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PQ magazine March 2018 /

All the top tips you need for the ACCA March exam sitting as our experts tell it as it is Labour Party’s McDonnell takes aim at the Big 4 accountancy firms Labour shadow chancellor John McDonnell says the large accountancy firms need to take a new ‘Hippocratic Oath’ to maximise the amount of tax their clients pay. Speaking at the World Economic Forum in Davos, McDonnell said the Big 4 were not doing enough to tackle tax avoidance. And he warned public anger over this issue was building. McDonnell felt the firms must change their entire ethos and rediscover their moral purpose. He told the BBC: “I think we need a new Hippocratic oath for accountancy firms, where they sign up to being committed to tackling tax

avoidance themselves, rather than coming up with all these bizarre schemes to enable that to happen.” McDonnell (pictured) described the situation as a cartel, and said the Big 4 are dominating the sector. He ventured: “If they don’t act they will be open to real public opprobrium.” Meanwhile, ICAEW CEO Michael Izza says that there is no need for an accountant’s Hippocratic Oath specifically for tax, as

chartered accountants already ensure that taxpayers pay the right amount of tax due under the law. “In this way we help reduce the tax gap by supporting good tax compliance,” he suggested. Izza emphasised that the ICAEW has “been saying for years that there is no place in our profession for anyone involved in the creation or promotion of artificial, contrived or aggressive tax avoidance schemes”. He applauded McDonnell, however, for wanting to deliver a fairer, more equitable, more prosperous society.


CIMA has dished out a salutory lesson on how not to use social media during exam windows! The institute has stamped down hard on students in a WhatsApp group who shared information about one of its operational level case study exams. More than 30 students from the UK, Sri Lanka, India, Pakistan and South Africa have been disciplined over what went on in the instant messaging group ‘OCS’ prior and during the November 2016 exam. Many students have had their November exam results declared void. There has also been a range of punishments, including reprimands, severe reprimands and even cancellation of students’ registrations. In many cases where the student was reprimanded they have been told to sit and pass the Fundamentals of Ethics, Corporate Governance and Business Law exam, before being permitted to sit any further CIMA exams. The CIMA case study exams take place over a period of five days, so some students will see the questions and unseen material before others attempt the exam. To reduce the risk of disclosure students do not all take exactly the same exam. There are at least five ‘variants’,

which are allocated to students randomly. CIMA acted quickly when it discovered quite a number of the 256 students in the WhatsApp ‘OCS’ group were exchanging instant messages

with each other during the exam window. The institute accessed all the correspondence in the group, which was then highlighted in many of the disciplinary cases. One student, who was severely reprimanded and told to pay £330 in costs, posted: “Ppl plz show some gratitude and post whatever you get.” She also said: “Guys as we don’t hav much time to prepare… come up with details plz”. Then she got more specific: “Guys the first question on risk approach is that on maximin Or risk adverse risk seeking those?” This student’s November exam was voided, but she subsequently passed OCS in May 2017 and this and other exams were allowed to remain valid. It appears some PQs knew that what they were doing wasn’t right. One student asked: “What if he reports to CIMA.” The student was told: “Its not our fault its CIMA’s fault.” They went on: “they [CIMA] leak all the variants within a few day so ya”. One reprimanded student asked just one question: “Anyone for the evening variant?” But that was enough for them to have to go before the disciplinary committee and be punished. In many of the disciplinary cases that followed Continued on page 10

This year I’ve passed 8 exams with OnDemand” Jack Conlan, Kaplan CIMA student

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comment PQ


News 06CIMA exam results Pass rates are holding steady 08CIPFA exam results Latest set of figures a mixed bag 10ACCA exam results Are pass rates on an upward curve? Features, etc 05Mind your Ps&Qs Don’t give up – all the hard work and heartache is worth it; why paper is best; and AAT explains training supplier listing changes 12CIMA syllabus review Noel Tagoe on bringing finance into the digital age 13Social mobility It’s time to change the ‘male, pale and stale’ image of accountancy

14ACCA P5 Be part of the 29%

of exam sitters who actually pass this tough paper

15Cybercrime Don’t become a

25Awards 2018 So who made the

short list for this year’s event? 26ACCA examiners’ reports We put the focus on December’s skills and option papers 27ACCA P3 Why the ‘why’ is the key to passing this tough paper 29Careers Life at the University of Derby; our Book Club review; and the best of social media 30Fun stuff – and our giveaways The columnists Robert Bruce Carillion collapse poses the same old questions 6 Prem Sikka Could Carillion crisis be the catalyst for change? 8 Zoe Robinson Exercise your body and improve your brain 10 Subscribe to PQ magazine It’s FREE – go to page 28 or see ABC July 2016 – June 2017

victim of identity theft


16ICAEW HE conference Are you ready for the fourth industrial revolution?

18Back to basics Top advice on how to deal with payoff tables

20Carillion fall-out What the

FRC’s Stephen Haddrill told Parliament inquisitors 22ACCA tips What our experts reckon will come up in March

24ICAEW spotlight How to best tackle computer-based exams

It pays to know the rules

March 2018

Publisher’s statement: We send a digital issue of the magazine to an additional 6,772 requested readers Free to subscribers who fulfil our terms of control Annual subscription: £35 (£50 overseas)

Hope you ‘enjoyed’ reading our lead story this month! We were genuinely shocked by how many CIMA students were embroiled in the OCS WhatsApp ‘cheating’ disciplinary hearings. Here at PQ we honestly believe a lot of those reprimanded students didn’t realise what they were doing. They had sat the case study and just needed to offload a bit and talk about their exam. Some may say, however, they are lucky CIMA has allowed them to complete their studies. How, for instance, will employers react if they discover their behaviour? Could they be trusted with confidential information? This is something we look at on page 15. What students have to realise is that CIMA is always monitoring social network groups. In fact, we understand it has social media tracking! However, although CIMA does tell students about its T&Cs we do think perhaps they should use plainer language to explain what is and isn’t permissible. ACCA students also have to be careful. The time differences between exam sittings across the globe mean they too fall foul of the rules if they discuss specific questions too early. The Big 4 are also going through the ringer at the moment. Carillion has brought this particularly to the fore in the UK. But it doesn’t end there. PwC has been banned from auditing listed companies in India and KPMG accountants in the US have been charged with ‘stealing the exam’ (see page 8). Perhaps that’s why Labour’s shadow chancellor John McDonnell has called for a ‘Hippocratic Oath’ for accountants. Good luck to everyone who has been shortlisted for the PQ Awards (see page 25 for more). In next month’s issue we’ll have all the results and photos of the winners on what promises to be another great night. Graham Hambly, PQ magazine editor (

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All ACA exams will eventually move from paper to computer-based, so getting to know the new exam format in advance of your exam is crucial to success. &RPSOHWHWKHÆ“YHVWHSVEHORZWRHQVXUH\RXDUHIXOO\ prepared and have everything you need for the day of your exam. 1 Read the exam guidance 2 Watch the exam webinars 3 Use the practice exam software 4 Review the sample exams 5 Read the Instructions to Candidates

Here is a summary of the exams moving to computer in 2018. PROFESSIONAL LEVEL March Business Planning: Taxation Business Strategy and Technology June

Business Planning: Banking Business Planning: Insurance


Corporate Reporting Strategic Business Management

Guidance, support and resources are available to you at

have your say PQ

email Keep on keeping on A recent letter in PQ magazine, headlined ‘Farewell to CIMA’, from a student who was giving up the qualification, struck a chord with me. I understand the sentiment in the letter – it can seem a long and expensive road and at times a lonely one. Yes, life and work does get in the way. I would like to encourage all PQs to keep going. I began CIMA in the 1990s and finally qualified in January 2018 at the spritely age of 47! My story began in the 1990s – three syllabus changes later I now have membership. In the early years of study I was very

keen, but then children and job promotions got in the way. I resigned my membership after my sister-in law died from cancer, but

a few years later I reapplied and CIMA welcomed me back wholeheartedly. Just when I was getting into my stride my second child was diagnosed with autism, studies again took a step back at the Advanced Dip stage. In 2010 the recession was biting and my company went into administration. My studies were not at the forefront of my mind at that point. I made a decision in 2016/17 that I would give CIMA another shot and sat the four strategic papers in 11 months.

So my message to all PQs is this: do you really want to do all the work but not be able to reap the financial rewards your experience and talent deserves? Keep going. The road does sometimes feel long, with many twists and turns along the way. But, as both Warren Buffet and Bill Gates say, keep your focus. You deserve the rewards and recognition for your work. Thanks PQ, I have been reading the magazine it seems like forever, as I was a distance learning student, and your magazine was invaluable. Name and address supplied The editor says: So say all of us – but we do know how tough it is.

Our star letter writer wins a fantastic PQ memory stick! Thanks for the mag Please could you cancel my PQ subscription, as I am no longer studying the ACCA qualification. Unfortunately, I am one of the ACCA statistics who didn’t quite finish the last couple of exams, but I really appreciated receiving PQ magazine every month as it has been an excellent resource. I am also very grateful that you still send a paper copy of the magazine. As someone who spends most of their day looking at a computer screen the last thing I want to do is to read the magazines I subscribe to online as well. I used to read the ACCA’s magazine from cover to cover when it was sent through the post, but as soon as it went online I stopped reading it completely. That probably goes some way to explaining why I didn’t complete the qualification! Anne Hesketh, Essex

all our approved training providers with the opportunity to showcase their services and venues through much improved profiles. Secondary to meeting the needs of our prospects, we also wanted to give providers the opportunity to promote themselves to prospects through the search.

I need

New listing explained I read your article stating that some training providers are worried about changes we at the AAT have made to our ‘Find A Training Provider’ website (‘Finding all AAT tuition providers just got tougher’, PQ, February 2018). I would like to give more information on the changes, and hopefully put some of the

training providers’ fears to rest. We have invested in our new Find a Training Provider service primarily to give current and prospective students the best chance of finding the right training provider to suit their needs. Compared with our previous Find a

Training Provider search, the new one is much easier to use, provides prospects with more accurate information, and allows them to easily see training provider details and to contact them directly. Alongside the benefits for prospects, our new service provides

Our previous service was also commercialised, offering advertising space which unfortunately did not allow for specific targeting (for example, a distance learning provider advert could be displayed when a prospect may be searching for classroom providers). But our new packages are more relevant, which benefits both the training providers and the prospects. It is important to make the point that every provider has the opportunity to better promote their offering but the £10,000 quoted is solely for distance learning providers due to the national coverage of their listing. Andrew Williamson, Director of Marketing and Commercial, AAT

PQ Magazine Unit 3a, Kingfisher Heights, 2 Bramwell Way, Royal Docks, London E16 2GQ | Phone: 020 7216 6444 | Email: Website: | Editor/publisher: Graham Hambly | Advertising manager: Polly Thrasivoulou Associate editor: Adam Riches | Art editor: Tim Parker | Subscriptions: | Contributors: Robert Bruce, Prem Sikka, Zoe Robinson, Tony Kelly, Phil Gammon | Origination and print services by Classified Central Media If you have any problems with delivery, or if you want to change your delivery address, please email

Published by PQ Publishing © PQ Publishing 2018

PQ news

ROBERT BRUCE Carillion raises the same old questions Who said that business isn’t cyclical? Every five years or so someone digs up all the old audit slogans again. Surely it can’t be right that the company pays for the audit? Why isn’t it the shareholders who pay for it? Surely the auditors should have spotted if there was any fraud? How come the auditors have been there 19 years, as they were in the case of Carillion? How come there are only four very large audit firms? The answers to these questions are as old as the hills. Shareholders have no intention of stumping up for the audit. Auditors do spot fraud but it is the directors who should deal with it. Auditors do rotate but the balance between gaining expertise and becoming too pally with the company is a difficult one. There are four large firms, just like there are only a small number of global firms in many other fields, because being financially big enough to do it, and wanting to do it, means that, like entering a bob-sleigh team in the Olympics, it is the few rather than the many who have the ability. The FRC can still, by law laid down by politicians, only discipline accountants. And there you have it. The same questions come around. But if a solution existed it would have been solved by now. At the heart of the anger and indignation about scandals are the politicians. They are immobile when regulators beg for change. And in the case of Carillion, they kept it going when others were waving red lights. Robert Bruce is an award-winning writer on accountancy for The Times

CIMA exam pass rates hold up CIMA’s latest set of pass rates have now hit the streets, and apart from a slight dip in a couple of the case study exams everything seems to be ‘holding steady’. CIMA exam chief Steve Flatman explained that the November case study sittings were the biggest on record, at least since the new syllabus was introduced. He

promised PQ magazine his learning team will be working with regional colleagues to help those who weren’t successful in the November 2017 operational and management case studies to have “a better chance of passing”. He also put the dip in pass rates just down to the different cohort. The first-time OT pass rates show that students and CIMA CASE STUDY AUGUST 2017 EXAM PASS RATES their tutors are Nov 17 Aug 17 May 17 Feb 17 doing better when Operational 49% 53% 47% 45% it comes to P2. It Management 56% 68% 73% 62% now has a firstStrategic 66% 62% 66% 64% time pass rate of 58%. This

CIMA OT PASS RATES First time E1 79% P1 50% F1 73% E2 88% P2 58% F2 55% E3 69% P3 60% F3 62%

Total 75% 45% 69% 86% 51% 51% 65% 54% 55%

Overall 87% 69% 84% 95% 78% 79% 83% 80% 81%

compares with the F2 first-time pass rate of 55%. P1 remains the ‘exam to beat’. It still has a 50% pass rate, the lowest of all the OTs.

Social networks key to better social mobility Breaking down closed professional networks with alternative networks such as Slack and Coworker is key to improving social mobility in accountancy. This is one of many recommendations to come out of the new report, called Purpose and the Profession, from ACCA. The report says the accountancy profession needs to take a more proactive approach to improving social mobility, and this in turn will help transform the talent pool.

The collapse of Carillion put its auditors of nearly 20 years, KPMG, firmly in the spotlight. Now the FRC, the accountancy watchdog, has launched an investigation into the firm’s audit of the construction and services giant. The worry for many commentators is that the outsourcing company liquidation comes only months after being given a clean bill of health. PQ magazine columnist Professor Prem Sikka told The Times newspaper: “The accounts for 2016 were signed off on March 1, 2017, yet by July the company was in serious trouble. The auditor is

Another driver of change would be the introduction of more flexible learning routes into the profession. And, if we are to move forward on this agenda, the ACCA report says the bias in the recruitment process also has to be addressed. One way of doing this is by collecting data on social diversity and using the results to drive forward change. Too many young people are also still unaware of the benefits of an accountancy career.

KPMG in the spotlight over its Carillion audit

supposed to satisfy itself that a company is a going concern. It must look at cashflow forecasts and what kind of margin of error is built in. It is very strange that within three to four months the chief executive walked and the forecast was erroneous.” Carillion issued three profit warnings last year, the first in July. CEO Richard Howson resigned, and

the company hired EY to carry out a review of its finances. It has been reported that the company quadrupled its borrowing from 2010 to 2013 and ran up debts of £900m and a pension deficit of £600m. The liquidators are PwC. • Read what FRC’s Stephen Haddrill had to say to Parliament about the collapse of Carillion, page 20.

falling debris. In all, 75 people were injured. The students were from Palembang, Sumatra.

wonder why he became a limited company. Carr did tell the great Ken Dodd joke. Dodd said he didn’t need to pay tax because it’s the Inland Revenue and he lives by the sea! He got his way…

In brief CIPFA seeks E&T chief CIPFA is looking for a director of education and membership. The new director will be responsible for driving the growth of new students and members both in the UK and international markets. The job ad says the salary will be “competitive based on experience”, and although an accountancy qualification is desirable it’s not essential. Accountancy students hurt Accountancy students on a 6

visit to the Jakarta Stock Exchange were among scores of people injured when the building collapsed. The students were standing on a mezzanine floor when it just ‘fell down’. Some students managed to leap to safety, although others walking below were injured and trapped under the

Jimmy Carr in Room 101 Comedian Jimmy Carr recently appeared on BBC’s Room 101 show, and much to the amazement of host Frank Skinner said he wanted to put tax loopholes into the room! He said the Paradise Papers had shown “everyone is doing it, even the Queen and she’s on money!” He said the rules really should be clearer, but he did

Annual Bumper Quiz winners Congratulations to Adam Harwood, Ryan Anderson, Becky Edwards, Thomas O’Neill and Estelle Green, our quiz winners this time around. Each wins a fantastic Google Mini. So how did you do? All the answers are on page 16 PQ Magazine March 2018

The ACCA Professional Level is changing in 2018 Does it affect you? The ACCA is redesigning the Professional Level qualification to give students the skills required of modern accountants. Through two new papers, Strategic Business Leader and Strategic Business Reporting, the changes aim to help students handle real challenges within the workplace. If you are currently sitting the P1 or P2 papers these developments could affect you. June 2018 will be the last chance to sit the papers under the existing structure. Read our expert advice on these changes and how it could affect you.

For more information   03331 224 093

PQ news

PREM SIKKA Could Carillion be the catalyst for change? Carillion is the latest episode to raise uncomfortable questions about auditors. Carillion was assessed to be a going concern by KPMG on 1 March 2017 for an audit fee of £1.4m and tax advice for another £200,000. But within four months it wasn’t. On 10 July 2017, Carillion wrote-down the value of its contracts by £845m. The knock-on effect of the write-down was to reduce cash flow forecast by £100m–£150m. This write-down wiped outs its equity of £730m. Another £200m write-down was announced in September 2017. Carillion had deep-seated financial problems. It was operating on waferthin margins of between 2%-5% and had little capacity to absorb contract overruns. During 2012-2016, it paid out £394m in dividends, but had pension liability of over £800m. Its 2016 balance sheet showed long-term debts of £1.5bn. Out of total noncurrent assets of £2,163m, £1,571m related to goodwill, an asset of dubious value for a distressed business and unlikely to be accepted as collateral by lenders. So how did KPMG manage to conclude that Carillion was a going concern? The profession’s usual response is to mediate the crisis by wheeling out the expectations gap and blame the public for expecting auditors to deliver robust audits. Meanwhile, auditors continue to play Russian roulette with the knowledge that they enjoy too many liability shields. Audit reforms are long overdue and the public is entitled to expect greater value for money from auditors. Prem Sikka is Emer itus Professor of Accounting at the University of Essex

CIPFA’s mixed bag of results Company Financial Reporting was the ‘stand out’ CIPFA paper in December 2017. The pass rate has always been ‘up and down’ in recent times, but for this sitting it was a lot more down – at 46.4%. By comparison, June sitters managed an 82.3% pass rate. Candidates struggled with the Audit and Assurance paper this time too – the pass rate slumped to 65.2%. In June, the paper had a 94.3% pass rate, and it was 82% and 91% in the previous two sittings. Meanwhile, the Corporate Governance and Law paper moved up to impressive 92%, and 89% passed the Management Accounting paper. Another good news story from December is the jump in the PSFR

paper. In June, the pass rate fell to 40.5%. CIPFA was quick to put extra resources in place and this has meant the pass rate has shot up to

Dec 17

Jun 17

Nov 16

64.3% 89.2% 46.4% 65.2%

69.0%% 86.7% 82.3% 94.3%

80% 94.9% 63.2% 82.3%

64.8% 85.4% 92.3% 85.7% 84.4% 60%

40.5% 88.6% 89.5% 88.6% 81.3% 65.9%

61.4% 75.4% 84.5% 58.7% 81.9% 69.1%

72.4% 82.2%

69.2% 79.4%

66.4% 73%

64.8%. The Strategic final level papers also had excellent pass rates in December. The case study rates impressed at 82.2%.

Flesh and blood beats HMRC computer A judge has warned HMRC that a tax official rather than a computer programme should make assessments for any fines. The surprise judgement comes in the case of Khan Properties Limited, and there is real concern that this ruling could lead to a surge in successful appeals, costing the public purse millions of pounds in lost revenue. Khan Properties appealed against a £100 late company tax return

fine. Judge Richard Thomas said: “In my view the requirement… is for a flesh-and-blood human being who is an officer of HMRC to make the assessment and decide to impose the penalty and give instructions, which may then be executed by a computer.” RSM’s George Bull said that the general view was that automatic fines were valid, so the decision has taken the tax community by surprise.

If you are planning to sit P1 and/or P3 in March or June this year, then you need to sign up quick to ACCA’s FREE webinars. The new Strategic Leader exam replaces P1 and P3 come September 2018, and there are only two more exam sessions before the change. ACCA is strongly encouraging anyone planning to sit P1 and/or P3 to access the free webinar

Free ACCA P1 and P3 webinars

PwC’s India ban PwC’s Indian unit has been banned from auditing listed companies for two years. The ban, by the Indian Market Regulator, surrounds PwC’s audit of Satyam Computers, where earnings and assets were inflated for many years. The collapse of Satyam Computers in 2009 cost shareholders more than $2bn. PwC has said it will appeal the decision, although the ban is due to come into effect on 31 March. Deloitte targets legal services Deloitte wants to convert part of its UK practice into a law firm. Senior partners at the London office have confirmed that they are in talks with 8

CIPFA JUNE 2017 RESULTS Professional Certificate Financial Accounting Management Accounting Company Financial Reporting Audit & Assurance Professional Diploma Public Service Financial Reporting Taxation Corporate Governance & Law Business & Change Management Strategic & Policy Development Financial Management Strategic Strategic Public Finance Strategic Case Study

resources on offer. You can join Dr Constatine Kiritsis for his live and interactive mini revision series on: • P1 – two-part revision series, 20 and 21 February, noon–2pm GMT. • P3 – two-part revision series, 26 & 27 February, noon–2pm GMT. Dr Kiritsis has run previous P1

the Solicitors Regulation Authority over an application for a licence. Deloitte is the last of the Big four firms to enter what is considered to be an increasingly competitive market. PwC, EY and KPMG all won their licences in 2014. ‘Stealing the exam’ Six US accountants have now been charged by the US Securities and Exchange Commission over alleged participation in a scheme to misappropriate and use confidential information on the Public Accounting Oversight Board’s (PCAOB) planned inspections of KPMG. The SEC says that unauthorised disclosures enabled KMPG partners to analyse and revise audit work papers in an effort to avoid negative findings by the PCAOB. At the

and P3 revision webinars and these are available on demand. The series advises students on how to answer questions effectively and covers the ‘Do’s’ and ‘Don’ts’ when answering questions. There are lots more resources available for PQs – go to the ACCA website to sign up.

time, nearly 50% of KPMG’s inspected audits were deemed to be ‘deficient’. Three former PCAOB officials, Brian Sweet, Cynthia Holder, and Jeffrey Wada have all been charged, along with three former KPMG accountants David Middendorf, Thomas Whittle and David Britt. The SEC’s claims the misconduct began in 2015 and went on until February 2017. EY Parentaship EY has launched Parentaship, a parental advice campaign to help families understand how modern apprenticeships can offer a valuable route into a professional career. The hope is that it can help to overcome misgivings about apprenticeships being a real alternative to university that many parents still have. PQ Magazine March 2018

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PQ news

ZOE ROBINSON Exercise your body and improve your brain Like millions of people around the world, I’m sure many of you pledged to get more exercise in 2018. It’s no surprise – once the clocks go back, dark nights make exercising more difficult and, let’s face it, as soon as we get to December we’re all too busy eating and drinking to worry too much about our fitness. January is therefore an ideal point to kickstart a new you. But I wonder how many of you have kept your resolve? In particular, if you’ve started studying for exams it’s hard to find the time and motivation to hit the gym or go out for that jog. However, neuroscientific research has identified many benefits of exercise, proving that the exact time you should ramp up your exercise is when you’re trying to learn new things. To start with, studies have shown that exercise improves our ability to focus attention. Brain functions are improved, allowing you to not only pay more attention but also to shift it around from topic to topic. Exercise combats stress. It releases chemicals such as serotonin and dopamine that are often depleted through anxiety or depression. And the clincher – it has been demonstrated that your memory can even improve with increased levels of exercise! Yes, exercise actually helps you grow new and maintain existing brain cells, helping you process new thoughts and remember things for longer. So if you’ve already given up on those New Year resolutions you might want to think again! Zoe Robinson is Learning and Programmes Director at Kaplan Financial

The ACCA says the December 2017 pass rates were ‘impressive’, and who are we to disagree! True, the P3 pass rate was a healthy 56%, and even P7 had a success rate of 35% this time around (that’s high!). The P6 advanced tax paper pass rate also rose to 36%.

Are ACCA pass rates on the up?

However, the P5 pass rate dropped to 29%, when compared with the September THE ACCA DECEMBER 2017 PASS RATES Dec 17 Dec 16 pass rates, and the P3 pass rate fell to 33%. F1 Accounting in Business 77% 82% Sitters had said P4, F2 Management Accounting 65% 63% F3 and P6 were the F3 Financial Accounting 71% 71% tough tests this time F4 Corp & Bus Law 77% 82% around, but this wasn’t F5 Performance Management 42% 40% particularly reflected in F6 Taxation 51% 52% the pass rates. F7 Financial Reporting 49% 49% After taking F4 F8 Audit & Assurance 40% 40% (which has a pass rate F9 Financial Management 48% 45% of 77%) out of the P1 Governance, risk, ethics 51% 49% equation, it continues P2 Corporate Reporting 52% 51% to be F8 that has the P3 Business Analysis 56% 49% lowest Skills pass rate, P4 Adv Financial Management 33% 33% at 40%. P5 Adv Performance Management 29% 30% F5 is never far

Continued from page 1 students were reminded that they are bound by the Code of Ethics at all times. Students also agree to the exam terms and conditions as part of the process of scheduling an exam. Those exam conditions state: “The exam is CIMA confidential and is protected by law. It is made available to you the candidate, solely for the purpose of being assessed by CIMA. You are expressly prohibited from disclosing, publishing, reproducing

behind, either. This time the pass rate was 42%. ACCA’s executive director, Alan Hatfield, emphasised: “We’re delighted with the improvement in the many pass rates at December 2017 sitting.” The Essential exam pass rates were strong, he explained, especially P3. He pointed out that the ACCA is carrying out extensive ‘Train the Trainer’ sessions across the world in preparation for the Strategic Business Leader study exam being introduced later this year. Some 139,039 students sat exams in December, an average of 1.37 papers each.

Sharing is dangerous or transmitting the assessment, in whole or in part, in form or by any means, written, electronic or mechanical, for any purpose without the prior written permission of CIMA.” It also specifically says you may not… “share or discuss the question or answers seen in your exam with other candidates”. Interestingly, the disciplinary committee said that students

asking other sitters to share or discuss questions and answers are not a direct breach of the exam conditions, but it is a direct breach for other candidates to answer the questions. However, by inciting other students to break the conditions candidates were seeking an unfair advantage in taking the exam and breaking the Code of Ethics big time.

Get yourself a new career – become a money mule! Santander recently conducted a ‘fake job advert’ experiment to discover how many of us would apply for a job as a money mule! In the advert a company called Money Spark was offering prospective employees a role as a Financial Transaction Control Analyst. This exciting technology

start-up company was looking for responsible, hard-working people who could “dedicate 3-5 hours per day to work on administrative and financial support activities across the wider financial and cost teams”. Details of the role included “receiving and processing of incoming cash funds” and

“transferring of funds to accounts indicated by our manager”. A staggering 32% of Brits said they would apply for the job that would have helped criminals to launder money! And 7% said they would still apply for the job even after they were told it involved criminal activity.

ICAEW PQs must ‘mind UK GAAP’ Business Strategy remains the ‘easiest’ paper to pass for Professional Level ICAEW PQs. The December pass rates, just out, show that 89% of sitters passed the exam at their first attempt. And the hardest paper for firsttimers? That would be Financial Accounting & Reporting (UK GAAP), with a pass rate of 67.5%. The stats continue to show that students sitting two papers have the best chance of passing all the papers they sit. Some 70.1% of 10

December sitters who opted to sit two papers passed both. This compares with the 66.9% of ACA

trainees who passed the one paper they sat. One PQ sat four papers and managed to fail them all. In total, 5,880 PQs ICAEW PROFESSIONAL LEVEL RESULTS Dec 17 Sep 17 sat 9,737 papers in Business Strategy 89.0% 90.5% the December session – 1.65 per PQ. Business Planning: Banking 72.3% 74.6% Business Planning: Insurance 77.5% 64.5% PwC students Business Planning: Tax 79.8% 77.1% picked up the first five Financial Management 77.3% 65.8% places in the FA & Reporting – UK GAAP 67.5% 71.3% international order of FA & Reporting – IFRS 74.8% 80.3% merit, and top student Audit & Assurance 73.2% 86.1% this time around for Tax 84.9% 73.5% them was Mihir Patel. PQ Magazine March 2018


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PQ CIMA syllabus review

Bringing finance into the digital age PQ magazine sits down for one of its regular chats with the man in charge of the ongoing CIMA syllabus review, Noel Tagoe


r Noel Tagoe is in no doubt about the task ahead. His job is to launch a new CIMA syllabus this summer, which among other things must bring finance into the digital age. He was keen to stress he wasn’t calling it digital finance. Like Deloitte, he prefers to say it that way. Tagoe emphasised: “I am not digital, I am a human being who is navigating and thriving in the digital age!” Currently, though, he is putting the final touches to the competency framework. This will outline what a financial professional needs to be able to ‘do’ from cradle to grave. And, he says, this will be “nothing revolutionary”. We aren’t looking at a root-and-branch change here, Tagoe confirmed. What these competences should do though is ensure the syllabus is totally in tune with the world students operate in both today and tomorrow. Tagoe stressed employability is key (he said it quite a lot) and he promised he won’t be leaving students high and dry. What is not in doubt is management

accountants today need to understand and embrace technology. There is no avoiding it and Tagoe believes it will create great opportunities for finance people and what they do. If CIMA can give them the right skills they will be able to do the things CEOs want – to enable, shape and tell the story. He was quick to stress that accountants don’t need to collect the data or even process it. What they will need to do is ensure the right data is collected, and increasingly this will be nonfinancial data, too. Tagoe stressed that it doesn’t mean accountants will be leaving the financial data behind, they just need to create a more joined up picture for businesses. This neatly led him onto another area that is high on his agenda – value and trust. There is a huge move from a tangible to intangible world. He knows he needs to answer the question: what do we do with that? Trust is a major part of all this. A lack of trust can be a barrier to entry into markets, and if you have it it means you can be given a bit of leeway when disruptors appear. This all means that Tagoe will want CIMA students to think differently right from the start. They will be asked to think about digital enterprises and digital consumption. PQs also need to understand intangible value and how they can generate future value. PQ • Read more from Tagoe in the coming months.

Good luck for your upcoming March exams! Do you need more support for your exams? Prepare to pass with the ACCA Exam Club Hub, where you can download exam-specific resources, find information about tuition providers, get practical advice from ACCA staff and members as well as view live and on-demand webinars. Register now:


PQ Magazine March 2018

social mobility PQ


ou would have all seen February’s edition of PQ magazine with two conspicuous words jumping out from the front page – ‘Social mobility’. It is certainly the buzzword of the moment, with government, professions and educational institutions being asked to do more to create an open access environment for people of all backgrounds. But what exactly does it mean? According to the Collins English Dictionary it is “a person’s ability to move to a different social class, usually from a lower to a higher social class”. At ACCA, ‘social mobility’ isn’t just a catchphrase. For the past 114 years we have been committed to opening up routes to the profession that were not previously available. In 1904, ACCA was founded as a result of the ‘closed shop’ attitude to the accountancy profession. It is no coincidence that our first core value is ‘opportunity’, which falls right at the heart of our organisation. Diversity, innovation, integrity and accountability make up the remaining four values, which signify a dedication to creating a strong, fair society for all. ACCA recently conducted some research around social mobility and the profession. Purpose and the profession, a global report which surveyed almost 14,000 respondents (53% ACCA PQs, the rest ACCA affiliates and members), found that the potential talent pool of professional accountants is changing. However, despite this change, the profession as a whole has a long way to go in raising the standard to continue to attract and support a diverse global talent pool through their careers.

Aspirational and accessible The survey also found 52% of respondents came from backgrounds where neither parent nor guardian had gone to university. An overwhelming number of respondents felt that social mobility really did matter, with 92% of those asked believing individuals should have access to career opportunities regardless of their social background. The report highlighted a great area of optimism around social mobility, with accountancy remaining an aspirational and accessible route for many in developed and developing nations. What was also really positive to see was that 74% felt ACCA was more accessible than other professional accountancy qualifications. ACCA’s qualification does not require a university degree and its flexibility extends to multiple annual exam sittings, to allow learners to choose an exam time that fits with their commitments. The online learning programme ACCA-X also provides free and affordable on-demand courses. designed to help individuals gain financial literacy skills. However, it is clear there is still some PQ Magazine March 2018

Accountancy must lead the way when it comes to equality of opportunity The UK’s accountancy profession needs to change so it reflects the society it services – and a new ACCA survey highlights this point, says Maggie McGhee

ground to cover in making accountancy, as a whole, even more approachable. Similar tones were set by a piece of research conducted by the Bridge Group, cited in last month’s PQ. It found that trainee accountants were more likely to be successful in their applications if they were privately educated. The study also said firms should not solely rely on Alevels and online-tests being sole indicators of future professional performance. ‘Male, pale and stale’ Is everyone familiar with the accountancy profession and what it does? ACCA’s report highlights the importance of the profession working harder to engage young people with the opportunities and benefits it offers. Across the board, we

need to instil the confidence in individuals that the world of accountancy welcomes those from diverse backgrounds and different academic levels. ACCA research also revealed that only 13% of respondents were influenced by a career advisor or by a school or university teacher. This low number proves there is a large gap to fill in the profession being proactively offered to students. Commenting on the research, ACCA’s director of professional insights, Maggie McGhee, said: “The perception that ‘this is not for me’ is a dangerous stigma to be attached to a profession. Many still see the profession as middle aged, white and male… while this is no longer true, it is likely that only those with prior knowledge will appreciate the diversity of the profession and flexibility of access.” It is evident the social mobility puzzle will not be pieced together overnight, but until then we all have a part to play in breaking down barriers and opening up the doors to talent irrespective of background. The accountancy profession needs to recognise the pivotal role it has in facilitating a holistic approach between business, education and government. Encouraging better data collection and interpretation on social mobility will enable an intervention which could make a difference and highlight where existing initiatives are failing. As the profession continues to evolve within this new digital era it will open up opportunities to those with a different skillset and interest – those who may not have previously considered accountancy as a potential career. PQ • Maggie McGhee is ACCA’s director of professional insights 13


How to be part of the 29% Mustafa Muchhala offers some sound advice on how to pass the Advance Performance Management paper


want to share with you a typical email I received from a student last October: “Hello Mustafa, I was just wondering whether you could give me any tips on retaking P5 this December. What steps would you suggest I take to ensure I pass?” P5 continues to see a very low pass rate (29% in December 2017). The examiner’s comments repeatedly spell out the reasons why students are not crossing the line, but it seems these comments are being ignored. So how did I respond to this student? Well, I advised them to: 1. Start by reviewing the P5 syllabus to ensure that your knowledge is up to speed. Examiner’s comments have repeatedly mentioned that rote learning of P5 knowledge and then regurgitating it in the exam will score no more than 20-30% of the marks. As you know, this is not sufficient to pass the question – so that showing you understand the concepts is more important than rote learning. 2. Revising the assumed knowledge from F5 and F9 is critical to exam success. The examiner continually examines these and gets very annoyed when students can’t do basic calculations, which is understandable. Read the article ‘Bringing forward F5 knowledge and skills

into P5’ from the ACCA website. 3. Question practice should take up over 50% of your study time. You should practise as many past exams as you possibly can. Plan your answers, even if you don’t write out all of them in full, before reviewing the solution. Use the P-E-A approach (Point, Explain and Apply) to each scenario. Do not fall into the trap of auditing the answers: in the exam this will not be a

relevant skill as you’ll have no answer to turn to. 4. Get some of your full written answers marked by your tutor, or by someone who is taking or has passed P5. Get constructive feedback and improve your answers. 5. Finally, attempt a mock exam to time, and get it marked. Feedback will help you work on your time management and exam technique. This final step is a must-do rehearsal before the actual exam. Ensure you read the examiner’s comments to the previous exams and so avoid the mistakes that others have made. If you practice enough questions, and focus on understanding and analysis, success will be yours. Best of luck! I was pleasantly surprised when I received an email after the December results: “Hi Mustafa, I passed with 56 marks. This was my fourth attempt (45, 49, 39 marks in previous attempts).Your tips really helped to obtain those extra brownie point marks to get me over the finishing line. Many thanks for all your help.” To pass you must learn from your mistakes. We all make them. The key is not to let them get you down, but to learn and grow from them. And then not to repeat them! PQ • Mustafa Muchhala is a freelance professional tutor and writer

Our qualification is evolving. Get ready for the first sitting of Strategic Business Leader (SBL), going live in September 2018. SBL will give you the opportunity to: • Carry out an innovative case study exam. • Respond to real world challenges accountants of the future will face. • Study a syllabus that incorporates essential professional capabilities: leadership, governance, strategy, risk, technology, organisational control, finance and innovation/change management. • Demonstrate your communication, commercial acumen, analysis, scepticism and evaluation.

Find out more:


PQ Magazine March 2018

cybercrime PQ

Corporate identity theft is on the increase so it falls on us all to be vigilant. The case study here outlines a fictional scenario involving identity theft and offers some talking points and courses of action The scenario Accounting firm employee K has recently completed her training contract and is now being contacted by recruitment consultants. One of these calls outlines a job that sounds too good to be true. The discussion quickly turns to K’s client portfolio and the structure of her firm. The headhunter seems to know (and be on good terms with) a number of K’s colleagues. He promises to call back soon with more details of this fantastic opportunity. In the pub that evening a member of the finance department (who received a recruitment call similar to K’s) can be heard bragging to colleagues about a great new career opportunity that is coming his way – that is when he’s not complaining noisily about the firm’s ‘woefully inadequate’ IT systems. Not long after, some of the firm’s clients start to receive correspondence from someone purporting to be K telling them that certain transactions on which K’s firm has been advising now need to go ahead quickly and that they must make the necessary bank transfers urgently. Some clients have already made their transfers and are now contacting the firm to check on progress. It soon emerges that the firm’s systems, including its customer ledger information, have been hacked over the weekend. The transfers made by clients were in fact diverted into a fake client money account set up by the criminals. The money has now disappeared. Discussion points 1. In what ways, if any, was this crime ‘enabled’ either by the firm or individual employees? K and her colleague in finance are not only victims. Having been convinced by a fraudster to reveal sensitive information, they have become

Don’t fall prey to the

identity thieves

unwitting enablers. Without the information they provided the criminal plan may well have failed. Any firm could find itself in a situation like this purely because of simple lapses in IT or information security and a failure to monitor client activity. Many cyberattacks are launched at the weekend in the knowledge that there will be no one around to notice the untoward activity. By Monday morning it is often too late. 2. Which fundamental ethical principle is K likely to have breached? Confidentiality. 3. How would you stop this happening again? Many cybercrimes include an element of old-fashioned, one-to-one deception (now called ‘social engineering’). Professional accountants have skills which are often in high demand and they can receive many, sometimes flattering, calls from recruitment consultants. Of course

employers and clients alike are owed a duty of confidentiality. But the sharing of detailed information about the firm and the affairs of its clients, as happened here, can easily become much more than a breach of confidentiality by actively enabling a fraud or cyber-crime that might otherwise have fallen at the first hurdle. All employees should receive regular training on the ethical requirements of their role, the nature of the fraud risks that threaten the firm and its clients, and what they can do to help prevent these kinds of crime. They should also be actively encouraged to think carefully about what information – especially work information – they share on social media, and to question the professionalism of their motives for doing so. Meanwhile, the firm should: • Ensure that documents carrying sensitive information are destroyed securely. • Monitor online references to itself – this can help identify imposters. • Carry out a systems health-check – which could include tasking a consultant to attempt unauthorised entry to critical systems – and get professional advice on data security. • Educate staff on IT security and how to spot cybercrime red flags. • Follow the latest expert guidance (from GCHQ) on secure passwords – at least eight characters long, no dictionary words, change them only after a suspected or actual security breach. • Ensure that firewall and anti-virus software is up-to-date. • Use data encryption software in correspondence. • Make special efforts to protect access to applications like searchable databases – these can give criminals a way in. • Remember: weak controls make crime possible. PQ • Thanks to the CCAB for this article

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PQ ICAEW HE conference

Ready for the fourth industrial revolution?

PQ dropped into the ICAEW HE conference to hear how the future might look for today’s trainee accountants


he factory of the future will have just one human and one dog in it. The human is there to feed the dog, and the dog is there to stop the human interfering with the machinery! That’s the tongue-in-cheek story EY’s managing partner for Talent, Maggie Stillwell, told when opening her talk on the future relationship between robots and accountants. Stillwell revealed that the robots are already ‘plugged in’ at her firm. It has around 400 robots for clients and 270 working for the firm’s employees. That’s nearly 700 up and running. Using tools such as its Capital Allowance Asset Review Tool (Caart) makes PQs’ lives very different today. A job that used to take 15 hours to do now takes three seconds. More tools like this are coming, too! Currently, EY takes on 1,600 students

Here’s the answers to our annual quiz – how many did you get right? 1) 2) 3) 4) 5) 6) 7) 8) 9) 16

Huddersfield Town Mexico Lebanon Joe Root Corry Evans It was a draw (1-1) Mark Samson Houston Astros Manchester City in the

a year, and Stillwell admitted people are the firm’s biggest cost and greatest asset. Embracing AI will, she said, mean that EY’s full-time numbers won’t grow as fast as they have in the past 15 years (it currently has 65,000 FTEs). The type of employees EY needs is also changing (see below). The upside to all this could be a downward pressure on the average age of partners. It was suggested last year that it could fall to as low as 27-30. Stillwell said that currently 40 is more likely to be the age of becoming a partner, but she wasn’t ruling out that dropping dramatically. She said there were five key personas that describe the talent EY need today and tomorrow. So, what are one of these five are you? Side Hustlers: Portfolio workers who split their time working for EY with another job, project or learning experience – whether that’s to upskill, start another career or create their own business. Hummingbirds: Workers with specialist skills and experience who have earned the freedom to choose their ‘gigs’ and see companies as partners/vendors,

2011-12 season 10) Men’s 4x100 metres relay team 11) Donald Trump 12) Gavin Williamson 13) Harvey 14) Bruce Forsyth 15) Colin Kaepernick 16) Fake news 17) Chase Carey 18) Belgium 19) Bono 20) Cassini Huygens 21) Army Officer 22) Moonlight

rather than employers. Climbers: Permanent people who want rapid career progression and expect to put in the hard graft to get there. However, they still want greater control over where and when they work. Balance seekers: Permanent people of all ages who wants the benefits of a permanent job but might be looking to reduce their hours or gain more control over when, where and how they work. Rotators: Experienced employees who like to continually take on new projects and challenges to keep work interesting, but don’t aspire to become senior leaders. PQ

Virtual reality in the classroom

Swansea University is leading the way in using virtual reality to help its accountancy students learn. Tutor Terry Filer teamed up with colleague Marc Holmes to create a virtual reality world to help taxation students learn about capital allowances. Using Google cardboard headsets at just £5 a pop made it all very affordable. Students simply has to download the app on their phone and they were away in a virtual world. Students said they wanted to see more of it, although one said “it makes me feel dizzy”! Another student felt VR helps relieve students from boring study and enriches their experience – strong praise indeed. • We’ll have more on this story in next month’s PQ

Bumper Quiz: the answers 23) Liam Gallagher 24) The Tick 25) Aston Merrygold and partner Janette Manrara 26) George Clooney 27) Robert Catesby 28) One Direction 29) Jodie Whittaker 30) Chris Hughes 31) Carousel 32) A3

33) ‘Women and children first’ 34) 36 35) Saint Matthew, he started life as a tax collector 36) Italian 37) 2007 38) Isaac Asimov 39) Cynophobia 40) Y 41) Hansard

42) 43) 44) 45) 46) 47) 48) 49) 50) 51) 52)

Hydrogen Kazakhstan Sumatra, Indonesia Sir Frank Whittle The mantle The Nile A Terabyte The moon Madagascar Venus Keratin

PQ Magazine March 2018

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PQ payoff tables

Live life to the max In the latest of our occasional Back to Basics series, AVADO lecturer Tom Bulman offers advice on how to deal with payoff tables


usiness risk is the possibility that a business may have lower than expected profits, or may even make a loss. Where there is a range of possible outcomes and a range of possible responses, the business may use payoff tables to represent the different options and select the most appropriate one. It is worth noting that business leaders will interpret payoff tables according to their own risk attitude: • Risk seeker – they seek the maximum return regardless. • Risk neutral – they will consider the most likely outcome. • Risk averse – they are concerned about the worst possible outcome. In using payoff tables, it is important to understand the three types of decision criteria: 1. Maximax – want the highest return under the best-case scenario. 2. Maximin – want the highest return under the worst-case scenario. 3. Minimax regret – want the option with the lowest maximum regret.

Example Let’s say we are running an ice cream business and we know that sales vary according to the weather. The hotter it is, the more sales we make and vice versa. We need to decide how many litres of ice cream to buy and we vary the size of the order according to the different weather conditions. If it’s hot we want to have lots of ice cream in stock to make lots of sales, and therefore increase profits. But if it’s cold we don’t want to end up with lots of unsold ice cream. Accordingly, we can draw up a payoff table showing the results of the different options as follows: TABLE 1 COLD WARM HOT SMALL ORDER $250 $200 $150 MEDIUM ORDER $200 $500 $300 LARGE ORDER $100 $300 $750 It is worth pausing for a moment to consider the decision we are making is about what size of order to place and not what the weather will be. In answering these questions remember to evaluate the options for each decision. For example, a small order might result in $250, $200 or $150 depending on the weather. Take care that you understand which way you need to “read” the table before trying to answer the question. We can now use this table to help us make decisions under the different types of criteria. 1. Maximax i.e. MAXImise the MAXimum payoff Step 1: Select the MAXIMUM payoff for each of the decision options. This is often the trickiest part but the key is to focus on the decision that the business is trying to make. Here the business wants to know what size of order to place so we need to select the best answer for each of those options: TABLE 2 COLD WARM HOT SMALL ORDER $250 $200 $150 MEDIUM ORDER $200 $500 $300 LARGE ORDER $100 $300 $750 Starting with small orders, we read across the table and find the best result under each of the weather conditions. The options are Cold $250, Warm $200 or Hot $150. We can see that with a small order the best result is $250 (when the weather is cold). Repeating this process for the other two possible decisions, if we place a medium order, the best result is $500 (when the weather is warm) and if we are considering a large order the best outcome is $750 (when the weather is hot). 18

Step 2: From those three outcomes, now select the decision that MAXIMISES the payoff. Clearly $750 is the best result and therefore the business will place a large order. This follows the principle where the risk seeker will seek the maximum return regardless – in this case, regardless of the weather. 2. Maximin i.e. MAXImise the MINimum payoff Using the same payoff table as before, this time we want the highest return under the worst-case scenario. Step 1: Select the MINIMUM payoff for each decision criteria. TABLE 3 COLD WARM HOT SMALL ORDER $250 $200 $150 MEDIUM ORDER $200 $500 $300 LARGE ORDER $100 $300 $750 Repeating the same process as before we can look at the results for small orders: Cold $250, Warm $200 or Hot $150. We want to minimum (worst) of those and that is $150 (hot). For medium orders the worst outcome is $200 (cold) and for large orders the worst outcome is $100 (also cold) Step 2: From those, select the decision criteria that MAXIMISES the payoff i.e. medium. Remember, we wanted the highest return under the worstcase scenario. 3. Minimax regret i.e. MINImise the MAXimum REGRET Step 1: Construct a table of REGRETs. a) Find the optimal decision for each of the order criteria (as per Table 1). b) Calculate the regret for each decision by deducting each of the possible outcomes from those optimal decisions. For example, the regret for placing a small order when the weather is cold is $250 – $250 = $0, whilst the regret for placing a medium order when the weather is cold is $250 – $200 = $50, and so on. TABLE 4 COLD WARM HOT SMALL ORDER $0 $300 $600 MEDIUM ORDER $50 $0 $450 LARGE ORDER $150 $200 $0 Step 2: Select the MAXIMUM regret for each decision criteria. For small orders, this is $600 (hot), for medium orders it is $450 (hot) and for large order it is $200 (warm). Step 3: From those, select the decision criteria that MINIMISES the regret and this is $200, so we should place a large order. As always, understanding the theory is an important first step. You should then go on and test your knowledge by doing plenty of practice questions. PQ • Tom Bulman is an ACCA F5 tutor for AVADO PQ Magazine March 2018

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PQ Carillion collapse

The FRC’s Stephen Haddrill recently answered questions from the Business, Energy and Industrial Strategy and Works and Pensions committees. Here are extracts of the best bits… Chair: Thank you very much for coming to give evidence on the collapse of Carillion to our two Select Committees this morning. I will start by asking you to provide us briefly with an update of your investigations into Carillion. Stephen Haddrill (SH): We announced yesterday [29 January 2018] that we will have a formal investigation into the audit by KPMG of Carillion and we are looking at the three years from 2014 to the present day. We have said that the scope of the investigation will include the going concern matter, pensions matter and how the contracts were being assessed, and it will look into other matters as well. There is also the question of whether we launch an investigation into what we call members in business, the accountants who were in the company. That is under different regulations and has a different test for launching the investigation, a misconduct test rather than a breach of regulations test. It is going to take us a little longer to work through whether there is a proper basis for launching the investigation, but we hope to do that very soon. Chair: What does “very soon” mean Mr Haddrill? SH: I would hope certainly within a matter of a few weeks. We have managed to launch the investigation into the audit very quickly and that would be our intention with that as well. Chair: How long would you expect your investigations into KPMG and then potentially into the accountants at Carillion to last? SH: I fully understand that the public, and in particular those people who have been heavily disadvantaged, lost their jobs and so on, as a result of this, want the most rapid possible conclusion to this investigation and, if it points that way, any prosecution thereafter. I think it would be wrong of me to set a firm timetable on this because, first, the scope of the


MPs grill FRC what Stephe investigation is very wide, going back a number of years, and secondly, it is absolutely vital that we do this thoroughly. We have the resources we need. We have expanded the resources of our enforcement team considerably over the last few years and I have made it clear to the executive counsel that if she needs any further resources we will provide them… Chair: I ask because it is 19 months since the FRC announced that it will investigate PwC’s audit of BHS and we have still had nothing from the FRC. The FRC investigation of audit failures at MG Rover, audited by Deliotte Touche, was announced in August 2005 and the outcome was not finalised until April 2015. Might we have to wait 10 years to get the outcome of this inquiry? SH: No certainly not. The Rover one was deferred while other inquiries we going on. We are starting this one absolutely now and, as I said, we will do it much faster than those timescales. Chair: When might you expect the work on the audit of BHS to be completed? SH: It is close to completion. Chair: It might report within two years, might it? SH: I think we will see a report faster than that. Frank Field (FF): One year? Chair: No, it has already been 19 months. SH: I really must not be drawn on things. Chair: No, Stephen Haddrill, the point of a Committee hearing is for us to try to draw out evidence from you and there is a public interest here. BHS was a huge collapse that cost jobs, people’s pensions and livelihoods. It has been 19 months and there is still no report. We are trying to find out whether there is any chance

that the report that you announced yesterday, ahead of coming to our Committees to give evidence, might be published in a timescale that allows learnings to be made and also to have some resolution for people who worked there and received pensions from Carillion. There was then some discussion on the expansion of the FRC’s enforcement team and Haddrill explained he now has 32 lawyers and forensic accountants at his disposal. Two years ago that number was 24. Peter Kyle (PK): Mr Haddrill, to what

PQ Magazine March 2018

C chief: en said

extent did poor corporate governance lead to the collapse of Carillion? SH: It is something that I hope will emerge through the investigation. PK: You have been watching them for a while now. Did they break the code of conduct of corporate governance at all? SH: I think I would draw a distinction between what we have been doing in looking at the auditing and the financial statements. We set the corporate governance code Stephen but we do not enforce the Haddrill corporate governance code. That is enforced by the shareholders. What we will want to understand is how the directors reached the decisions that they took, particularly towards the end of the last financial year, how they took the decision in relation to going concern and whether that was soundly based. That is the sort of thing that would underpin any investigation that we conduct into the directors. PK: In your opinion, at these early stages, PQ Magazine March 2018

Carrilion collapse PQ do you feel that there is cause for concern about the way the company was governed? SH: I think there must be enormous cause for concern about how the company was governed. That is not a conclusive point of view because we need to look into these matters. PK: What action have you taken that could have in any way altered the direction of Carillion in the last two years? SH: What we do not have the ability to do is to see into the way the company is running, is developing its business model and so on. Antoinette Sandbach (AS): Your chairman made an announcement that the FRC had been actively monitoring the situation at Carilliion for some time. When did that monitoring start? SH: The monitoring of the audit I think is what was being referred to there. That started after the profit warning in July. AS: 10 July 2017? SH: Yes. AS: But as you have referred to, you have already gone in and raised concerns with KPMG about the audit in 2015-16. SH: I was talking about concerns we had with the company about their report and accounts rather than with the audit. I think the last time we reviewed the audit was 2012 with KPMG. FF: Two of the last three finance directors of Carillion came from KPMG. KPMG has conducted the audit for the last 19 years. Did that not sound a warning to you? Given the oligarchy that now exits among the accountancy firms, shouldn’t we be considering a recommendation to the government to break them up? SH: We feel there should be more competition in the major accounting and audit area. We asked the Competition Commission in 2012 to do a review and they did. They made a number of recommendations that have been implemented. To some degree, there is more competition among the big four themselves but there has been no entry to the market by other firms at that top end of the corporate sector. FF: There would be if you broke the companies up. SH: I think the Competition Commission – the CMA now – at some point will need to review the effectiveness of what they recommended and look at it again. There are rules about the extent to which auditors can join companies. I think

there is a two-year cooling off period. I would have to check what the situation is. FF: But they are all mates, aren’t they? There are four companies dominating the scene. They appear in all papers in one guise or another. You are going to recommend that the relevant body looks at breaking up these companies? SH: We are going to propose to the CMA that they look again at whether there can be more competition in the sector. What the remedy is I think is for them. We have strengthened what we call the independence rules in relation to the extent to which an audit firm can be engaged with a client to provide nonaudit services and the extent to which auditors and company directors can move between those institutions. They were changed in 2016 and they are certainly much stronger than they were. Chair: KPMG has been the auditor of Carillion since its inception, for 19 years, and had earned £30m worth of fees during that period. Is it FRC’s view that it is appropriate or good practice to have the same auditor for almost 20 years? SH: The law requires the audit to be retendered after 10 years. The incumbent can keep that role for 20 years. That is what the law says. Chair: Do you think perhaps that law needs revisiting with fresh eyes? SH: Those regulations came in only less than two years ago. I think we need to review them to see how they are working. One of the things that is happening is the combination of rotation and the independence rules means that in some sectors we may well end up with even fewer than four people competing for the job. There are things that we need to review. Chair: Do you know what the biggest asset was on Carillion’s balance sheet? SH: Goodwill, I think. Chair: Goodwill was worth £1.57bn. That seems quite surprising. Is it good practice to have goodwill as the biggest asset on your balance sheet? Without goodwill the liabilities would have been greater than the assets. It was only the goodwill that kept the assets higher. SH: It is not untypical. What is happening is that increasingly companies’ balance sheets are made up of goodwill. They are made up of intangible assets rather than bricks and mortar and all the rest of it. FF: Can you tell us what goodwill is, Stephen? SH: I can’t give you the strict accounting definition, but it is… FF: It is an item that disappears once the company is in trouble, isn’t it? SH: Absolutely. I think this whole issue about how to account for intangible assets and whether too much of the proportion of the balance sheet is in that sort of asset is something that, frankly, we are all struggling with. PQ 21

PQ ACCA exam tips

The March exams will soon be here. So what advice do top tutors at BPP and LSBF give to sitters? BPP F5 • For section A and B learning the whole syllabus appears to be the only tip in town! • Sitters are ‘strongly advised’ to plan answers to section C before starting to write. And when writing make sure you make reference to the scenario in your answer. Section C expected areas are budgetary systems, planning and operational variances, mix and yield variances and evaluation of the company performance (either as a whole or on a division basis). • Expect the unexpected – since the introduction of MCQs this advice is even more critical because more topics are tested. • Expect the exam to be 40% calculation and 60% discussion. That means its not sufficient to just be able to perform all of the calculations. • Interpretation and application are crucial, especially in section C. F6 • Section A: expect a couple of the OTs to be devoted to the administration of income tax and corporation tax. • You also have to be comfortable with quite a lot of other stuff too, including: – Due dates for payment of income tax (including payment on account). – Due dates for the payment of corporation tax (including instalments for large companies). – Filing dates for the income tax and corporation tax returns. – Penalties and interest for late payments and returns. • Also likely to be tested in section A of the exam are: – VAT rules on registration, impairment loss (bad debt) relief, and the SME schemes relating to cash accounting, annual accounting and flatrate schemes. – IHT due to lifetime transfers both in the donor’s life and on death. – Statutory residence tests for individuals. – Identification of groups of companies for corporation tax loss reliefs and gains. – Trading loss reliefs for both companies and sole traders, • At least 50% of your revision time has to be spent answering section C questions. • Remember to learn your income tax and corporation tax pro formas. • Calculations which require no more than two or three entries into your calculator can be included on the face of your proformas (eg time apportioning a salary). Calculations that are more complicated (eg company car benefits) need separate workings that are properly referenced (W1, W2, etc) and have a heading. • Aim for as many sentences as there are marks with each sentence containing something technical. • Keep your paragraphs to no more than three sentences long. • The two longest questions will focus on income tax and corporation tax. They are likely to include the following: – Employment benefits. 22


– Property income. – Relief for pension contributions. – Adjustments to profit to arrive at trading income for both companies and sole traders; in past questions you had to correct errors in computations. – Capital allowance computations. F7 Section A • Expect questions to include several on consolidation and interpretation of financial statements. • When it comes to non-core areas think inflation and specialised entities. • Long form questions – one will cover interpretations and the other preparation of financial statements. • One question is likely to be in the context of a single company and one in the context of a group, so you could have a single company interpretation and a groups preparation, or vice versa. • An accounts preparation questions may include extracts or standalone calculations or full statements of profit or loss and other comprehensive income and/or statement of financial position. • Both questions will cover items from other areas of the syllabus. • There may be a short separate part, eg with a

statement of changes in equity, statement of cash flows extract, earnings per share calculation or linked written topics. • A consolidation question would include one subsidiary and often an associate with adjustments, eg fair values, deferred/contingent consideration, PUP on inventories/PPE, intragroup trading and balances, goods/cash in transit. • A single entity question could be preparation from a trial balance or restatement of given financial statements with the usual adjustments for depreciation, revaluation and current/ deferred tax (including deferred tax on revelations), plus a mixture of adjustments on other syllabus areas, eg leases, substance over form issues, financial instruments (change in fair value or amortised cost), share issues government grants, inventory valuation, revenue recognition or construction contracts. F8 • In Q16 and 18 expect: – Audit planning. – Audit risk (identification and explanation of audit risks from a scenario and explanation of the auditor’s response to each risk. – Internal audit. – Internal controls (identification and explanation of deficiencies in internal control and the recommendation of suitable internal PQ Magazine March 2018

ACCA exam tips PQ

M TIPS controls or description of test of control). – Audit procedures (both substantive procedures and tests of control). • Try to use a tabular format in your solutions where relevant as the examing team have stated that candidates who do this score better. • Understand your verbs: ‘explain’ requires a sentence and will score one mark; ‘list’ simply requires you to list out information with no further explanation and this will score 0.5 marks per point. F9 • Section A questions will often be knowledgebased and will balance out questions in section B and C. That means you should expect to see questions on ratio analysis, the concept of shareholder wealth, as well as the economic environment and financial institutions topics (financial intermediation, fiscal and monetary policies). The efficient market hypothesis is likely to be tested here, too. • For section B, the commonly tested areas are working capital management (eg the operating cycle, the impact of a change in credit period or accepting a factor’s offer), business or security valuations (eg methods of valuation), and financial risk management (currency risk, interest rate risk). • Section C will focus mainly on syllabus sections C, D and E. So think either an

evaluation of financial options (interest coverage and gearing ratios), or a cost of capital and analysis.

• Incorporation of a business and relief for trading losses made by a sole trader/partnership at the end of the trading cycle. • Investment in a VCT/SEIS the theory versus LSBF investing in a registered pension scheme. P4 • EMI and CSOP share option • International investment schemes. appraisal. • Property business profits, • Financial reconstruction. including rent a room relief • Mergers and acquisitions and the advantages of (including corporate furnished holiday letting valuations). properties. • Hedging foreign exchange • Ethics. risk. P7 P5 • Risk of material • Evaluation of KPIs. misstatement, including ratio • Breakeven/financial impact calcs. of strategic decisions. • Business risks. These tips should • Improving business • Assurance on forecasts. only be used in conjunction processes. • Forensic investigations. with proper study. We cannot • Types of information • Audit report scenarios, guarantee that these topics required. including MURGC, KAM, other will appear in the actual P6 information. exam as we have not seen • IHT with the death estate, • Quality control. the exam papers. Examiners • Advertising. including BPR and APR and are not predictable so it is lifetime gifts. Gifts with • Tendering. vital that all core syllabus reservation and relief for a fall • Money laundering. areas are revised fully. in value. Domicile including • Laws and Regulations/ deemed domicile and election NOCLAR. to be treated as UK domiciled and deed of • Big data and data analytics. variation. • Subsequent events. PQ • Lifetime gifts into a trust. • Audit evidence. • Takeovers and mergers. For all the tips go to • Group question, sale of shares versus sale of There’s lots the trade and assets, including SSE and the more advice in our ACCA study zone. degrouping charge. Help from PQ magazine is never more • Overseas aspects of corporation tax including than a click away branch versus subsidiary.



Calculation of goodwill PQ magazine’s troubleshooter Philip Dunn explains a troublesome issue for F3 studiers, which may also cause problems for AAT and ICB Level 4 students Problem: I am an ACCA student currently studying F3 and do not fully understand the calculation of Goodwill in a business combination in relation to consolidated financial statements. Solution: Goodwill is measured according to IFRS 3 Business Combinations as the difference between the consideration transferred in the transaction and the fair value of the acquiree’s identifiable assets and liabilities. A non-controlling interest often referred to as minority interest is equity in a subsidiary that is not attributable directly or indirectly to the acquirer. In the case below this will be the 20%. Example: Dunn plc acquired 80% of Artist Ltd for £22m when the fair value of Artist Ltd’s PQ Magazine March 2018

Equity comprised Share Capital £10m and Retained Earnings £5m. The calculation of Goodwill at the point of acquisition using the proportion of net assets method we find: £m 22 3* -----25 Less Fair value of net assets at acquisition 15 -----Goodwill at the date of acquisition £10m *the non-controlling Interest (NCI) is 20% of £15m. A further way of calculating the Goodwill is: £m Consideration 22 Less: 80% of the Share Capital 8 80% of the Retained Earnings 4 ------12 ------Goodwill £10m • Dr Philip E Dunn is a freelance author and technical editor for Kaplan and Osborne Books

Fair Value of consideration Fair Value of non-controlling interest


PQ ICAEW spotlight

ACA exams are changing A

ll six Professional Level and two of the Advanced Level exams – Corporate Reporting and Strategic Business Management – are now computer-based. This means it is essential that you familiarise yourself with the new exam format in advance of your next exam. To help you prepare for this, ICAEW has created a five-step checklist that will ensure you walk into the exam feeling confident and prepared. 1. Read the exam guidance: The exam guide will prepare you for what to expect on the day of your exam, an explanation of the key functionality within the exam software, FAQs and exam top tips. 2. Watch the exam webinars: Short webinars have been created for you to watch on-demand. A selection of eight webinars will prepare you for the new exam format. This includes: an introduction to computer-based exams, an overview of the software, the exam experience from start to finish, the guidance and support available, and top tips. 3. Use the practice exam software: It is crucial that you practise with the exam software in advance of your exam. Being unfamiliar with the functionality and formatting may impact you in the live exam. Questions from the ICAEW question banks are available within the practice

Make sure you are ready to tackle the new computer-based exams

exam software two months before the first exam sitting. You can download these so you can revise on the go. 4. Review the sample exams: Sample exams are available with a blank version of the software so you can practise answering questions as you would during an exam. Sample answers are also available from our examiners to offer guidance and support on exam technique. 5. Read the ‘Instructions to Candidates’: The

Instructions to Candidates contain important information regarding the administration of your exams and they have been created specifically for computer-based exams. Read them carefully and familiarise yourself with all the processes and procedures before the day of your exam. Exam top tips Here are some more top tips to help you with your exam preparation. • If you insert a row or column, interrupting a formula, you will need to reset your formula to include the new cells. • The examiner can only see what you have written on screen, and not any formulae that are used to arrive at totals. Therefore, ensure there is an audit trail for numerate answers. • All exams will follow standard rounding rules to the nearest whole number by default, with the exception of Financial Management which will round to two decimal places. • Standard keyboard shortcuts are not supported within the software – make sure you discover the key functionality within the practice software. Share your exam top tips with ACA students at Find more guidance, support and information at PQ • Thanks to the ICAEW for this article

ACCA revision sessions led by PQ Magazine’s Public Sector Lecturer of the Year • • • •

Courses in April and May for June 2018 exams All ACCA modules F4-F9 & P1-P7 Learn on-campus from experienced professionals

Find more information online or speak to programme leader Nagin Lad directly:


PQ Magazine March 2018

PQ Awards PQ

Who made the 2018 short list? Thanks to all you lovely readers who entered our awards – unfortunately not everyone can make the short list. See next month’s PQ magazine for all the winners and the action pix! STUDENT BODY OF THE YEAR • Accountancy Student Network Facebook Group • Birmingham Chartered Accountant’s Student Society (BCASS) • Northern Chartered Accountant Students’ Society (NCASS) • North West CIPFA Student Network (NW: CSN) ACCOUNTANCY BODY OF THE YEAR The usual suspects! ACCOUNTANCY COLLEGE OF THE YEAR Public Sector • Belfast Metropolitan College • CIPFA E&T Centre • University of Derby • Gower College Swansea • London South Bank University Private Sector • First Intuition, Leeds • HTFT Partnership • Kaplan, Leeds • Kaplan, Norwich • The Training Place of Excellence • Vale Financial Training ONLINE COLLEGE OF THE YEAR • Avado • BPP Online Classroom • Kaplan OnDemand • LSBF Online • Premier Training LECTURER OF THE YEAR Public Sector • David Oakes, LSBU • Alan Parkinson, UCL

PQ Magazine March 2018

• Paul Robbins, PACA Adult Learning • Lisa Wakefield, DMU • Fiona Williams, Sutton Coldfield College Private Sector • Carly Barnes, 3aaa Apprenticeships, Norwich • Donna Curling, CBK • Andrew Mower, Kaplan • Mary Ofili, The Training Place of Excellence • Sue Thistlethwaite, Kaplan STUDY RESOURCE OF THE YEAR • Becker Study School by Becker Professional Education • CIMA Study Planner • LSBF ACCA Live Online • Mindful Education • Premier Training (Premflix) INNOVATION IN ACCOUNTANCY • ACCA’s Ethics & Professional Skills module • CIPFA Learning • Joanne Holt – Manchester Metropolitan University • University of Derby • West Yorkshire Community Accounting Service (WYCAS) BEST USE OF SOCIAL MEDIA • Accounting Student Network Facebook Group • Avado’s Caron Betts – ACCA exam countdown • CIMA – Five steps to case study success • Kashmob – Kaplan • North West CIPFA Student Network

ACCOUNTANCY PERSONALITY To be announced on the night EDITOR’S SPECIAL AWARD To be announced on the night APPRENTICE OF THE YEAR • Raisa Ahmed • Charlie Atkins • Amber Gibbs • Rahil Mahmood • Preena Raja NQ OF THE YEAR • Kelly-Marie Besley • Christina Christoforou • Craig Coda • Naomi Jackson • Michael Scott DISTANCE LEARNING STUDENT • Toby Austin • Elena Brown • Kelly Crawford • Kerry Parkinson • Tamara Salter PQ OF THE YEAR • Jeanette Barlow • Eliott James • Gemma Lowe • Syahira Md Nor • Tyson Nsimbe


TRAINING MANAGER OF THE YEAR • Brunilda Aliaj, The Training Place • Samantha Hannigan, Premier Training • Priya Kourtis, LSBU • Melanie Wright, training manager, Lovewell Blake ACCOUNTANCY TEAM OF THE YEAR • Concession Finance at Balfour Beatty Investments • Finance Team at Robert Woodhead Limited • Greater Manchester Mental Health NHS Foundation Trust Finance Team • St Mary’s Accountancy Services • Student Experience Tutors, Manchester Metropolitan University


PQ ACCA examiners’ reports

Straight from the

horse’s mouth Do you measure up to examiners’ expectations? We look at the December skills and option level papers with the worst pass rates

P5 Advance Performance Management December 2017 pass rate – 29% The examiner says you need the ‘right attitude’ to pass P5, and to remember that the exam standard is intended to be at a post-graduate level. In the December report the examiner voices concern that candidates have been taught that they should define in their answer any jargon in the question requirement. But they are wrong to assume (usually) that this alone will provide them with a passing answer at P5. This paper is all about application and evaluation in a business scenario. To pass P5 candidates need to be capable of analysing and evaluating the situation in the scenario, using their technical knowledge. The marker needs to see a competent accountant on the paper. That means justifying your opinions and going beyond mere calculations by explaining the implications of the results. In December, candidates were particularly weak when it came to the questions on the introduction of the balanced scorecard at a manufacturing business, the threat of new entrants and the value for money framework. So what was in the December exam? Well, Q1 required candidates to consider issues around the introduction of the balanced scorecard at a manufacturing business. Q2 dealt with issues of performance measurement and management at a retailer. Q3 examined performance measurement and management at a not-forprofit hospital. This was the most popular question in section B. Q4 considered the issues around risk and uncertainty at a manufacturer on the size of a new factory. P4 Advanced Financial Management December pass rate – 33% So why did candidates perform less well in December? The examiner says it doesn’t help when they leave whole or parts of questions unanswered because of their lack of detailed knowledge. And too much time in the exam room is spent carrying out relatively simple calculations. The examiner said Q1 in section A tested a candidate’s ability to provide sound advice, supported by relevant computations, in a coherent report on the impact of a change in the company’s capital structure by increasing the proportion of debt. It asked candidates to perform calculations of the debt instruments, estimate the impact on earnings and financial position of the company, and discuss the impact 26

on the company and the key stakeholders. This shows the level that candidates are expected to be at by P4. For Q2, candidates were asked to use net present value, internal rate of return, modified internal rate of return and value of risk. There was also some Monte Carlo simulation method and assumptions involved. The length of December’s Q3, on financial performance evaluation using ratios and trends, meant this was the least popular question. However, the performance of candidates who attempted this question was good. By contrast, Q4’s currency hedge using future contracts and looking at option contracts was a popular choice. That didn’t mean students didn’t have difficulty calculating the profit/loss on the futures market. F8 Audit & Assurance December 2017 pass rate – 40% F8 students sitting the CBE exam have been told by the examiner they need to write longer answers, especially in the provided preformatted tables. For December 2017 we are told candidates tended to submit answers that were often ‘quite brief, almost note like’. The examiner said that while bullet points are acceptable answers must be sufficiently detailed to maximise marks. Sitters were reminded that 70% of the F8 exam marks will be for written answers. So lots of exam practice is a key to success here. The examiner was pleased to see many students structure their answer in columns, especially for audit risk and internal control questions. This makes papers easier to mark and easier for students to review their answer, it was suggested. However, as in September, many December 2017 sitters did not attempt all the question requirements. This tended to be in knowledge areas, substantive testing questions and some auditor’s report questions. Some exam answers were also too generic, particularly those requiring a description of substantive procedures. The examiner wants to see exactly ‘how’ the procedure should be performed. And there must be an appropriate number of procedures. A four-mark question should have at least four well-described procedures to maximise candidates’ marks. For section A, it is imperative you enter the exam with knowledge of all the International Standards on Auditing (ISAs) and important areas of the syllabus such as audit procedures. The Examiner’s Report explains that section A in December 2017 included questions on the

following areas: • Professional ethics and application of ACCA’s code of ethics and conduct. • Substantive testing, including testing on wages and salaries, revenue and tangible assets. • Subsequent events. • Audit finalisation and the final review. • Auditors’ reports. The constructive response questions in section B tested candidates’ understanding of: • Audit framework and regulation. • Planning and risk assessment. • Internal control. • Audit evidence. • Review and reporting. F5 Performance Management December 2017 pass rate – 42% The examiner picked out two areas that students seemed to have difficulty with in section A – calculating the margin of safety and a target cost and cost gap. The range of topics covered in section B in December were: costing; pricing; learning curve; short-term decisions; and budgeting. The examiner stressed that the list above shows just how large the F5 syllabus is. For section B, it is also vital that you can apply the logic of the concept or theory to the problem you are presented with. In section C, candidates were presented with questions drawn from the following areas of the syllabus: • Performance management and measurement (in two questions in December). • Divisional performance measurement and transfer pricing (two questions on this area). • Budget and control (again, two questions covering this area). • Risk and uncertainty. The F5 examiner is worried about the number of candidates who couldn’t calculate a percentage accurately. The report says students often provide too many calculations for the marks available and have a pre-determined list of ratios they try to trot out on every occasion. There also appears to be a lack of knowledge of the requested variances – candidates often prove price and volume variance instead of mix and quantity. They also use selling prices when asked for profit variances. The examiner told CBE sitters that it takes a little more effort to make sure that requirements are properly broken down when reading them as they can be split over several screens. The advice is to do a small plan and ask yourself how many things you are being asked to do. However, it was felt that it is easier to be more focused when answering questions using word processing skills and spreadsheets. It is also easier to go back and insert missed points in the correct place, too! PQ PQ Magazine March 2018

ACCA exams PQ

Why the ‘why’ is the

key to passing P3 to analyse an organisation’s strengths and weakness you are given a set of financial statements you might be able to see that debt is falling, or revenue is growing. These are both strengths that can be used to form good points in your answers. You may have to create some of the numbers for yourself through calculations. But these shouldn’t be technically difficult and will have been studied in earlier papers. The test is whether you can calculate them quickly and use them to give advice or analyse an organisation.

Paul Anderson explains what you need to do to get through this tough paper


he ACCA P3 exam requires key skills and techniques that you will need to develop to be successful. Here I’ll explain my five most important techniques. 1.Use models to provide answer structure The P3 syllabus includes over 40 models and you need to be familiar with all of them. The examiner does not always ask for them by name so you need to know which model fits with each part of the syllabus and when to use them. For example, the examiner may ask for you to ‘assess the macro environment’. Even though it is not explicitly asked for, there is an expectation you will use the PESTLE framework. Using the syllabus guide and an official text can help you understand where each model may be relevant. There are no marks for academic answers that explain a particular model. At this level you are expected to use the models as a framework for your answer; to create the structure. An easy way to think about it is to use the model to provide the subheadings in your answer. If you avoid using models you will struggle to cover the depth and breadth required to score sufficient marks to pass. 2. Make your answers relevant and specific Regurgitation of the scenario or your study notes will not score well in P3. Instead, to score the necessary marks for analysis your answer needs more relevance and specifics. A key to making answers relevant is to use the scenario and match your knowledge to it. For example, let's say we have an owner managed business where the owner is risk averse and wants to grow slowly and we are asked if the business should grow via an acquisition. When studying acquisitions, one of the first things you will have learned is that they are a quick way to grow, which is normally seen as an advantage. But we must match our knowledge to the

PQ Magazine March 2018

4. Ensure broad syllabus coverage In this paper question spotting doesn’t work. Relying on tips is very dangerous. Anything can be examined. In December, the examiner stated that many students failed the paper because, despite having a strong attempt at part a of a question, they lacked the requisite knowledge to attempt part b, which came from a different syllabus area. Before starting to write an answer to an optional question you must have read all parts of the requirement to ensure you can have a good go at all parts of the question.

scenario. In this scenario, acquisition is not appropriate as our owner manager is risk averse and wants to grow slowly. Answers must also be specific. In question 1a of the December 2017 paper the examiner commented: “Some candidates… reproduced a fact from the scenario without analysis. For example, ‘the production process is patented’.” These candidates have identified something important but it won’t score marks as there is no analysis. We are not told whether the patent is a strength or a weakness or why it has been categorised as such. The candidate could have added some specifics, such as stating that the production process can’t be copied and therefore it makes the business stand out from the competition. This analysis, the why, is essential for scoring marks. 3. Include quantitative data when relevant Questions will often include some numbers, perhaps extracts of financial statements or a table of data. You are expected to use these numbers to complement the qualitative analysis, to help explain the point you’re trying to make. Not using data will result in you losing a considerable number of marks. For example, if in a question asking you

• Paul Anderson, P3 content specialist and tutor at Kaplan Financial

5. Manage your time well There are a few key rules when it comes to managing your time. ● Only answer the question that has been set. For example, in December 2017 Q3b the examiner set a question on the disadvantages of outsourcing. However, some candidates gave the advantages of outsourcing. This was not asked for, would not have scored any marks and therefore wasted the candidate’s time. ● Set a deadline for each question – 50 minutes for a Section B question, 100 minutes for section A. Stick to it. When your time is up move on to the next question. ● Use the number of marks to help you understand how much you need to write. For example, if you were given a Five Forces question for 15 marks you are looking at around three marks per force, so you need to write perhaps three to five sentences. Don’t write two-and-a-half pages about each element just because you know lots about Five Forces; you are wasting your time. You can only score 15 marks no matter how brilliant your answer is. PQ 27

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careers PQ

social media ROUND-UP We love a pass rate at PQ magazine. Just check out our news pages – we have them for ACCA, CIMA, CIPFA and ICAEW in this issue. The AAT ones are coming soon, too. We think it is important that PQ regularly publishes these rates, as it’s a way of bringing more transparency to the process. But the magazine isn’t the first place you will find them! Immediately we get them we tweet them straight out @pqmagazine, and put them on Facebook and our website. The December ACCA results got lots of retweets. Rebecca Pope said: “These pass rates highlight just how difficult it really is to qualify as an ACCA.” Sam Vater was a happy lad: “Woohoo one of the lucky 29% for P5. Passed first-time and blown away as completely unexpected. Only completed 80% of the paper as well.” Fakhrullah Mohamed saw the pass rates and said: “Pass rates for P6 and P7, so scary.” Afifi Hasan tweeted: “Feel so lucky I passed my P4.” And Claire Braddick summed up many people’s thoughts: “I do find it shocking how low the pass rates are even with a 50% pass mark. Is there a reason for such low marks or is it just they are hard exams?” Bloody hard is what they are! The PQ Awards, our 15th, loom large, and we hope you will all be checking out the winners on the night. We will be using #PQawards and have our fingers crossed there aren’t too many ‘PwC Oscars’ moments! We should have cameras there too so we will be posting up the ‘highlights’ – watch out for them. We also helped to spread the good news that radiation from your phone should not cause tumours. We explained: “The rats and mice exposed to radiation at the frequency emitted by your phone for 9 hours a day for two years are mostly fine!” Although Keith Breckenridge wasn’t totally happy: “Mostly fine. Is that – they’ve grown an extra ear, but apart from that all is well?” PQ Magazine March 2018

Life at the University of Derby Nagin Lad is the university’s Professional Programmes Lead. He has a BA in Accounting (UKC) and an MSc Accounting and Finance (DMU), as well as being AAT and ACCA quualified.He was PQ magazine’s Public Sector Lecturer of the year in 2017 What time does your alarm clock go off on a working day? It never goes off – I always wake up before it goes off and switch it off. What’s the first thing you do when you get to your desk? Water the plants and put the coffee on. What’s on your desk? Phone, desktop pc, keyboard and Cartman “I’m not fat just big boned” mouse mat. What’s the best thing about where you work? The people in our team. Where’s your favourite place to go for lunch? Papa John’s on campus. What (or who) can you see when you sit at your desk? My flags from places I have taught at around the world and a Bob Marley poster which reads ‘Don’t worry, be happy’. What are your favourite

websites and why? Leicester I am a mad Leicester Tigers fan. Which websites do you use for work? and How many hours a week do you spend in meetings? A couple too many. I prefer to spend time with my ACCA students What time do you leave the office? Some people think I have a sleeping bag under my desk. Usually 8.30–9pm. How do you relax? Watching Leicester Tigers. What’s your favourite tipple? JD and Coke. How often do you take work home with you? Apart from when I am sleeping I am on my emails and social media,

responding to students from all over the world – so all the time. My wife even caught me answering emails on holiday – I thought she was asleep! What is your favourite TV programme? Suits. Summer or winter? Summer. Pub or club? Pub. Who is your hero? Has to be my mum – she has been gone more than 45 years but she is a lasting influence. If you had a time machine, where would you go? To the future so I can see my grandchildren. Hint to my son: I would like to see them without the need for a time machine, so get a move on! If you hadn’t chosen accountancy, where might you be right now? Probably working in a factory or redundant!

Face blindness Have you ever struggled to identify a work colleague without their suit on, or when you meet them outside work? If so, then you may have face blindness. People suffering with prosopagnosia (face blindness) are unable to recognise people by their facial features alone, and there are more of them around than you think – it could be as high as one in 50 people. Among known sufferers are Brad Pitt and Duncan Bannatyne.

Deloitte misses top 100 Deloitte was again conspicuous by its absence from the Stonewall Index of top employers for 2018. The definitive list of the most LGBT-inclusive employers in Britain found PwC at equal 33rd, KPMG at 35th and EY down at 79th (equal). The National Assembly for Wales and law firm Pinsent Masons took first and second place in this year’s list.

In brief Bad bosses, bad employees Scientist say they have worked out that it is possible to work for a psychopathic boss, but only if you too are a psychopath! This is primarily because they are not easily upset by being treated badly. The University of Notre Dame’s Charlice Hurst said: “People who score high in primary psychopathy lack empathy and are cool-headed and fearless. They don’t react to things that cause other people to feel stressed, fearful or angry.”

The PQ Book Club: books you should read The Science of Intelligent Achievement by Isaiah Hankel (Capstone, £14.99) For those wanting to take ownership of their life and learn the art (and science) of positive change, this book explores how to overcome distractions, misinformation and overcommitment, and become selective in order to achieve goals. Author Isaiah Hankel explains how unlike ‘fake success’, in which realism and personal responsibility are sacrificed, intelligent achievement is “a collection of values that are aligned with who

you are” – and this comes from within. Divided into three parts, the book begins by discussing ‘Selective Focus’, including chapters on why mental energy is your most valuable asset and how to deal with negative people without becoming negative. It then goes on to look at ‘Creative Ownership’, where millennials and baby boomers meet; finding your voice and letting the right audience pick you; and why a good story will make you more money than a great product.

The final part looks at ‘Pragmatic Growth’ – avoiding drama, ‘FOMO’ and blind spot ignorance; and how ‘decision fatigue’ reduces willpower are among the topics here. Containing smart strategies for pragmatic, science-based growth and sustainable achievement, The Science of Intelligent Achievement teaches readers the process of finding success. PQ rating 3/5 This book will help you focus, create and grow – every day. 29

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Deloitte’s Stefan Hansen became an internet sensation after he recorded a song about the firm as a thank you for giving him a job. He sent it to his superiors and it is now being ‘shared’ by a much wider community. The song, ‘Making an impact that matters’, includes the chorus: “Deloitte is calling, is calling, Is calling out your name”. Hansen had obviously seen the Deloitte video ‘Make an Impact that Matters’ and was inspired. Some of his colleagues weren’t totally enamoured with the song. One wrote: “Made it to Dublin office today, we were all embarrassed for him.” Another said: “As far as songs go made by an accountant it’s not terrible”. Go to YouTube to hear Hansen’s tune. We thought Eurovision straight away.



Every year around self-assessment time HMRC releases a ‘fun’ press release about people’s excuses for not completing tax returns and some of the wildly optimistic expenses claims it receives. We are told one taxpayer told HRMC: “I couldn’t file my return on time as my wife has been seeing aliens and won’t let me in the house.” Another claimed: “My ex-wife left my tax return upstairs, but I suffer from vertigo and can’t go upstairs to retrieve it.” But our favourite was: “My business doesn’t really do anything.” Among the questionable items taxpayers tried to expense were vet fees for a rabbit, hotel room service for candles and Prosecco, and the same sausage-and-chips meal expense for £4.50 for 250 days. Or what about “a three-piece suite for my partner to sit on when I’m doing my accounts”? The answer to all these requests was a big fat ‘no’.


Brighton footballer Glenn Murray and his wife Stacey were recently arrested as part of an HMRC investigation into a suspected £1.1m tax fraud. The Seagulls striker’s home was searched and computers, business and personal records all seized. The arrested pair were quickly released under investigation. HMRC would only confirm it was investigating two people for income tax and VAT evasion, and cheating the public revenue. Who said it was lucky if a Seagull poops on you?

Pop star Shakira is the latest celebrity to find themselves under investigation by the Spanish authorities. It is being claimed that she failed to pay any income tax while living in Barcelona between 2012 and 2014. She is living in the city with her footballer partner Gerard Piqué. It has been reported that Shakira has hired PwC for the investigation. She was among those named in the Paradise Papers too, along with U2’s Bono and Madonna.

THREAT TO DEMOCRACY Billionaire investor George Soros has said the tech monopolies such as Facebook and Google are a threat to democracy. He told guests at his annual dinner at the World Economic Forum in Davos that these social media giants were “obstacles to innovation”. He predicted that their days were numbered because tax policy and regulation would catch up with them. He said: “Internet monopolies have neither the will nor the inclination to protect society against the consequences of their actions.”


Men are more likely than women to try to dodge tax. A study of people in the US, the UK, Sweden and Italy found that given the opportunity men are more likely to under-report their income. Yet the same study found that men were more willing to pay their full share of tax if they knew what the money paid for! The University of Exeter’s John D’attoma ran the research.


Worried that you are overdoing the revision? Well, scientists claim that you just need to touch your nose! If it is cold then you probably need to take a break. A cold nose is a sign that all your blood has rushed from your face to help your brain work that little bit harder. Researchers using thermal imagining cameras found that the temperature of their noses dropped by about 1C when they felt overwhelmed.


Ladybirds for grown-ups

I love PQ mug

We have three books from the Ladybird ‘grown-ups’ collection to give away this month. The titles are Red Tape, The Meeting and The Student. Do you, for example, provide a laminated list of your achievements for your annual appraisal? Don’t tell us you haven’t thought about doing that! To win this set of books just email with a ‘Ladybird’ header and we will do the rest.

We can’t believe it! We were moving some furniture around the office when we found a whole box of ‘I Love PQ’ mugs. To celebrate we are giving away not one but five mugs. We will also throw in a PQ memory stick as well to the lucky winners. To be entered for this draw just email ‘I love PQ’ to to be entered into the draw.

Terms and conditions: One entry per giveaway please. You must send your name and address to be entered for the draw. All giveaway entries must be received by Friday 9 March. The main draw will take place on Monday 12 March 2018.


PQ Magazine March 2018

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PQ magazine, March 2018  
PQ magazine, March 2018  

PQ magazine is a free monthly magazine for student accountants, focusing mainly on the ACCA, CIMA, CIPFA, ICAEW and AAT qualifications. It's...