*** P7 December 2014 Exam was.. Instant Poll and comments ***

For the goodwill part in Q2, in addition to impairment, I think there was something with the initial recognition of goodwill. It said the following things:

Add, NCI share of net assets (20%) = $13,000
Less, total net assets (i.e., 100%) = $61,000

As the NCI share is not PROPORTIONAL to the total net assets, this means it has been accounted using the fair value method and so, the NCI share includes goodwill, which effectively amounts to $800 (13,000 – (61,000*20%)). Thus, goodwill is overstated by $800.

I am not sure if this is correct, nor did I do this in the exam myself. But there should be a reason they gave all of that!

I agree q2 was a stitch up – I hope there are marks for saying the usual impairment of GW, materiality calc and the evidence/procedures.

I get the feeling seeing that most people where quite good with the rest of paper the will mark them stringently and hit people hard with q2 ( and no doubt maintain those suspiciously consistent low pass rate).

Anyone (with a better memory than I) recall the questions and mark split for q1-4?

Question 1–
business risks mentioned above
Risk of MM – Litigation claim, Revenue recognition of animal rev,Valuation of intangible assets – brand,research n dev,gdwil if any; Inventory – gels, tablet, cream etc- can’t remember the other
Procedures – prior fin statements, bank depost, depreciation schedule,board minutes, due diligence report, sale cojtract etc
Ethical – loan guarantee – self interest (pay off audit fees due – cahs flow probs, going concern increased gearing); reveiw of system – self review

Q2
a. goodwill-material – impairment test req.increase loss
valuation – not material in sense of value but bcuz of acq. 50% ofold value
Loan -vlauation of financial instruments- amortised value-interest in PL, balance on FS
Also had to discuss audit evidence to find (i think-cant rem)
b.Claim – virtually certain – premature recognition 9insurance comp investigate: look at ins policy, report for demo cost, report property unsafe, etc
c. cant remembr quest -ethics??

Q4
tender – company briefing, quality control standards, personnel backgroud,management and auditor responsibilities, audit objectives n approach
ii.Fee issues n ethics – new client – two yrs no audit, test of controls, one accountant – overworked? reliance on data n also limited assurance review , evaluate qualif of unrlated firm;owner wants 4 mnt report and low fees in short time frame, strategic advice – ethical issues – lowballing, self interest. Fees based on qualification and time to be spent, develop learning curve.

c. Former partner as quality control – no- familiarity n self interest, mitigate risk , new partner.

Q5
Quality control n ethical
New client, 20 locations, discussion wit finance dir. and no other info given (there was another issue-cant remembr) ethical issue – disc with fin – self interest

b.share option -Ifrs 2 -material, provision – not comm b4 yr end, obsolete inv – due to market etc (not sure if it hard to be tied to part a but if it did the fig was not material)
c. I thought adverse.

Also a quest bout comp system – give rise to self review(cant remeber which part).

Wheeww… I think/hope what I did is enough to muster 50%.

What were the marks available for question five please???

q5 – think it was 3 marks for each accounting issue (3 x 3mrks) , 4 marks for the audit reoprt opinion and cant remember think part a was 7 marks regarding the long standing business relationship

No probs at first glance I thought the paper was ok but no amount of practice can prepare you for the real thing I found. Found it hard to string answers together and was also rushed on q5 even though I left the recommended time for it. Also found some of the accounting statements hard to understand especially the one with the 300 revalue upwards was badly worded or maybe it was just me. Was more like an accounting paper than an auditing paper but saying that p2 was easier ! Onwards and upwards tax Friday

@keyboard said:
computerized accounting system was no MM..beacuse it had clearly writtern it did not cause any.. it was only there for ethical threat..

can any body confirm GC issue in q2… it could have beenadjusting event because manufacturing site was hit

There was a mm and business risk in implenting new system.

There were no deficiencies in old system. But mm and business were there in implementing new system.

Secondly, you are wrong GW was material as it was representing 3% of total assets. Total assets were in million. And GW was presented in ‘000 so we were required to calculate materiality carefully.

Let me show you how it was given In question

Suppose total assets were in question as 10million.

Working:
‘000
Fv of net assets. (40)
GW. 35

So we were required to calculate materiality by dividing 35/10000 or 35000/10000000.

@abdullahzafar said:
There was a mm and business risk in implenting new system.

There were no deficiencies in old system. But mm and business were there in implementing new system.

Agree with this- I had it as a risk that there could be significant disruption to implementing a new system

@keyboard said:
and for going concern since manufacturing site had had a hit… it was a adjusting event too being a going concern event!…

well, if you’re not sure about this, open up f7 kaplan book and read topic ‘going concern’ under IAS 10 chapter…

good luck everybody..god bless

It might be a going concern issue AFTER year end, however I was under the impression that because it doesn’t have to do with the current year end being reported on, it wouldn’t require an adjustment, only disclosure. There were no indications the site had any problems before year end…

Adjusting event:
An event after the reporting period that provides further evidence of conditions that existed at the end of the reporting period, including an event that indicates that the going concern assumption in relation to the whole or part of the enterprise is not appropriate.

Not sure if that’s right though, just my thoughts..

Paper was quite general no specific were really asked…

Hi All,

Fair exam overall. However, when they asked about business risk does’t that mean discussing the risks faced by the business under the 5 main sub-headings of business risk i.e. Operational Risk, Financial Risk, Legal Risk etc?…

hey guys.. the question paper is up now:

https://www.accaglobal.com/content/dam/acca/global/PDF-students/acca/p7/exampapers/int/p7int_2014_Dec-q.pdf