*** ACCA P7 December 2016 Exam was.. Instant Poll and comments ***

I thought it was a tough paper. Reading the latest article about KAM a few more times would have helped with Question 5a.

7 marks for ethics was a lot of marks in my opinion. For me, I would have preferred a split of 12 marks for Business Risk and 8 marks for RMM, instead of the 10/10 split.

Q2 was tough, with IAS265 last being tested in June 2008 if I’m not mistaken! But this was after the ACCA had published an article in April 2008, so I felt this was tough.

Q3 on the forecast, was a very open question in my opinion, and I think we may be given a few choices for our answers in the template answer. I picked up things like, the instrument was worth $365k at y/end, but was expected to generate income of $500k in 2 yrs to match the loan repayment. Inflation had been taken away for salary, instead of being added I think.

I was wondering about that too.

The landing rights that were exchanged on a non-cash basis, what was the right treatment? I waffled on valuing and taking any difference between the new rights and the one they gave away to P&L

Does anybody know what the right treatment should have been? I’m loathe to pick up the P7 text book again unless I find out I have failed.

really? I am so regret that I do not have a chance to do Q 3. Instead I did Q4 &Q5. You give me a little relief.

Do you really think they want us to pass?

How would they make more money if we don’t keep writing the exams.

Sad but true 🙁

Plus that is what makes us proud and adds VALUE once we have passed.

Yes, the exam is designed and meant to be Hard. Not designed to be easy at all 🙂

Anyone guide me about the risks which i identified in RMM
NEW CLIENT(RAMM PROCEDURES)
IFRS8
LISTING COMPANY ISSUE
30M LOAN UNDRRSTAte LIABILITIES UNDERSTate EXP
BUSINESS RISK:
1 supplier
Change regulations
Difficult to acquire new runway due to space
Theft issue
Are these ok????
Or all RMM wrong

Operating segment risk is that
The company may not be follow the rules and didnt segmented the business properly
And my remaining risks are not right?

@xamii said:
Operating segment risk is that
The company may not be follow the rules and didnt segmented the business properly
And my remaining risks are not right?

I also thought about that, considering the fact that the last two brands did not make up to 10% of revenue. The requirements of IFRS 8 were a bit hazy but had to put something down

Thank was a very good summary. On that basis. I award you a pass. I think we did the same options. I am hoping for a pass myself.

All the best dude

@kolkleen said:
I also thought about that, considering the fact that the last two brands did not make up to 10% of revenue. The requirements of IFRS 8 were a bit hazy but had to put something down

Glad to know that I wasn’t the only one to write about segment reporting. I felt justified cos it was a Listed company & IFRS 8 is mandatory which means that there could be a risk of not reporting the segmental results correctly. Personally,I felt it to be relevant cos segment reporting is what goes into the financials & get published as well..

You are asking to me or someone else??

Questions 2, 3 and 4 are up on ACCA:

https://www.accaglobal.com/content/dam/acca/global/PDF-students/acca/p7/exampapers/int/p7int-2016-dec-q.pdf

@xamii said:
Anyone guide me about the risks which i identified in RMM
NEW CLIENT(RAMM PROCEDURES)
IFRS8
LISTING COMPANY ISSUE
30M LOAN UNDRRSTAte LIABILITIES UNDERSTate EXP
BUSINESS RISK:
1 supplier
Change regulations
Difficult to acquire new runway due to space
Theft issue
Are these ok????

Or all RMM wrong

New client risk is detection risk nd the ques asked for ROMM, it means only control risk nd inherent risk

Hi everyone,

– First question was about:
a) Business risks (10 marks) – I described things, mentioned above by the others (one supplier, going concern, political restrictions, limited rights and some others.
b) RoMM (10 marks) – also described things, mentioned above (loan, rights, inventories, so on)
c) Procedures in order to get understanding of the Internal control of the group (4 marks) – just wrote 4 points in order not to spend to much time on the question which costs only 4 marks
d) Ethical issues (7 marks) – do not like ethical questions, so just wrote about self-review and advocacy threats and moved to the second question.

– Second question was about audit evidence, additional procedures required from an auditor and was asked to consider what matter need to be communicated with TCWG and management:
a) Assets held for sale (9 marks).
Evidence get by the auditor is not sufficient. I wrote that more procedures required in order to obtain it (such as plan of disposal, meeting minutes, where there is a decision of disposal of assets, to analyze if the disposal will be in 12 month period, to recalculate the depreciation (not only arithmetic check), analyze if the assets are recorded under IFRS 5, are the proper disclosure in the FS and some others). I am not confident about the matter to communicate to TCWG, but I mentioned about the lack of knowledge of management and absence of quality control procedures in the audited firm)
b) Capital expenditure (7 marks).
Also not appropriate evidence. Weaknesses in internal control authorization and segregation were need to be communicated under ISA 265.
b) Payroll expenses (9 marks).
Not enough evidence. Spoke here about outsourced services (type 2 report, the nature of communication between the service organization and audited company, existence of control of information get from the service organization before putting it in the FS and so on). Also mentioned about procedures: detailed and analytical (trends) on payroll expenses, which need to be performed by the auditor. The matter to communicate: the audited company do not check the information, provided by the service organization and there is absence of some employees in the payroll list (also recommend some procedures on this matter).

– Question Four was about ethical and professional issues on the described matters:
Here I wrote about the fact, that the group management and group auditors may have something to hide, so scepticism need to be applied. I said that the component auditor need to obtain in a formal way a letter of continuous support from parent and even the FS of a parent in order to analyze if it can really help the subsidiary. Also mentioned about the legal case of a parent company, that it is not a problem of a parent company but also a problem for subsidiary, because id the parent company will have a problem in future, it will not be able to provide financial support to the component and GC issue arise once again. I wrote about possible intimidation threat from group management to group auditor, because the group audit partner asked the component auditor not to modify the report. Finally I mentioned, that if there was no formal letter and no information regarding the legal case, the component auditor need to modify the report. If the management of the client will continue to insist not to modify, the auditor can seek legal advice and may even decide to resign the engagement (do not know exactly, but if no – no marks will be take off).
I divide my answer in 3 parts, as asked in the question (6 marks for skepticism, 14 marks for ethical and professional issues identified and responded).

– Question Five was about the KAM:
a) Describe the useful of KAM (transparency, review audit procedures, more reliable report and some others) and the problems for auditors (first year of such reports, no standards what need to be included as KAM, nothing about the place in the report (except – close to the opinion) and some others) – 8 marks.
b) To decide implications of the 3 matters on audit report:
1st (4 marks) – it is KAM (as properly disclosed, a lot of time used by the auditor, used of valuation specialist, lot of judgments, material amount, significant risk determined by the auditor)
2nd (4 marks) – not KAM, it is a misstatement, but not material (I think so – less than 1% of total assets and revenue). Do not include sign risks and judgment, not material, no necessity of using specialists and so on. So not a KAM, not modified.
But I have doubts regarding my answer to this point.
3d (4 marks) – it is KAM and my answer was very similar to the point one.

Maybe someone write something similar or not?