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

To me overall, the paper was quite fair. I was happy reading the first part of question 1 where business risk was asked but definitely found it challenging to come up with more than 6 points. Not sure how many points is needed.

Then the part b on material misstatement was fair as i talked about : Goodwill impairment (IAS 36), Borrowing Cost (IAS 23), Derivatives – IFRS 9 (Complex in nature) and the recognition of license cost (IAS 38) – As there were non monetary exchange.

For part c was on the audit procedures/evidence relating to controls an i talked about : Sighting the organisational chart, reviewing the standard operating procedure and reviewing the controls of inventory movements.

For part d was on ethical issues : I raised points on objectivity of the audit assignment and that additional tasks may be a threat to objectivity. I also mentioned that it is fine to take up such assignment but a seperate team needs to be assigned…

Question 2 :

(a) Assets held for sale : Talked about verbal confirmation on the assets to be sold is not concrete and should have further evidence such as advertisements to sell or an S&P

(b) Capitalisation of asset : Cant remember what i wrote but was focusing on the controls and mentioned that the purchase to pay system needs to be walked through and reviewed again (something along that lines)

(c) Payroll Expense : Using the work of an outsourced entity ISA 402 – Third party confirmation is important and need to deal directly as there could be possible manipulation in the payroll file provided by the management on behalf of the payroll company

Question 3 : PFI (skipped)

Question 4 : I found this question attempted was rather the weakest of the lot. I went on to define professional sceptisicm under ISA 200 and how the component auditor needs to question the possible collaboration by the leagal team and the group auditors. And i cant remember anything else that i wrote.

Question 5 : (a) Why is there a need for KAM? I wrote that it is to bring more emphasis on the face of the audit report for the users to be able to make decisions (along that lines)

What are the problems faced in the KAM? I wrote that items listed there requires high judgements and may to be too complex for users to understand. Then i also mentioned that it is difficult for auditors to estimate on the relevance and accuracy of the item.

(b) What is the impact on the audit opinion.

All of whish i computed the materiality first.

i. Goodwill

I wrote that the audit opinion will be unmodified but with KAM paragraph stating that the impairment test has been carried out with the valuers confirmation and that there is no impairment for that year.

ii. Provision lawsuit

There was a lawsuit at the component level and the report was unmodified. So i mentioned that at the group level there is a need to modify the report as the provision was not done as per IAS 37. The report will be modified with the basis of opinion stating an “except for” since the item is material and not pervasive (IAS 705).

iii. Was it disposal? Cant remember

I computed the materiality and found that the disposal was only 0.8% of the total assets and hence was not material to the financial statements. However a disposal was a matter to be brought to the attention of the stakeholders and so under ISA 706 Emphasis of matter and other matters paragraph, it should be highlighted.

I dont know how i am going to fair in this sitting, just hopefully some miracle happens 🙂 All the best on your results guys!

The p7 was not difficult at all, but it was hard. The duration was not fair at all, especially for the Question 1. I cannot just agree that, anybody can finish the Q1 within 63 minutes. That alone can cause students to panic in the exam.
Going forward I think it will be a wise decision to leave Q1 till the end, rather than starting with it.
Nevertheless, may Allah bless what we were able to put down, amin

Operating segments is not an allowable ROMM, as it is purely DISCLOSURE related.

It doesn’t change the figures within the financial statements.

this was one of the toughest P7 papers i have ever seen,and to top it off Question ! consumed too much time,wasnt such a tough question but too time consuming. Question two b was rather tricky,the options were terrible,especially the 5th one were all the scenarios seemed fine,can anybody tell me what they wanted us to do here as barely reading the texts would not get u marks here. Terrible paper

@mogorosi said:
Hi guys,

I see a number of you discussing risk of material misstatement (Q1b)

I am not going to discuss the whole paper but please note that the question wanted 4 “SIGNIFICANT” risk of material misstatements.
These are risk that require special audit attention and involves risk relating to fraud, complex transactions, related party transactions, transactions involving high degree of subjectivity.

So, for example fuel derivatives as a risk would qualify as a significant ROMM as it should be done in accordance with IFRS 9/ IAS 39 which is a complex standard for both management and the auditor

Inventory would also qualify as it related to fraud (misappropriation of assets). Though the amount of inventory stolen was immaterial at about $12 500 the scenario stated that management were worried that the problem might be broader which then meant that as an auditor you needed to consider the possibility of inventory stolen being material. Thus your inventory being overstated and inventory write off understated

Having mentioned the above, this makes risk like the IAS 23 borrowing costs that I see a significant minority of you talking about, being not relevant to what was asked. (i.e interest to be capitalised not a complex calculation, not estimations, no fraud, etc).
Again IAS 23 is made more irrelevant to fact that IAS 23 relates to assets being constructed, were capitalisation of interest is over the construction period. Information in the scenario said the aircrafts were purchased from a supplier, which means the was no period over which the company needed to capitalise the interest.

IFRS 8 was also not relevant as this is a disclosure requirement and the question explicitly instructed you not to include risks relating to disclosures

How about opening balances? the client was a new audit client? even fraud may not be a significant risk if its not material. You make a good point but there may still be inherent flaws in any answers. let the examiner decide.

Time pressure

@misschile100 said:
Exactly the same with me. Didn’t do justice to question 1 I feel so bad about it

Same here.
Its sad to feel you have to write same paper again immediately after leaving the exam hall…
And these Exams are really expensive……