ACCA 2.4 Exam Tips

ACCA Paper 2.4
Financial Management and Control
June 2006 Exam Tips

Anthony Head is the examiner for FMC. He has set exams, which are fair and focused on the core areas of the syllabus.

The references after each topic are to questions in the 2006 Practice and revision kit:

Section A

Section A is a compulsory 50-mark question based on a case scenario of about 1½ - 2 pages. It tends to contain questions on investment appraisal and sources of finance.

Investment appraisal – Q86 Water supply services, Q95 Springbank, Q98 Sassone
Sources of finance – Q65 Newsam, Q66 Sources, Q72 Raising finance, Q74 Tirwen
Performance measures – Q95 Springbank, Q39 Balanced scorecard

Remember that the more complete case scenarios you attempt the better prepared you will be. The Case scenarios in our practice and revision kit are questions 87 to 97.

Section B

In section B of the exam there will be two questions on Financial Management – if investment appraisal does not appear in section A then it will definitely appear in section B, the examiner has never set a 2.4 exam which does not have an investment appraisal question. The other two questions will be on areas from the Management Accounting section of the syllabus.

Working capital (probably stock management but possibly debtor management) – Q59 JIT and EOQ, Q56 PCB, Q55 Special gift suppliers, Q61 Velm
Modern costing techniques – Q7 Throughput accounting, Q10 Abkaber
Variance analysis – Q19 Hairdressers, Q22 Woodeezer, Q23 Carat, Q24 Linsil
Capital rationing - Q83 Filtrex, Q84 PI, Q85 Basril
Sensitivity analysis, risk and uncertainty – Q80, Q81 Forex risk, Q82 Umunat

Health Warning! The examiners deliberately try to avoid question spotting. Just because a question featured last time, doesn’t mean it won’t feature this time. Use the tips as areas to have a good look at, but remember that no one knows what is in the exam, apart from the examiner. Your safest bet is to achieve good syllabus coverage in your revision, as the examiner aims to do in the exam.

ACCA 2.5i Exam Tips

ACCA Paper 2.5 (Global)
Part 2 - Financial Reporting
June 2006 Exam Tips

For each area described, please note the reference to useful questions from BPP’s Practice and Revision kit (P&R kit) (2006 edition) for the International Stream or UK Variant. We recommend you practise them all to get broad syllabus coverage.

Section A

Question 1

Section A will comprise one compulsory question that will examine group accounting. Group accounting is a core area and this question could ask you to produce a consolidated balance sheet and/or income statement (profit & loss account) with one subsidiary and possibly an associate or joint venture.

It usually includes adjustments for items such as: fair values, unrealised profit on inventories (stock) or tangible assets, cancellation of intragroup trading, goods/cash in transit, pre-acquisition dividends.

Part (b) of the question usually includes a related discussion element.

2006 P&R Kit Questions: Q52 Hanford (B/S), Q46 Hydrate (I/S and B/S), Q50 Holdrite (I/S with associate), Q55 Hapsburg (B/S with associate), Q51 Augment (joint venture).

Section B

Section B will comprise four questions out of which candidates should select three questions. The examiner, Steve Scott has stated that the style of the paper will remain fairly static:

Question 2

Question 2 will be preparation/restatement of an income statement (profit & loss account) and/or balance sheet. This question normally requires adjustments for current tax, depreciation, interest and dividends. Other adjustments may relate to debt factoring or other substance over form issues, leases, financial/capital instruments, revaluations, share issues, inventory (stock) valuation, government grants or deferred tax. There may be further disclosure requirements re discontinued operations, movement in reserves or an earnings per share calculation.

2006 P&R Kit Questions: Q8 Chamberlain, Q28 Telenorth, Q35 Deltoid (also includes convertible debt), Q54 Bloomsbury.

Question 3

Question 3 will be a written question examining theoretical/conceptual areas or accounting standards. This could be on construction contracts, leases, provisions, inflation, intangible assets, accounting policies or substance over form issues with reference to the Framework for the Preparation and Presentation of Financial Statements (Statement of Principles).

2006 P&R Kit Questions: Q13 Dexterity (intangibles), Q26 Bodyline (provisions), Q31 Atkins (substance), Q57 Update (inflation). For other topics, see Question 5.

Question 4

Question 4 is likely to examine interpretation and/or cash flow statements. There could also be a discursive part on why, for example, segment or discontinued operations disclosures are useful.

2006 P&R Kit Questions: Q39 Planter (CFS), Q40 Bigwood (CFS and interps), Q63 Comparator (interps).

Question 5

Question 5 has no specified format or content and will cover other areas of the syllabus. The examiner frequently includes a 'mixed bag' question, which examines three or four different accounting standards.

Possibilities this sitting include: deferred tax, construction contracts, segment reporting, events after the balance sheet date, governments grants, financial/capital instruments, discontinued operations or substance over form issues.

2006 P&R Kit Questions: Q3 Derringdo (revenue and grants), Q7 Tintagel (accounts preparation & financial instruments), Q17 Linnet (construction contracts, segment reporting) (Q16 in UK kit), Q21 Bowtock (deferred tax, leases, events after the balance sheet date), Q27 IFRS 5 (INT kit only).

Relevant Articles (www.accaglobal.com/students)

How to approach performance appraisal questions
Steve Scott (Examiner), 28 April 2004

First time adoption of International Financial Reporting Standards
Steve Scott (Examiner), 4 January 2005

Dealing with debtors
Graham Holt, 14 October 2005

ACCA 2.6i Exam Tips

ACCA Paper 2.6
Audit & Internal Review
June 2006 Exam Tips

The following list is an idea of the type of questions that may come up in the coming exam. The list highlights areas of the syllabus and how they may well be tested.

Suggested practice questions from the BPP Practice and Revision Kit (2006 edition) are shown after the relevant area. It is also worth reviewing the past exam questions mentioned to give you an idea of how a topic has been examined recently. These are easily available on the ACCA website (www.accaglobal.com/students).

Please note that there was a new examiner in June 2005

Internal audit/ Internal review – Following the new examiner’s only article on how the internal audit department can assist in corporate governance and risk management, this was tested in June 2005. It was also tested with outsourcing in December 2005. Note that in addition to a specific question on internal audit or reviews conducted by internal or external staff, questions could be in the form of a report to management on control weaknesses with recommendations, very similar in substance to that produced by an external auditor (see Systems and Controls below) (P&R kit practice: Q6 Internal Auditors, Q8 Roxy Hotels)
Substantive testing – This will be in the exam, but what will be tested? In December 2005 inventories (stock) were tested. In June 2005 sales and tangible assets were tested. In December 2004 substantive testing of payroll balances was tested (Q4). In June 2004 inventories (stock) (Q3) and payables (creditors) and accruals (Q4) came up. In December 2003 payroll audit was tested (Q2). In June 2003, Inventories (stock) (Q2) and provisions were tested (Q3). In the December 2002 exam, payables (creditors) (Q3) and inventories (stock) were tested (Q5). In June 2002 cash was tested (Q2) and in December 2001 receivables (debtors) were tested (Q4). That would appear to leave non-current (fixed) assets, bank/cash and receivables (debtors) as likely candidates for examination this time round. (P&R kit practice: Q42 Springfield Nurseries, Q49 Goodfoot & Q51 Villawood Computers)
Systems and controls – Again this topic will be included in the exam in some format. In June 2005 Q3 was centred around a complex computer system. The examiner has warned that computers will be expected to feature in scenarios. In December 2004 Q3 risks from a scenario had to be spotted, and controls recommended. In June 2004, they came up in the context of outsourced catering and payroll (Q5). In December 2003 controls over payroll were tested in Q2 and Q1 included controls over business risks in the areas of human resources, procurement and marketing. In June 2003, controls over non-current (fixed) assets were tested (Q6). In the December 2002 exam the sales system was tested (Q2). In June 2002 the cash system was tested (Q2) and in December 2001 Purchases/ capital expenditure were tested (Q3). Any of these could come up again: the purchases/payables and sales/receivables systems looking the most likely. (P&R kit practice: Q36 Cosmo & Q34 Internal Control)
Planning and risk assessment (from a scenario) – risk in one form or another comes up at every sitting. It is one of the key stages of the audit, but can also be examined in the context of a company's business risk as it was in June 2004. In December 2005, an audit planning memorandum, or audit strategy, was required. In June 2005 Q1 was a straightforward question looking for risks from a simple scenario. In December 2004, Q2 was centred around planning and the information you require, and Q1 was about spotting the risks of fraud and error. (P&R kit practice: Q20 EWheels & Q25 Nepco)
Professional ethics – This is a core area not examined at the last 4 sittings. It is still a topical issue with all of the recent corporate collapses bringing the independence and professionalism of their advisors into question. Recently, confidentiality came up in December 2003 (Q6), conflicts of interest in June 2003 (Q3) and objectivity in December 2002 (Q1). Any independence issues would be ripe for examination again at this sitting. (P&R kit practice: Q10 Billington Travel & Q11 Manly).
Audit/ Assurance Reports – This is a very important area of the syllabus, it is deliverable from the end of all assurance engagements. You also need to be aware of the differences between internal audit reports/ external audit reports and other assurance reports such as review reports. It was tested in June 2005 as an unpopular optional question asking for errors in a given audit report. It has been tested in December 2003 (Q3 b and c), June 2003 (Q3c and Q5), June 2002 (Q3b) and December 2001 (Q5), but not in the last few sittings. (P&R kit practice: Q62 Audit Reports, Q65 Cremorne)
Parts of questions – The following topics could form discrete parts of questions at this sitting: fraud, management representations, audit regulation, materiality, e-technology (see article below) so make sure you are up to speed on these areas.

Relevant Articles
The following articles can be found in the Student Accountant magazine (or ACCA website)

The regulatory environment, Alan Lewin, 4 January 2005
Audit risk in a brave new world, Namasiku Liandu, 30 September 2004
Confirmation as audit evidence, Graham Cosserat and Katherine Bagshaw, 28 October 2003
Electronic technology and the auditor, Katherine Bagshaw, 25 June 2003
Service organisations, Katherine Bagshaw, 26 March 2003
Internal audit and review reports, Katherine Bagshaw, 29 January 2003
Corporate governance in the 21st century, Namasiku Liandu, 30 September 2002
The independence of accountants, Namasiku Liandu, 10 June 2002.
The role of internal audit in risk management, Katherine Bagshaw, 1 March 2002.
Technique in auditing questions, Kim Smith, 4 September 2001
Audit and internal review, Katherine Bagshaw, 1 June 2001

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