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Dear Mike,
Regarding Sep/Dec 2017 Q5 (b2), I would like to check with you how much mark would I earn if part of my answer associated with materiality is as follows:
The value of the loan is trival, therefore it is not material to the financial statements by value. (0.5 mark or 1 mark?)
Regardless, related party transation is material by nature, as the director may be abusing their position and power for own personal gain, and hence the loan being offered on favourable or non-commercial term. (0.5 mark or 1 mark?)
The total I would achieve from the above 2 sentences is 1 mark or 2 marks?
Thank you.
Regards,
MarthewYou should be aiming for 1 mark per sentence!
Paraphrasing your points, what about:
“Mrs C Angel, a member of the senior management team, has borrowed a sum of $75,000 from Basking Co
The board has minuted that they consider the amount to be ‘trivial’
But the concept of materiality is a two-way street – what is ‘trivial’ for Basking Co could well be material for Mrs Angel
Furthermore, as a member of the senior management team, Mrs Angel is a related party
As such, quantitative considerations are irrelevant – the company should instead be considering the qualitative materiality
Therefore, the board of Basking Co should be informed that the full details of this $75,000 loan to Mrs Angel should be disclosed in the notes to the financial statements
Failure to make such appropriate disclosure would result in the audit firm having to issue a modified audit report with a qualified ‘except for’ opinion”
This part of the question is worth 5 marks and asks for “an explanation of the matters to be discussed” and “an evaluation of the effect ..”
I believe that my suggestions better address the question requirements that do yours and I have given the marker sufficient opportunities to award 5 marks
Do you agree?
In addition, I have managed to avoid using the word ‘and’ within my suggestions. To include ‘and’ in an answer suggests that there are two separate points that could be made
By combining those two separate points, you are running the risk that only 1 point will be recognised by a marker
Hope that helps
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