage of completion of WIP have been confirmed. Any digression into counting inventory is therefore irrelevant.

2. Imagine you are instructing a 16 year-old trainee, with no audit experience, to carry out the procedures. Your instructions must have sufficient detail so your trainee can follow your instructions and understand your concerns or explanations.

One of the great recurring grumbles from the examiner is the use of the word ‘check’, as in ‘check supplier invoices’, ‘check trial balance’, ‘check receivable balance’. Obviously, if you told a naïve 16 year old to ‘check invoices’ that assistant would not know what you meant. Which of the following do you really mean?

• Ensure the invoices are cancelled after payment?

• Look for evidence that the invoices were accepted only for goods actually received?

• Re-perform the calculations on the invoices?

• Trace the invoice to the appropriate payables ledger account?

If you don’t make the effort to say exactly what you mean, you can’t expect many, if any, marks.

So, try to make it a rule never to use the verb ‘check’. There are so many more precise words (agree, reconcile, recalculate, trace, inspect, observe, confirm, verify, test, examine and so on), and use of those inevitably forces you to add detail.

What verbs words, other than ‘check’ could describe the audit procedure you would be carrying out in relation to the following?

1. Receivables balances and the control account agree.

2. Paid invoices should be cancelled.

3. Goods should be counted when received.

4. Only ordered goods should be accepted.

5. Cut-off for sales must be accurate.

6. The financial statements disclose all contingent liabilities.

7. All non-current assets exist.

8. Depreciation calculations are correct.

9. The level of receivables is reasonable.

10. The inventory count was satisfactory.

Suggested answers are at the end of the article.

Suggested answer to auditing verbs

Receivables balances and the control account agree. (Reconcile/Reperform)

Paid invoices should be cancelled. (Inspect [to ensure])

Goods should be counted when received. (Observe)

Only ordered goods should be accepted. (Agree/Trace [a sample of])

Cut-off for sales must be accurate. (Reperform/Trace invoices) 

The financial statements disclose all contingent liabilities. (Ask/Inquire of [management]/Review [board minutes])

All non-current assets exist. (Inspect)

Depreciation calculations are correct. (Recalculate/Perform test in total)

The level of receivables is reasonable. (Review/Compare)

The inventory count was satisfactory. (Attend/Observe/Review/Reperform)