Slide 4

Recent 2.6 papers up to December 2004 paper were written by Katherine Bagshaw.

The June 2005 paper onwards will be written by the new examiner, Alan Lewin.

The new examiners approach is on the ACCA website (www.accaglobal.com). The overall approach is very similar to that of previous examiners. There are more details in this presentation on the new examiner’s approach.

Slide 5

Key areas of the syllabus, which will be reflected in the 2.6 examination, continue to be:

Professional ethics – as they apply to accountants working in public practice and business.

Understanding the nature of auditing - how auditing is carried out and the audit evidence/types of testing done.

Risk assessment and internal controls – looking for what internal controls should be setup in a company and how those controls will be tested with compliance testing.

Practical application of audit techniques – in other words questions based around short scenarios rather than simply factual questions asking candidates to list or explain theory.

Newer areas – corporate governance – as they appear and are relevance to this syllabus. See the article by the examiner in the January issue of student accountant.

Slide 6

Overall, candidates tend to perform well in the following areas:

Ethical awareness – normally part of a case study –identifying the relevant points from the case study.

Commercial awareness – identifying commercial problems with audits e.g. client non-payment of fees and the overall commercial background to clients e.g. going concern issues.

Using information the question – this can be good (or bad) leading to a good differentiator of whether the candidate has reached a pass standard. In the 2.6 examination, there is an assumption that the candidate will use the scenario to illustrate the points made where this is possible.

Answering all of the questions – 99% of candidates answer all (OK 5) questions.

Time allocation – normally good, although a minority of candidates do find some time pressure on the last question answered.

Slide 7

Areas where candidates could perform better include:

Confidentiality – there can be a lack of precise comment concerning where client details can be disclosed either with or without client permission.

Going concern – in many answers the standard going concern tests are not known.

Management consultancy – in some answers candidates seem to take the view that the auditor is there to provide general advice on how to improve or amend systems. While this is part of the overall work of an auditor, many questions relate to audit testing and there is a need to provide the tests in many questions, not general consultancy advice.

Substantive testing – overall confusion between substantive and compliance testing as well as the conduct of a substantive test – using the comment “check the wages sheet” is not a test. See additional comments on the December 2004 paper in these notes.

Slide 8

December 2004 2.6 examination – main strengths of candidates

Relatively few candidates not attempting all questions – almost all candidates attempted the correct number of questions.

Questions 2a and 3a - both questions had small scenarios attached to them. Most candidates attempted to illustrate points in their answers with examples from the scenario.

Question 3b - this question required 4 recommendations with advantages and disadvantages. This provided a clear answer structure which many candidates followed.

Question 4a - most candidates managed to list 5 or 6 assertions with a brief explanation and therefore obtained high marks.

Slide 9

December 2004 2.6 examination – main reasons why some candidates did not achieve a pass standard.

Not reading the question – resulting in small but significant errors such as explaining audit risk model in 1a rather than explaining how Internal Audit decreased risk.

Substantive testing. Question 4b required substantive testing on wages. Two poor approaches: 1) stating compliance tests 2) emphasis on checking but without sufficient detail to show what was being checked.

The ‘splattergun’ or “write everything I know” approach – writing lots of potentially correct points but with little or no explanation, the main example of this being question 2a.

Very poor presentation – some scripts were very difficult to read due to handwriting and presentation. Candidates are advised to use neat writing where possible and headings to introduce individual points.

Few students very badly prepared or unprepared. It was apparent that auditing was not understood either from rote statement of points or lack of ability to deal with the details provided in the scenario.

Slide 10

The next few slides explain one approach to obtaining a pass standard in the 2.6 examination.

Having the pilot paper, question “E-wheels” would be useful to fully understand the points being made.

This question was scenario based – that there was a short scenario prior to the question requirement to enable the candidate to apply their knowledge on auditing into a specific situation.

Slide 11

E-wheels concerned an Internet auction site for motor vehicles. The main points of the scenario are bullet pointed on this slide.

Slide 12

The requirements for e-wheels, as many other 2.6 questions, were split between knowledge and application questions. This split will continue in the June 2005 paper onwards.

Slide 13

Knowledge questions test whether the candidate has actually read the syllabus and studied the underlying theory of auditing. If the appropriate theory is known, then marks are available for repeating the theory in the examination. Working through a good text book will provide the candidate with 2.6 knowledge.

Slide 14

Other questions require the application of knowledge to the scenario presented in the question. The question is – how to ensure that application of knowledge to the scenario is being clearly shown.

One of the risks in the systems of E-wheels was a poor control environment. A candidate could therefore present the answer of literally “control environment”.

Slide 15

If control environment was the answer, then how many marks would this be worth. Remember that a typical marking scheme has one mark for each point made.

Slide 16

This answer is likely to score zero.

The score of zero may seem harsh – but control environment as a heading is insufficient to show why this is a problem in E-wheels or to show that the candidate actually understood the term or its use.

Slide 17

The answer has now been enhanced to show the effect of a weak control environment. In other words, the candidate has started to show that the issue has been understood.

Again there is the question, how many marks is this comment now worth?

Slide 18

As noted above, this answer the point is relevant to a weak control environment. However, in its current form it could relate to any audit and it therefore not specific to the client in the scenario. Half a mark is therefore reasonable.

Slide 19

In this example, additional detail has been added to link the point to the situation in the scenario. So, how much credit does the candidate get?

Slide 20

In this answer the candidate has identified the risk area and explained why there is a risk using information from the scenario. A full mark has been obtained.

The mark is therefore split:

identifying the relevant point and explaining it.

showing why that point is relevant to the scenario provided in the question.

Slide 21

This slide shows that where candidates provide additional detail, credit will be made.

Slide 22

The same point on building up marks in an answer is illustrated in the next set of slides.

Slide 23

As before identification of the area is not necessary sufficient.

In many clients that first year of an audit does not present any problems – so why is the first year audit a risk in E-wheels? The answer must clearly show this.

Slide 24

Here, the point has been explained, but not linked to the scenario.

Slide 25

In other words the point could apply to any client, limiting the marks awarded.

Slide 27

The point is now clearly relevant to the scenario, allowing the candidate to obtain the full mark.

Slide 28

The next few slides explain the effect of different presentation styles in the 2.6 examination.

Slide 29

The text is deliberately very small, providing an example of a script that is difficult to read. Small handwriting with lots of similar shaped letters is challenging to read.

Slide 30

Providing clear handwriting is useful, but it is not necessarily clear what the point is about.

Slide 31

Including a heading and larger font clearly shows what the point is about (even if the words are not quite logical). From the examiner’s point of view, the candidate has clearly signalled what point is to be made; this makes it much easier to identify relevant comments in the actual comments made.

Slide 32

Other hints for the overall approach to the 2.6 examination.

Read all of the questions first – effectively deciding which one NOT to do in part B.

Do your best questions first – the order of answering questions is irrelevant. Just ensure that the answer book clearly shows the number of the question being attempted at the start of the answer for that question.

Read the question properly! Check in particular for the requirement words and the need to link comments to any scenario.

Do not repeat yourself – providing a brief plan of the points to make and ticking these off as made will help to avoid repetition.

Do not write about just anything to fill in time – think! Either make a valid point or leave some space in the answer book and go onto the next question.

Slide 33
Additional tips for the 2.6 examination.

Practise clear and precise presentation – this helps the examiner read your script as well as showing you can produce a professional communication. Think of how you practice for a driving test – see the Examiner’s article in the May issue of Student Accountant.

Read articles in student accountant.

Practise answering questions in full and then review the answers to ensure that appropriate detail has been included.