AAA*** P7 June 2014 Exam was.. Instant Poll and comments ***

Mark allocation: Q1 – a) i) audit risk – 18 ii) additional info – 5 b) component auditor – 8 professional marks – 4 Q2 – a) i) PFI engagement accept – 6 ii) PFI audit procedures – 8 b) i) money laundering stages– 5 ii) elements to encounter money laundering– 6 Q3 – a) i) Chemicals, PPE 60 mln, R&D – 8 ii) Car sold to Related party – 7 b) prior year unaudited account – 5 Q5 – a) Current issue – going concern – 8 b) Appraise the opinion – 12

I did mention that the transfer price to Lynott is expected to be relatively high as there could be material waste due to recycling the luxury silk clothing and also (not mentioned) the cost of labour for processing the luxury clothing is it taken into account in the transfer price. If so, despite having cheap labour in Lynott, the transfer price could be relatively high.

Does the same functional curency mean the same reporting currency ? I think if they have the same functional curency but diferent reporting curency and the subsidury is autonomous it requires translation

I talk about inherent risk , control risk and detection risk question 1

Do all have the same reporting curency?

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Q1 - audit risk Inventory Intra group transactions Revenue ( inherent risk due to scheme attached ) lynott company controls ( control risk ) as new Investment revaluation ( who did that internally / externally ) Associate ( demonstrate significant control ) Brand - impairment Clapton co ( as subs material and component auditor ) always risk One more i dont remember Q2 - pfi procedures - Obtain a break up of operating expenses and verify the expenses against payroll record , and for dep expense - Review board minutes to confirm the approval of capital expenditure - Discuss with management and confirm the charging of price increase from September instead of May - Obtain a loan application from the management and verify the finance cost as the increase in finance cost doesn't look appropriate considering $8m - confirm the remaining half of the funding of $8m against cash book/bank statement - break up of cap expenditure and verify the expenses against supplier quotations etc Few of the procedures arenot linked to profit and loss but it was necessary for the proper examination of profit and loss. The point i missed was . Increase in ticket price was reasonable or not they can be confirm through competitions prices Q5- going concern disclosures ! Because identification of all going concern event / situations can lead to Better understandability Reliability Transparency Independence Better decision making There was so much to write on that , something u really need to add to make ur answer strong.

Isnt pfi supposed to just be analytical procedures and enquiry if management? I remember from my reading that pfi doesnt have any substantative procedures. Thats why its limited or negative assurance

It was a fair paper. My audit risks were written each under subsidiary and the associate. Audit risks are: No cumulative auditor's knowledge and experience Opening balances may be mistated since we were just appointed. The brands name overvalued cos its been held at original cost-no amortisation and impairment. Stewart co. Classification as associate may be wrong despite having 25% cos the Group may not participate in the operating and financial policies. The date of acquistion is Jan so part of the profit should be taken and not the whole. Translation risk cos of location overseas. One sub has 200 depts- control may be weak in some depts Bonus scheme- Rev may be overstated to get the bonus. Just trusting in God for the best

Q1 i wrote a)Risks IAS 28 -investment in associate maybe wrongly classified as associate- however more than 25% so may not be a risk -associate acquired on January so only for 5 months- risk of not taking that into account for profit and loss -brand at historic cost- ias 38 no amortization - no impairment -ias 21 (wrong dint see it was the same currency) -inter company transactions-risk of non elimination -inventory in transit risky -as sub transfer inventory in other subs -ias 2 inventories lower of cost or NRV if the goods were transferred at no price then NRV Zero risk that was not recognized at lower of .. -New IT system risk of errors made -all these were made with comments on their materiality (I am so pissed that I forgot opening b/ces unaudited ias 24 disclosures, Ias 40 investmet property and no ratios) b) other info -copies /documentation from the acquisition of associate I don’t expect much here -the financial ration to obtain an analysis of the group C) matters on component auditors -same ethical requirements as the group auditors -their competence,qualification,standards. if they are part of a network of audit firma -resources to be involved with consolidation as it is small firm procedures( confirmation of belonging to a network of firms, written representation that they comply with all ethical standards and one more dont remember.... unfortunately i could not find others Q2 a) nature of assumptions –distribution of the report –use of the report not thoroughly explain though Period cover –responsibilities of mgt Limited assurance b) Procedures-don’t remember c) - money laundering stages not thoroughly explained again elements to encounter money laundering -appoint a MLRO Training of employees in the firm didn’t write as much as I would Identification procedures Q4 a)Explain business risk, f/s risk related with going concern b) Outsourced payroll I I wrote 2 lines about what is outsourcing (don’t expect marks here) Also that auditors should have unrestricted access to the payroll from the outsource org to obtain evidences c) matter to be consider before giving advice on tender - Conflict of interest - Safeguards Advocacy thread Non audit service d) joint venture with audit clien -self interest thread -business relationships prohibited unless immaterial -less critism on clients if client go to events that has a motive for profit All these very summarised Q5 a) 3 lines about going concern should be disclosed if there is significant uncertainty b)report -reference to the appropriate ISA 706 -basis of opinion and opinion paragraph should be included -The paragraph was not explained adequately -Materiality I wrote that was correctly included but apparently is wrong since the materiality was wrongly based -impact on the financial statement if not corrected reference to IFRS9 financial asset receivables About the claim -Immaterial so no impact on audit opinion -EOP inappropriate since only highlights significant matters -Disclaimer of opinion not appropriate as it’s only made when a matter is pervasive and -lack sufficient appropriate evidence Audit opinion I accidentally thought that the 50 000 was 500 000 and if was taken together with the 2.5m of receivable would have become 3m so pervasive and Adverse opinion (GGrrr So mad) Overall I attempted 90% I am so pissed that I didnt had the time to write something more on all the question as I was time was a biiiigggg issueee I pray for a pass its my 3rd attempt and i still not understand why i didnt pass previous time

IT was a good time pressured exam the scenario were familiar ,though time was an issue hope to pass

The exam was extremely time pressured as there were a lot of things to write! Q1... as soon as I saw that auditors were appointed recently I went into ISA315 and talked at length about the need to gain an understanding of the client in order to assess the risks of material misstatements...such things as nature of operations, ownership and governance structures, internal control, financial performance measures etc...needless to say I was overly obsessed with ISA 315 that I didn't have sufficient time to really go into the financial statement risks. I managed to mention the associate classification could be a risk as 25% isn't sufficient unless management can demonstrate significant influence! Also, inventory transfer within group is intercompany, shld be eliminated, NRV = zero, risk of overstatement, not correctly recorded, inventories in transit...new system is a risk because if it's not integrated into sales/ general ledger, errors could arise, investment properties must fulfill ICE criteria (especially as it's overseas we can't verify if it's empty of the group, hence classification might be wrong), forgot to mention FV as a risk! 200 stores is definitely a risk as we can't attend stock counts and we may not have sufficient time and resources to gather enough evidence as per these stores!. I didn't calculate ratios so my question paper was clean & untouched on the numbers bit. But I mentioned that revenue was a risk as bonus is dependent on it!...I thought the 800k management charge was subsequent event IAS 10 (due in September), I bet it was only me that thought that (dumb maybe!).... Q2. PFI was basically things like fees, threats to objectivity, risks, financial health of client, who the report is for( we may be held liable if client defaults on interest and principal payments as bank would be relying on forecasts) etc.... Procedures was mainly analytical and enquiry as they are just forecasts although some of the figures may be actuals like rent, staff salaries etc. Money laundering, remembered only placement and layering but still mentioned the transfers overseas.... Other sections were fairly okay but time was seriously not my friend! I thought the q3a was a bit tricky and it needed a provision (may be for decontamination) which should be present valued, research costs should be expensed as incurred. Didn't know how to deal with the 60k ppe so I left it... Car to FD is related party transaction that shld be recognised at 75k and not 50k...disclosure also required! That's how much I can remember for now. I am seriously hoping that I atleast get more than enough marks to pass by God's grace!

Stock held at various locations could bear risk of out of date stock and over valued inventories. In addition there is a risk of inaccurate stock counts due to new stock system in operation. I thought this question had a lot of time pressure.

i was baffled during the exam on how i spend 2 hours on Qs 1 the remaining one hour 15 mins i spend on 3 qs altogether :S. I am hoping & praying for just a 50. Qs 5 was very straightforward but i believe in part b the opinion was adverse and not disclaimer i missed that part :(

Q5(b) had except for opinion because matter was not pervasive hence it could not be adverse or disclaimer

question say sub same currency same ifrs but new associate buy during the year remain silent...as.professional skepticism..i believe this remain a big audit risk..like class ie significant influece n the accounting trearment ie buy duringthe year..this should be solid answer to question one ??

Can anyone please tell that have i followed a right approach to answer Q1 : I made an answer plan first on my answer sheet which included short points and key words so that i can structure and follow logical sequence and within that answer plan I also included an Appendix which showed ratio calculations and then i started my actual answer on a fresh page and gave Heading of Briefing notes and followed format of briefing notes, then i wrote Q1 a + Q1 b and answered them togather and after this I wrote Q1 c and answered it and at last I wrote conclusion to end the briefing notes. With this approach can I also get some professional marks as I fear that I do not fail due to 1 or 2 marks only. I am very worried. I thank you for your time and guidance.

@Faizan, you mean you did all that in 63mins for Q1?? If you attempted atleast 90% of the paper within the 3hours, then I must commend you, you must be a fast writer! I couldn't take that risk cos I didn't think there was sufficient time for the paparazzi, had my techniques in my head which I wrote down in the 15mins reading time for all the questions...as soon as I heard start I just dived in! I did the To, From, Date, Subject, Introduction and Conclusion...no planning on answer sheet! You should get atleast 3 out of 4marks for what you described up there #myopinion...but then what do I know?

Like most people have said i feel it was a fair paper with familiar questions. However it was very time pressured. Which meant to complete the paper you couldn't really take too much time to think. Overall i just kept writing the whole way through as i knew i needed to attempt all questions to have a better chance. It meant i missed quite a few points i obviously knew. Also my explanations for my point were probably not as i good as i would like as i was just writing. I did question 4 then 3 as my options. I skipped question 5 even though audit reporting was my strongest area when i saw 8marks was all to the with going concern changes in reports. Luckily question 3 was reasonable and probably the easiest optional. It just looked intimidating as there was more to read. Anyway with most people's comments regarding not completing, i am a bit happier that i finished and hopefully did enough to pass. We will all find out in August!

Dear Toyosi, thank you for your reply, I first started my paper with Q4 then I did Q2 then Q5 and at last I had almost 58 to 62 left to complete Q1, I completed 100% paper by the Grace of Allah, but I am still confused that what doeas ACCA expect from us, I scored 71 in P1 at first attempt and 74 in F9, but last time I failed in P7 that was my first attempt of it, and i still don't know that why i got failed, since my points were almost according to past paper answers of Dec 2013 session. This is making me worried that despite all of the efforts, what does ACCA wants from us.

This is exactly true with me. I looked at the answers for the Dec-13 paper and was surprised I failed also and seem to remember that my answers were nearly exactly same. Let's see what happens on 8 August 2014.

@Faizan, okay good! Fingers crossed! I have passed all my 5 F papers on first attempts as well, 3 of them with 70+. p7 is my first P paper and I am just praying to God for help to pass. Since you did 100%, chances are you would have said enough VALID points to atleast get 50marks. Again, fingers crossed. Let's look forward to celebrating in August by God's grace! Cheers.

Dear Toyosi and Azramalik, thank you for your support and good wishes, May Allah help all of us to achieve great success in this world and the hereafter. I wish all of you good luck and best wishes.

tough exam compred to lasttime

For Questions pls visit: https://www.accaglobal.com/content/dam/acca/global/PDF-students/acca/p7/exampapers/int/P7INT-2014-jun-q.pdf

Q 1 : I spotted some risk as follows: - Associate: Significant influence or not? - Income Statement dint show share of profit from associate (25% x 6Mtns x PAT). ( I believe the Extra 500K is the profit share, which may have been accounted in Revenue to inflate bonuses for managers) - Purchase consideration may have been incorrectly accounted. - Fashion industry - IAS 2 : highly volatile. (also says in Q - 12 months unsold inventory : I believe provision of obsolete goods not created at a group level) - IAS 24: Related party Disclosures not shown as required.. - Provision on unrealized profit not eliminated - Interco Sales / Purchase, Receivable/payable not eliminated. - Management Charges: 800K x 3 branches = 2.4 Mn to be eliminated (not 800K) 2.4 Mn is significant amount that could be charged to revenue and thus increase bonuses and similarly provision created must be knocked off. - New Client: opening balances may contain errors. - Control Risk - Forex purchase and sales, Interco forex gain on sales and purchases to also be eliminated. - OCI element not shown on face of SOFP. - Forex Translation of Open Net assets/ goodwill not shown on income statement under OCI. - Impairment review of Adam Brand name due to slow moving goods ( Actually many more provision would be required to be passed, subsequently profit margin will reduce, therefore an impairment review needs to be done.) - cash rich people? laundering money into investment property (Cash business: high chance for laundering to happen.)............................................. (not very sure about this) - Investment property income during the year is only 200 and opening balance is 7500. How come 10000 on SOFP?. - Previous year TAX % 26% and Current year only 20% ( understated provision and overstated profits.

Hello guys, regarding Question 2 (a) part where before accepting PFI engagement matters to consider were asked, i badly messed up on that part although i knew the answer but i mistakenly wrote other before acceptance matters such as Objectivity, fee & profitability, risk etc.. I want to know if these things are also considered or i will get 0 marks?

If you look at your BPP exam kit at Q42 Cusiter part (b) will give you the answer to that question of matters to consider before accepting PFI engagement. I manage to remember the responses to this question, thank God so I know I picked up a few marks there. Also, I would like to say that the Kaplan mock exam June 2014 was extremely helpful. The questions asked were almost mirroring what came in the exam. My husband and I went through the first question just the night before the exam, cuz I only saw that the link to download the mock exam was put up last Sunday. But many of the questions were on point. I benefitted greatly I must say. I'm praying for a pass. Looking forward to August God willing.

@trinistudent001 sorry i don't have access to BPP kit, i do know the correct answer and that my answer was wrong but shouldn't objectivity and other stuff also be considered?

it was a relatively easy exam compared to some questions in previous years. I tried my normal approach to make as many relevant points as I could explain well. tried the *because* technique which LSBF teaches us- worked from the feel of it. actually I feel like my P7 tutor did brilliant work as he gave very good techniques and some of the questions- like Q2 on forecast- I wrote all 13 marks without reading the example first because it did not make much difference to my answer. itis all about technique. not sure why people complain that ACCA wants too much- guys if everyone passes and exam is a piece of cake, how much do you expect to be paid after investing yourself into these exams? 14k? please. I work in top 10, attend college, do self study and take 3 exams each session, now it's my last one with P6 on top. so nobody can tell me I don't do much. I work my ass off- and it works- I haven't had a single exam lower than 60. just don't complain, work hard.