AAA*** ACCA P7 June 2018 Exam was.. Instant Poll and comments ***

Wait what there was a grant? Damn how I could I miss that.. must be me panicking to read everything

@thomasperry123 said: I done the UK variant. Can anyone tell me what the mark scheme was for Q1?

a) Business risk 8 marks b) RMM 12 marks c) procedures 5 marks d) ethical issue 6 marks

Q1 a) Bus risks (8) b) RoMm (12) c) Restructuring Provision (5) e) Ethical (6) 4 proff

@bhonegger said: Q1 Business risk: Liquidity: 0.3m in cash with acquisition planned and already 0.7 gearing Gearing: 70% liability, potential high interest cost and covenants Continuity of funding on Residential: Government reducing funding on grants, it's 25% of their Revenue, any going concern risk? Exposure to Property market: On their commercial undevelopped land held at FVTPL, in case of market crash (2008), very large SOPL charge and risque of insolvency Reputational: Disposal of the sub with redundancies, negative media coverage and strike with costs Audit risks: Grants: Are they recognised in line with IAS20? Risk they are deferring when not allowed Land: Investment property, requirement to FVTPL, incorrect 10K gain when it should be 1m loss, risk the rest of portfolio is misstated Disposal of rail: Risk that the disposal of asset is incorrectly recorded, very material figure. Disclosure risk: Should be showing as Discontinued operation Disposal of agriculture: Risk provision is overstated as training costs not allowed. Same risk as above, shoud show as discontinued operations. Risk of litigation if any redudancy deemed unfair dismissal Audit of restructuring provision: *Recalculate employer calculations, agree to employee salary per GTN *Obtain letter from ER to EEs, verify date *Obtain copy of media coverage for audit file *Ensure in line with employment law and taxation law for any taxable/non taxable lump sum Anyone with theirs? I feel like I could have missed loads

Another point you could add for the provision is the sale agreement. In order to recognise a restructuring provision which relates to the sale of an operation, there must be a binding sale agreement. I explained that there must be evidence to support the claim that it is highly likely to sign the sale agreement. For the procedures: Review any correspondence between co. and potential buyer for evidence that he will sign the agreement

@laurlou said: Q1 a) Bus risks (8) b) RoMm (12) c) Restructuring Provision (5) e) Ethical (6) 4 proff

I remember if correct that there is sale of division . But the restructuring provision no announcement made right. And the restructuring is likely signed on august 2018 with is 1 month after year end . Correct me if i am wrong

@lesbella said: I remember if correct that there is sale of division . But the restructuring provision no announcement made right. And the restructuring is likely signed on august 2018 with is 1 month after year end . Correct me if i am wrong

Question said that it is likely signed on June 2018 which is in the current year. As for the announcement I think that's a valid point which I missed

For the sale of boxer rail which have asset. The asset should have perform impairment review as there is indicator of poor sale. And asset held for sale. Fair value is subjective and complex right. One buyer for the sale is too simplistic right. Should get market value to identify correct valuation. . Not sure is this stand for the sale of railway I think there is ifrs 15 revenue recogition issue. Although not recorded for 10 percent. But there may be other contract with is recorded. Therefore i say revenue may be overstated

@lesbella said: For the sale of boxer rail which have asset. The asset should have perform impairment review as there is indicator of poor sale. And asset held for sale. Fair value is subjective and complex right. One buyer for the sale is too simplistic right. Should get market value to identify correct valuation. . Not sure is this stand for the sale of railway

I did not include those in my RoMM but your points seem justified and well explained. And yes I remember writing something about IFRS15.. I wasnt sure of the exact requirements but I said that the construction contract should be recognised based on its stage of completion. Since work will only begin August 2018 he should not recognise profits. Need confirmation on this though

Reluctantly voted ok in the poll, wasn't ridiculous and i feel decent-ish about it. TIME. That was the worst part in this exam. I think i managed to at least touch everything however. Did 4 & 5 as the options. Ran from the CSR part of Q3. But didn't like the first part of q5. Still went for it anyway and gave it my best For the benefit of persons who'll want to know what came: Q1: Business risks, ROMM, ethical issues due to financing advice and preparing cash flow forecast, Audit procedures for a provision Q2 : Quality control, ethical and professional issues - new credit system during yr, FD only posted journal for half of the impairment, member of audit gave advice and was paid $600 by client Q3: Something about CSR report and procedures KPIs? (someone that did this could clarify Q4: Matters to consider and audit evidence - fair value of instruments, provision, inter-company sale Q5: Discussion of benefits and difficulties of KAM and how it addresses the expectation gap (ugh) and critically appraise an audit report (which of course contained KAMs..)

Spent almost half of the exam on question 1. Less than 15 minutes left on the last question.

Q3 was the nuclear plant accident and some CSR audit

Story of my life. Started last question with 15 minutes left.?

Anyone remebers the csr audit procedures?

seems many were in such situation...time presure of this exam unreal

I don't understand what P7 examiner look for ? If the knowledge and student's ability to apply that in situations, very good, then one full question is an extra just to pressure the students unless exam time increased to 3.30 hrs. Frustrated with this paper !!

12 marks for the criticism of the audit report

I started with exam with Q3 and Q4, then Q2 and ended with Q1. I rushed through everything and just managed to finish - but without any time to think further. I read some of your points which have completely escaped me! I did mention some others though. It is the first exam where I had to request a 2nd booklet, that's how much I wrote! hope the examiner can read me!!

The exam time pressure on this paper is incredibly difficult to manage. This is my second sitting and yet again I felt I spent too long on Q1. I sat the Irish variant and am interested to see that candidates that sat the UK variant seem to have a breakdown of the marking structure for Q1. This wasn’t apparent on the Irish variant and if this was the case then it is hugely unfair that the ACCA would include the detailed marking structure on one variant of the paper over another. It leaves too much scope for the candidate to spend too much time on specific areas of question 1 when there are more marks awarded for other requirements. I felt a lot of the other questions and their sub parts are too long. It seems to me that each question was loaded with additional requirements. In reading a question of two sentences you’d be asked to perform 3 matters in some cases I.e. identify, comment and explain in addition to detailing Audit procerdures or evidence you might find. The question requirements should be shorter and more precise. It’s difficult enough to balance time pressures on 4 questions without multiple layers to the requirements. All in all I felt it was a very difficulty paper and I’ve no doubt I’ll be back again in September for another attempt. Feeling deflated and dejected by P7.

Curious as to whether the breakdown of the detailed marking structure for Q1 was listed on the UK variant of the paper or whether this is just speculation? Nowhere on the Irish variant of the paper was the detailed marking structure included for Q1.

Sat for the first time the INT variant. I've never felt so pressured by time in my life. I was reading through the requirements and the scenarios way too fast in order to catch matters that were not too obvious. I have looked at the requirements of Q 3,4 & 5 and chose Q 3 & 5 without even reading the scenario in Q 4 (which might have been easier than other Qs that i picked). From what i recall: Q1, a) Business risks: 1. Future restrictions on cash inflows in the division with the government grants 2. Loss on customer goodwill on the agricultural division's strike being made public 3. Poor investment decisions with all that land held and not utilized 4. Potential risk of non-performance on the new acquisition due to lack of knowledge of the business b) RoMM: 1. Operational segments - non compliance with disclosures 2. Impairment review on the division with the grants due to future restrictions as well as risk that the government grants are not properly accounted for (recognition and netted off against stipulated in the grant expense) 3. Revenue recognition - material (i believe), too early, should be recognized when the criteria is met, as the contract progressses 4. Impairment review of the rail division as the potential buyer is offering less than the carrying value 5. Agricultural division should be impaired as well due to the negative media, the provision should be recognized (but exclude the retraining fees as they should be expensed as incurred in the future period) 6. The investment property should be revalued at FV, no cherry picking, must check that all the assets in that class are @ FV And i don't recall anything else writing here. c) Procedures on the restructuring provision: - obtain the plan and check for arithmetical accuracy of calculations - i don't recall much about this answers either d)Ethical threats due to business plan request and financing representation: - advocacy - self-review - assuming management role - also the 10% increase promised was like a bribe if not a contingency fee attached to the audit fee Q2 A big blur which included quality control, ethics and evidence to be found in the audit file: a) Year end Journals: - the recurring one was material, needed more info even though was in line with last year's figures, like customers balances this year checked vs. customers balances of last year, investigate and inquire further if any major differences are found. - the one for impairment was like a management earnings adjustments -> management bias might be involved (it was a listed company) b) New credit system implemented - evidence was contradictory (nothing changed from last year but there's a new system), little info was acquired, needed to test it for controls and not rely only on client's word, etc. c) Auditor giving advise to the client: - on the payroll review i considered it as being correctly done, they should have tested the new overtime calculation - on the advice for which he got paid, big no no, major ethical threat, the auditor should be removed from the audit team, re-training performed, self-interest threat, self-review threat -> an independent review should be done on the work the guy performed, etc... Q5 a) expectation gap, benefits and difficulties of KAM - major disappointment with my reply :) Part b) Not professional to blame somebody, to mention his name or when he joined the group. - IFRS should not be abreviated - the second matter (with the material misstatement) should have been in the Basis for qualified opinion - the order was wrong, but i made a mistake, i said that the order should have been: * Opinion *Basis for opinion * KAM * Uncertainty regarding the going concern ( could not remember the correct name :)) - emphasis of matter paragraph should not be included, the matter should have been disclosed in the "never hear of" paragraph of Uncertainty regarding the going concern :) Also my suggestion above is not correct :( but i hope they will still give me some marks... Q3 a) Matters to discuss about a nuclear accident: - material, impaired, it happened right at the year end, therefore it's a must to be impaired, going concern is questioned (40% of revenue stream), the provision should be recognized not only disclosed. b) Difficulties in assessing corporate and social reports: - discussed about KPI's difficulties: * difficult to put a monetary value on them * controls are not efficient on gathering the data * difficult to compare as they are not regulated so each company will calculate as they want * difficult to identify stakeholders -> hope this is what was needed c)Procedures to assess the reasonableness of the objective and target that the company set: Objective: to be leader on training its staff - obtain a list of major competitors and check if they have this KPI and confirm if objective is reasonable Target: $200 per employee for training and 80% of employees trained internally - obtain a list of the employees that attended the training, on a sample of them inquire if they really attended - check the total training expense and obtain the invoices behind the journals to see if they are indeed training expenses - and something more but i can't remember. This was my experience with P7 and i pity the person who is going to read my answers as my handwriting during the exam goes from bad to worse to illegible :( Fingers and toes crossed and good luck to all of us!!!!

It was 12 marks criticise audit report. Could not do it due to time pressure. I had done KAM 8 marks and time was over. Disaster!!!

1a.Biz risk *restricted funding, less contracts and decline in revenue *restricted funding could also affect private customers, decline in revenue *decline in farming industry *diversification could be a risk? No time! 1b romm *impairment of undeveloped land *revenue recognition of contract still at negotiation stage *mgt bias, projected increase in revenue but less funding from govt * provision for restructuring without announcement? No time! 1c *recalculate provision figure based on management assumptions? *obtain representation from mgt that redundancy plan was communicated *review assumptions made for reasonableness? No time for d. Just sad!

I don't understand how some people are saying the redundancy plan was not communicated/announced? The employees are on strike and all the media is aware, the implication is very strong here

valid point. must have missed that while reading the scenario in rocket speed..lol. oh boy...

@joeko91 said: valid point. must have missed that while reading the scenario in rocket speed..lol. oh boy...

see you in September lol

@sarahb1985 said: Most time pressured exam I have taken! 6 pages Written for question one.. took up half the exam time! Qu one and two ok.. the options questions I feel my answers were weaker..! Chose 4 and 5.

Agreed. I do not remember how many pages i wrote for question 1 but i do remember that i filled 20 pages for the whole p7 paper. I chose question 3 and 5. I also found qn 2 abit tricky.

Exactly the same as you.

You have very good memory. And you made more valid points than me. I see where I lost marks. So you should pass. Good luck.

12 marks, the first part abut the KAM and its benefits and expectation gap was for 8marks.

For the error in calculation of impairment that the director only adjusted half of it until it became inmaterial in Q2 can I say that even though the remaining error is immaterial it could be a system error which will effect subsequent periods therefore will have an impact on the audit report in the following years. Therefore the audit team should have confirmed that the source of the error was corrected.