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

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!!!!

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!

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

@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.

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.

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.

Time is a real issue in this exam. Just hope for a pass!!!

@vikar said:
Hi every one,
The paper was tough as compared to others.
Q1.i wrote business risks.5
ROMM.i missed government grant .
The one for sale of division IAS40 but it should be inventory as it was his normal course of business.procdures was good.
Ethicas portion was ok not good due to time.Q2 was Quality controle and good attempt 85%.Q4 was also attempted good 85% and miserably only wrote EOMp. And time up.please comment.

i agree with you…it shouldnt be classified as investment property.not meets criteria.

@anastassiya777 said:
i agree with you…it shouldnt be classified as investment property.not meets criteria.

Wow I didn’t realise that too.. However to my understanding it did say he purchased the land on speculation.. which means there is undetermined use for the land therefore meets the criteria of IAS40. Construction for customers was his ordinary course of business, not selling land.

Correct me if I’m wrong.

provision made for customer rebate, i wrote that the provision can not be made. because think this is similar to early payment discount etc for which provision we never recognized provision … is this correct

There was too much write and time was not enough…. the paper was a little bit tougher

@sujawahab said:
Question 4 – matter to consider evidence expect to find question

Ohhh I didn’t answer that question. Had a heart attack for a moment there, thought I misread other questions