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- November 27, 2016 at 4:20 pm #351913
hello ,
i was practicing the qs lapwing from june 2012 ,,it is about PFI assignment ,,writing the examination procedures at the end i realised that they look like audit procedures ..please have a look and comment if these are acceptable under pfi assignment ..this company wants a loan of 30 m from bank ….the procedures are :
inspect the board minutes of meeting to ascertain the sale of BEAK RETAIL is being negotiated and its certainty that it takes place in sept 20X2
obtain written representations from management that on which basis do they believe the profit on disposal to be 4720
obtain and review correspondence between bank and the client on the approval of 30 M LOAN AMOUNT
inspect the site physically to determine that development of new retail and leisure park is under process
review corresspondence between kestrel co and hawk co for the development of park ,its acheivability and issues of funds
review of fin statements to ensure that Held for sale is disclosed seperate from other non current assets in use
are these examination procedures acceptable ? under PFI assignment
November 27, 2016 at 5:12 pm #351920Have you read the examiner’s report?
Here it is
“The second requirement, (aii) was for 13 marks, and asked candidates to recommend the procedures that should be used to examine and report on the forecast financial statements to be included in the business plan.
The best answers made good use of the forecast financial statements that had been provided, and gave procedures that were both well described and relevant to the specific content of the financial statements.
Many candidates also performed analytical procedures to determine unusual trends and relationships in the figures and information provided, which helped to generate very exact procedures.
Sound answers had a range of procedures, some general, some focussed on income and expenses, some focussed on assets, liabilities and equity.
Weaker answers tended to state simple enquiries, for example “ask management who prepared the forecasts”, or “ask why sales has increased” without any further development.
Another problem arose in answers that seemed not to realise that the figures were forecasts, so source documentation would not be available in the same way that it is for an audit of historical information.
For example, many answers suggested agreeing assets purchased to invoices from suppliers, or the forecast increase in share capital to share certificates, but these items would not yet exist as they relate to future transactions.
The one area that was missing from almost all answers was the need to ensure internal consistency in all forecast figures, so for example cross-checking from the forecast financial statements to a capital expenditure budget and to cash flow forecasts.
Another problem with weaker answers was that they tended not to always provide procedures.
For example, some answers contained a lengthy discussion as to whether a part of the business that was planned to be sold should be accounted for as a held-for-sale group of assets, which is not very relevant to the question requirement.
These answers seemed to be drifting into an assessment of potential material misstatements, which was not asked for.”
Now do a bit of critical self-examination … how much of the above refers to you and your answers?
November 27, 2016 at 6:11 pm #351949`YEAH MANY THANKS ,,
some procedures (may be one or two ) are relevant but others take the view of audit ,,(and may be not correct in that context too)..
i want to ask that in Pfi are we going test the assumptions on which the forecast is based ? as in this question there is not much theoritical data given to understand each forcast figure ..they have given financial statements with two aspects of sale of park and investment of loan for development purposes ….please guide me on what should i focus when asked to examine forcasts ?/ where did the forecast come from ,,or how close these forecasts are to future outcome,, what should be the focus for the practitioner for such assignments on which examination is based
November 27, 2016 at 6:17 pm #351957as regards with examiner report’s view the concern that :
Another problem arose in answers that seemed not to realise that the figures were forecasts, so source documentation would not be available in the same way that it is for an audit of historical information
i read my procedures and they are not demanding any source documents ,for verifying figures …..but writing those thats by chance …so this point was not in my mind while writing ,so thanks for notifying that forecasts will not have source docs………….we are so carried away in writing procedures that these basic mistakes leads to zero ,,,,
so thanks
November 27, 2016 at 9:16 pm #351992Glad that it helped!
Sure it’s a valid point to consider the actual person that has prepared the forecast , how close they have been in the past when forecasting and (given that the budget / forecast may have been prepared a couple of months previously) how close is actuality to the forecast / projected results
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