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Poor audits still rife, says outgoing FRC chief “At a time when the future of the audit sector is under the microscope, the latest audit quality results are not acceptable,” said Financial Reporting Council (FRC) CEO Stephen Haddrill. He was commenting on the FRC’s audit inspection reports of the Big 6 audit firms, where one in four (25%) were deemed below an acceptable standard. That leaves 75% of FTSE 350 audits reviewed as ‘good’, or requiring no more than limited
improvements. However, the FRC target here is 90%. Haddrill said that audit firms must identify the causes of their audit shortcomings and take rapid and appropriate action to improve quality. “Our latest results suggest that they have failed to achieve this in recent years,” he said. The FRC pointed to PwC’s ‘deterioration’ of good audits from 84% to 65%. That means
35% are now felt to be ‘unsatisfactory’. Haddrill explained that the FRC will be scrutinising closely the implementation of PwC’s new action plan to strengthen its focus on audit quality (see page 10). And while the results of KPMG have improved, the firm remains subject to increased FRC scrutiny. This will continue until “KPMG has demonstrated a sustained improvement in audit quality”.
THE CRYING GAME? Did anyone tell you that if you are taking professional accountancy exams then you have better be prepared for a “bit of a cry”? Well, over half (56%) of PQs have told us in our ground-breaking mental wellbeing survey that the exams process has left them in tears. Some 88% of respondents said they have real difficulty thinking clearly in the revision phase (‘yes’ and ‘sometimes’). A feeling of isolation is also experienced by 78% of students at some point, and just over half (55%) felt that they had no one to talk to about their accountancy exams and the stress. When asked if PQs thought their accountancy body should be doing more to safeguard students’ wellbeing then some 68% of respondents said ‘yes’, while another 17% were ‘unsure’. Many PQs admitted they struggled getting a good balance between work, studying and life. As one PQ put it: “I can’t wait until I can watch Netflix without the guilt that I should be studying instead!” Another student revealed: “My mental health has certainly worsened since I got to the more challenging ACCA papers”” Worryingly, some students felt that their professional body treated their young professionals as robots. One said: “I very much hope that accountancy bodies like CIMA change their behaviour and will support their students more.” Another explained: “I haven’t seen
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CAMPAIGN anything (articles, emails, etc) relating to mental health from ACCA.” One good suggestion that was made was for the accountancy bodies to have an independent student support telephone helpline available
24/7, where they can turn to for independent advice and support, or just get the stress of their chest. • See next month’s issue for more analysis of our survey’s findings.
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CONTENTS
August 2019
News 06AAT salary survey Latest
27Study advice How to stay
08KPMG cheats SEC slams
28Viewpoint Bridging the UK’s
figures bring some good news
firm’s culture of exam cheating 10AAT qualification We need completion rates, say tutors 12Tech news An update on the digital world Features, etc 04Mind your Ps&Qs Tackling mental health issues; ARGA’s money to burn; and the best of PQ’s social media 14Interview Rogo’s James Carter on how studying will change dramatically in the future
15Our Agony Aunt Caron Betts tackles your ‘taxing’ problems
16ACCA SBR/ACCA exams Top tips on how to pass SBR – and how to audit a sausage!
18ACCA P papers Making sure you choose the right options
20CIMA syllabus changes Institute updates qualification to make it more workplace-relevant
21What apps? Apps that will help you work, rest and sleep
22ICAEW spotlight Applying your skills in the workplace
24ACCA conference More reports from the GLPC
26Your career Why it pays to develop a digital mindset
motivated in your studies; and the AAT’s award winners investment gap; and how to tackle questions on costs
29Careers Life at CIPFA; finding your extra 1%; and our book club review
30Fun stuff – and our giveaways The columnists Robert Bruce Money – that’s what you want! 6 Prem Sikka Audit firms must stop playing Russian roulette 8 Zoe Robinson Why your exams aren’t all bad 10 Mike Day Get ready for a new era of opportunity 12 Subscribe to PQ magazine It’s FREE – see page 22 or go to www.pqmagazine.com JUNE 2019 ISSUE Total Distribution
30,461 Publisher’s statement: We send both a paper and digital issue to a controlled database each month. The above figure is the combined total of issues sent out this month. Free to subscribers who fulfil our terms of control Annual subscription: £35 (£50 overseas)
200 issues young I have never been good with figures (I jest), so was surprised when someone told me that this month’s PQ was our 200th issue. I still have a copy of that first issue, published in January 2003. On the front cover was Sir David Tweedie with the headline “Is this the most hated accountant in the world?” In that first issue we highlighted problems of exam hall closures in Sheffield and Leicester and we announced CIMA were thinking of making its trainees sit exams on computers! Things have certainly moved on, and hopefully you can see we are still championing you, the PQ… Saving the planet PQ magazine rolled up to the CIPFA student conference in Birmingham, just as we were going to press. One of the most insightful sessions was about how accountants need to get involved in the climate-related financial disclosure (read more about this next month). Some 109 UK local authorities have declared ‘a climate emergency’ and accountants will need to show they are carbon literate. This is not, as one delegate suggested, like councils declaring a nuclear free zone – this emergency is real. To this end, you need to pencil 21 November in your diary – the date for our conference at LSBU. The theme this year is ‘Accountants will save the planet!’ A fond farewell Finally, I heard some very sad news this week. Former PFK training manager and top bloke David Hunt (right) passed away in early July. A visiting professor in finance and accountancy and former AAT President, he was both a regular contributor to PQ magazine and a massive champion. Above all though, he was a good friend and a most charming man. PQ magazine will miss you, David. Graham Hambly, PQ magazine editor (graham@pqaccountant.com)
PQ email graham@pqaccountant.com
HAVE YOUR SAY Good mental health I wanted to get in touch regarding your excellent article on mental health in your July edition. I’ve been a reader of PQ magazine for a few years now – throughout my training and since I qualified last summer. Despite now being qualified, I always enjoy reading PQ as it tends to be pitched at the right level for trainees and NQ accountants, compared with a lot of similar publications. I’m really pleased to see you addressing mental health concerns, and launching a survey to capture that information. I trained in external audit and studied ACA. I also became very ill and was diagnosed with
depression and anxiety disorder during my training, and while I was fortunate to have a supportive employer I couldn’t find any resources from my training
provider or the ICAEW to support me as a student member. I think even CABA didn’t have any specific mental health focused resources at that time. As a result of my experiences of studying and working in a high pressured industry with a mental illness I have set up my own company, called Talking Minds (see www.talking-minds.com). I offer mental health awareness training to employers and staff, and have become certified to train people in mental health first aid. Olivia Hodgson, by email
social media ROUND-UP Our story on ‘KPMG exam cheats’ and the $50m fine from the SEC got everyone talking (you can see the full version on page 8). On LinkedIn James McGiven said: “More damage to the KPMG brand”. And Andrew Sawers asked: “Do these people simply have no concept as to what the role of an auditor actually is – and the non-negotiable ethical standards required to be one?” Rich Tompson added: “Sad state of affairs. I’m relieved to report it was different in the 90s!” Others were even more angry. Terrence McGovern said: “Bad apples spoil a whole bunch of
Our star letter writer wins a fantastic ‘I love tax’ t-shirt! Thank you, PQ Congratulations on your 200th issue of PQ magazine! You have created such an incredible resource for students, which I know you have worked tirelessly to produce, in the most ethical way, regardless of the challenges it may inherently bring. Thank you also for all the support and opportunities that you have given me personally and many other students for the past 17 years. I cannot imagine how many people’s lives you have positively influenced. You have had a remarkable impact on my life, particularly in my final years of study, so thank you on behalf of the many others who have struggled with their exams. Thank you for the motivation and support you’ve given us, and for expressing our feelings and thoughts and making us all feel a little more human. You are remarkable and I’d like to say thanks for all you have done. Craig Coda, by email The editor says: Thanks for your kind words, Craig – we do our best!
Money well spent? So the head of the Audit, Reporting and Governance Authority (ARGA), which is to replace the Financial
I need pqjobs.co.uk
Reporting Council, is to be paid £330,000 a year. Nice work if you can get it. Whether that will make the new audit regulator more effective than its predecessor remains to be seen. I, for one, remain somewhat cynical. Jon Banks, by email
Sweet dreams… I was delighted to read your article ‘Sleep is the key to success’ (PQ, July 2019). I no longer have to beat myself up because I’ve had a couple of extra hours in bed at the weekend instead of studying. Cool! Fiona Hobden, by email
reputations and history!” Mark Davies went on: “When will this firm get a grip and stop destroying the reputations of the many who qualified with them and were and privileged to call themselves ex @KPMG and alumni of the firm.” Taking a different tack Thomas Halsell said: “Not to defend ‘cheating’, but in the real world if you do not recall immediately a solution do you not Google, call a friend, ask for help, find an expert? Cheating is if you still provide the answer and not understand.” Another story that got a big response was the University of Manchester email telling students they had all failed (see page 30). Some CIMA PQs explained they had just received their OCS results. As one explained: “At the top of the email – pass. Bottom of the email – fail!” On twitter we highlighted the fact that five people have now been arrested in connection with the Patisserie Valerie accounting scandal. What we still don’t know, however, is how many of the five are accountants!
PQ Magazine Unit 3a, Kingfisher Heights, 2 Bramwell Way, Royal Docks, London E16 2GQ | Phone: 020 7216 6444 | Email: graham@pqaccountant.com Website: www.pqmagazine.com | Editor/publisher: Graham Hambly graham@pqaccountant.com | Associate editor: Adam Riches | Art editor: Tim Parker | Contributors: Robert Bruce, Prem Sikka, Mike Day, Tony Kelly, Phil Gammon, Edward Netherton, Francesca Cullaney | Subscriptions: dom@pqaccountant.com | 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 dom@pqaccountant.com
Published by PQ Publishing © PQ Publishing 2019
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ROBERT BRUCE Money that’s what you want
A downside of being a financial journalist is that everyone assumes you are an expert in personal finance. People ask you how the markets are doing and they are disappointed when you tell them that you probably know less than them. But you also discover that people are woefully ill-informed on all manner of other financial knowledge. I remember someone telling me that the financial crisis of 10 years ago wasn’t going to affect her or her business. I asked about her pension plans. She was blissfully unaware that her savings were probably, at least in part, on the stock market, and she was shocked to discover that it was so. But another route beckons. The Rolling Stones are touring again, with Mick Jagger and his heart problems seemingly resolved. The tour is sponsored not by some outfit offering youthful pleasures but by a financial services group offering annuities. One of their strongest songs, ‘You Can’t Always Get What You Want’, has been altered to become the slogan: ‘You Can Get What You Need, When You Have An Annuity’. The answer to all of this is to make yourself an expert as early as possible and stash your cash sensibly. Don’t rely on governments to help out. Politicians of all parties are shockingly inconsistent and negligent when it comes to legislating for savings regimes. Talk about tax to a former Chancellors of the Exchequer and the story is always the same: if only I had known. Think of another Rolling Stones song: ‘This Could Be The Last Time’. It is up to you. Robert Bruce is an award-winning writer on accountancy for The Times
AAT salaries rising, says recent survey The average salary for a qualified AAT in the UK has jumped to £29,000, a rise of 8% over the past two years, according to the AAT Salary Survey 2019. The biennial study found that salaries rose most sharply in the West Midlands and the South West – both saw averages jump a whopping 12%. Affiliates saw an average rise of 7% (£23,500) in their pay packets, while students salaries also performed ‘very healthily’, rising 6% since 2017, to £20,000. The figures mean that those trainees who progress through to
Adam Harper full membership of AAT can expect to earn nearly a quarter (23%) more than the average affiliate member. Now there’s your incentive to get qualified, if you needed one! Interestingly, the figures show
Saying no to Boris Johnson The AAT has called on the Tory party leader candidate Boris Johnson to limited his ambition to strongly raise the higher-rate income tax threshold, and warned that there are huge cost implications for the various other
spending commitments he made, vital as they may be! The AAT said lifting the 40% rate from £50,000 to £80,000 would cost £9bn to the Treasury. Head of Public Policy Phil Hall said: “The proposals being put
female students earn 8% more than their male peers. However, this switches for AAT full members, where the gender gap is 5% in favour of men in full-time employment (that’s a rise of 3% since 2017). AAT’s Adam Harper said: “This year’s AAT Salary Survey shows a strong performance in salaries across all membership levels, demonstrating the ongoing need for business to appoint and engage both accountants and bookkeepers. “For students, for example, to have the ability to earn around £20,000 while studying for their AAT qualifications (rising to £24,500 for those in London) underlines the strength and health of the profession.” Check out the full salary at https://www.aaat.org.uk/salary forward by Boris Johnson are very expensive and benefit only the highest 5% of income earners – who are mostly men in London and the South East.” Another commitment, to deliver an extra 20,000 police officers at an estimated cost of £1.1bn, will also be “tough to implement”, said the AAT.
Chinese students in Wales On the case ‘laundered £100k a week’ Two Chinese students ran a £100,000-a-week money laundering scheme from their rooms in a UK university hall of residence, it has been claimed. Bin Bin Ding and Juxin Guo, who studied at Aberystwyth University in Wales, were caught at Euston station in London with £100,000 in £20 notes. While Ding carried the
money, Guo had a series of accounting records written on pink paper. The Old Bailey was told that Bin Bin Ding contacted fellow Chinese students using WeChat – a Chinese multi-purpose messaging app – offering sterling in exchange for renminbi. At first Ding started small, laundering £1,000 a week, but it rose to £100,000 in the seven days before his arrest.
The August CIMA case study pre-seens are out, and candidates will be looking at the jewellery business, cruising and taxi services. It’s hard not to think Pandora for AKL Sparkle (OCS) and Uber for Zoom (SCS), but tutors will stress these cases are never about ‘real’ firms. They can help, however, with your understanding of how an industry works! MCS case sitters are reminded that cruises aren’t just for the old – you might need to go on one after the case!
In brief One happy PQ Who wouldn’t want to win one of the world’s top tutors? ACCA PQ Harjinder Kaur Randhawa recently won our ‘tutor in your pocket’ competition, and is currently receiving the personal attention of AFM expert tutor Sunil Bhandari (pictured). Randhawa called the service from Bhandari and FME LearnOnline simply ‘fantastic’. Bandari, he explained, is always there to solve your 6
problems, and the video lectures explain exactly what you need to do both expertly and plainly. That’s one happy PQ! Keep to the script There have been some unintended consequences to the rise of recorded university lectures, says a new study by the University of Leeds. The practice not only makes undergraduates less likely to attend, it also causes a change in teaching style. It was found that when they are being filmed
lecturers were less inclined to go off script and improvise. This means less engaging sessions. Why the calculations? ACCA PM candidates like doing the variance calculations, but seem to struggle with discussing variances in relation to managers’ performance. The examining team told the Global Learning Providers conference that students don’t really understand why they are calculated, or what they tell us about how the company is
performing. Check out our GLPC briefing on page 24. NHS pathway open CIPFA and AAT have joined forces to create the NHS Professional Accountancy Apprenticeship Pathway. Open to existing and aspiring finance professionals, the two bodies now provide a streamless qualification journey, offering three entry points from AAT levels 3 and 4, through to full level 7, Chartered Public Financial Accountancy. PQ Magazine August 2019
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PREM SIKKA Audit firms can’t keep playing Russian roulette The Anglo-Saxon model of auditing is broken. Here is more recent evidence. PwC has been fined £4.55m by the FRC for “serious lack of competence in conducting the statutory audit work”. Fraud brought down Patisserie Valerie and its chairman has said that Grant Thornton “never raised any material issues about the quality of our accounts”. KPMG has been fined $50m by the US regulator. The firm used stolen regulatory information to cheat on audit inspections and boost its score; 28 of the firm’s staff, including senior members of its Audit Quality and Professional Practice group, did so on at least four occasions. The US also banned an Ernst & Young partner for failures on the audit of Forest Oil Corporation. The Indian government is seeking a court order to ban Deloitte and BSR (a local arm of KPMG) from auditing for a period of five years. The move comes from the fallout of the audits of IL&FS Financial Services Limited (IFIN). The government alleges that “the fraud committed at IFIN is nothing short of organised crime”, actively aided and abetted by the statutory auditors. Audit quality at SMEs is also poor. The ICAEW reported that, in 2018, 26% of audits required “some form of follow up action” and 10% needed “significant improvement”. The above highlights failures of education, training, supervision and integrity. None of the failures were reported by the firms themselves. Nothing will change without reform of auditor liability and regulators need to shut down persistent offenders. Prem Sikka is Emeritus Professor of Accounting at the University of Essex
KPMG exam cheats exposed Large numbers of KPMG US audit professionals cheated on internal training exams, improperly sharing answers and manipulating the test results. A US Securities & Exchange Commission (SEC) investigation found that KPMG staff who had passed training exams sent their answers to colleagues to help them to also attain passing scores. The exams related to continuing professional education and training mandated by a prior SEC order finding audit failures. The cheats sent images of their answers by email or printed out the answers and gave them to colleagues. This included lead audit engagement
partners, who not only sent exam answers to other partners but also solicited answers from and sent answers to their subordinates. In addition, certain audit professionals manipulated an internal server hosting training exams to lower the score required for passing. By changing a number embedded in a hyperlink, they manually selected the minimum
passing scores required for exams. At times, audit professionals achieved passing scores while answering less then 25% of the questions correctly. KPMG has admitted the facts in the SEC’s order. In mid-June, the firm was also charged with altering past audit works after receiving stolen information about inspections. The Big 4 firm agreed to settle the two charges by paying a $50m penalty, and retained an independent consultant to review and assess the firm’s ethics and integrity controls. SEC chairman Jay Clayton said: “KPMG’s ethical failures are simply unacceptable.”
Enhancing the ACCA student experience ACCA’s CBE practice solution platform is now ready for approved providers to play with. As outlined in the June edition of PQ magazine (see cover story), the new platform will allow Strategic Professional level students to practise exam standard questions, which is seen as vital to getting students ready for the live CBE exams, which are being rolled out from 2020. Approved providers in the UK,
Ireland and Czech Republic are in the first wave being offered advanced access to the practice platform and its exclusive benefits. Access will be rolled out to further markets in the coming months. Students will have access to the practice solution after the exam week in September 2019. ACCA has also revealed a further development as part of the CBE Practice Solution, which will
see Applied Skills CBE specimen and past exams incorporated into the platform from December 2019. The platform set-up allows approved providers to personalise the ACCA practice solution with their company logo and colours. They can even create their own questions and practice tests exclusively for their students. The system also allows tutors to offer marking and feedback services to their students, too.
Joint qualification launched The Chartered Institute of Taxation (CIOT) and Scottish institute ICAS have unveiled a new joint qualification in accountancy and tax. The new programme will allow students to study both the CA (chartered accountant) and CTA (chartered tax adviser) qualifications at the same time. Available from September 2019,
students who undertake the joint programme will be able to fast track their studies and become a specialist in tax and accountancy in around three years. CIOT CEO, Peter Fanning, said: “Collaborating on the CA CTA programme is the logical next step in a growing relationship between CIOT and ICAS. The programme offers students and their employers
reins of the business and ensuring resources are used wisely to secure the best outcomes for communities.
£4.05m, a 23% rise, which was primarily due to a £20m onerous lease provision. There were also some oneoff charges related to the renegotiation of other leases and the closure of unprofitable stores to be taken into account. The lease provisions cannot be deduced for tax purposes.
Done deal: Peter Fanning and ICAS Chief Executive Bruce Cartwright another path to chartered status in both tax and accounting with the highest professional standards in both disciplines.”
In brief Concern over 101 Officers There is real concern that a fifth of lead finance officers are no longer reporting directly to their council’s CEO, says CIPFA’s Rob Whiteman. Responding to an LGC survey, Whiteman was also concerned that there appears to be an unsettling high number of individuals occupying these critical roles who have been in post for between one and three years. He said that the section 101 Officer occupies a critical position in local government, holding the financial 8
Starbucks pays tax shock Starbucks UK has reported a pre-tax loss of £17.2m, compared with a profit of £4.6m in the previous year. That is its first UK loss since 2013. Gross profits fell to £56m in the year to last September, although turnover jumped 4.1% to £387.1m. However, it paid corporation tax of
Possible changes to IFRS 17 The International Accounting
Standards Board is proposing amendments to the insurance contracts standard – IFRS 17. The aim of the amendment is to help reduce the costs of implementing the standard, and make it easier for companies to explain their results when they apply the standard. They are also designed to minimise the risk of disruption to implementation already under way. They do not, however, change the fundamental principles of the standard. PQ Magazine August 2019
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ZOE ROBINSON Why your exams aren’t all bad
Most accountancy students don’t like exams. Not all of course, but the majority see them as a hurdle, something to “get through”, a bit like a trip to the dentist. Yes, individual subjects can be interesting, but the process of constant testing in some way takes the fun out of it. What you may not know is that until 1854 examinations didn’t exist at all. In order to support the growth created by the industrious Victorians there became a need for a large civil service, and so competitive testing was introduced to fill the vacancies. Disappointingly, there is no great vision, educational ideal or inspiring story here. The problems with exams are well documented but they do have merit; for example, they are formal and transparent, there is a recognised and robust exam system administered by the professional bodies that provides clear guidance as to what you need to know and do to pass. Exams are objective not subjective; we are not reliant on individuals judging competency. Lastly, and arguably from a PQ’s perspective most importantly, is that the questions offer clarity on what must be learned and understood. Despite these strengths, the world of assessment is ripe for transformation. Technology and our ability to gather data will provide us with new and exciting alternative methods of assessment, such as continuous competency assessment or assessment using virtual reality. Without doubt, the days of the exam as we know it are numbered. Zoe Robinson is Learning and Programmes Director at Kaplan Financial
Completion rates please AAT tutors are again calling on the AAT to provide national completion rates so they can prove to their FE colleges they are doing a good job! No completion rates for any of levels means some college bosses are benchmarking AAT courses and completion rates against other qualifications, such as BTEC business. This, explained several tutors, just wasn’t fair and puts them in a tricky position. Funding is conditional of success of a whole course, not the paper pass rates. “We are doing a really good job
Talk Russian with ACCA LinkedIn may be advertising the fact that it has 20 million jobs, but this aspiring accountant got back to basics recently. He was spotted in central London handing out his CV. We liked the idea that he doesn’t bite!
Inclusion is the future ICAEW new president Fiona Wilkinson says she will use her role to be an ambassador for inclusion in accountancy, and to ensure the profession is fit for the future. Wilkinson (pictured) has spent her career as an advocate for diversity in the profession, spreading the message that accountancy is inclusive and open to all, no matter what their background. One of her aims during her year
KPMG restructures KPMG UK has unveiled a new governance structure in direct response to recommendations from the Competition & Markets Authority’s call for an operational split between the Big 4 firm’s consultancy and audit businesses. A new Audit Executive Committee will assume responsibility for the audit businesses performance, risk and control management. The firm’s Head of Audit will be Jon Holt. KPMG’s current Head of Audit, Michelle Hinchliffe, will join the firm’s UK board as the Chair of Audit (a newly created role). KPMG stresses that these changes do not mark the separation of the firm’s UK audit practice from the rest of the 10
but can’t prove that,” they said. And even if pass rates go up, this tell us nothing about completion
rates, emphasised one tutor. Another said: “It’s like being an accountant and not having a budget to compare performance.” AAT education chief Suzie Webb said this was a hugely problematic area for the association. People come into the qualification in so many ways, she said. However, she added that providers can always do their own calculations. The problem is the AAT used to make these stats available – but that was before AQ2016 and the synoptic assessments.
as president is to celebrate the centenary of Mary Harris Smith, who was the first women ever to become a chartered accountant and was a member of ICAEW in 1920. Wilkinson explained: “Mary Harris Smith applied several times to join the institute and was turned down before finally being accepted. I want to celebrate her resilience and determination to achieve the qualification she wanted.”
firm, but will “deliver on many of the recommendations proposed by the CMA and the BEIS Select Committee in their recent reports on the profession”. More women for EY board EY has announced the appointment of Justine Belton and Tonia Lovell to its leadership team. It means six of the 10 positions on EY’s UK LLP board will be held by women. Belton took up her role on 1 July and replaced Robert Overend. Lovell, who is joining the board as a UK independent non-executive, joined in June. PwC gives £30m audit boost PwC UK is introducing a package of measures designed to ensure it delivers consistently high
ACCA has launched a Russian language Advanced Diploma in Finance & Business. The new diploma is aligned to the Applied Skills exams of the full ACCA qualification, and the first sitting will take place in December. All Russian language exams will be available twice a year, in June and December. On successful completion of the ACCA Advanced Diploma in Finance & Business (Rus), students will be able to progress to the strategic professional level of the ACCA qualification. These exams are offered in English only. The advanced diploma is available to those based in Armenia, Azerbaijan, Belarus, Estonia, Kazakhstan, Kyrgyzstan, Georgia, Republic of Moldova, Russian Federation, Tajikistan, Ukraine and Uzbekistan. ACCA CEO Helen Brand said: “This brings a wealth of opportunity to business people in Russian speaking regions, and highlights our commitment to those markets.”
quality audits that meet the needs of investors, companies and wider society. The firm has said it is investing an additional £30m annually as part of a wide-ranging action plan to provide greater focus on the quality and public interest responsibilities of PwC’s statutory audit services. The plan has three key areas: additional investment in training, people and technology; further alignment of the firm’s audit business behind audit quality; and a reinforced focus on culture and quality control. Head of audit Hermione Hudson said that PwC will be creating a new national digital audit team, focused on the development and application of innovative technologies. The firm will also be hiring more than 500 additional experienced auditors across the UK. PQ Magazine August 2019
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PQ tech news
MIKE DAY Get ready for a brand new era of opportunity
Interestingly, in a recent survey 56% of UK businesses said they wanted their advisor to implement tech for them so they can focus on running and growing their business. We are seeing that play out, with not only the birth of new roles in practice and industry, but also in the creation of whole businesses who have made it their speciality. People who understand business and finance processes, and how to deploy technology to enable those processes. And so to accountants. At Xero we have an Approved App Integrator program. These are businesses that specialise in the accounting software and the 700+ integrated business applications. Google ‘OutServeWeb’ and you will see a new breed; wrapping around the accounting platform to provide eCommerce, CRM and digital marketing. So, the good news is that there are thousands of accounting practices specialising in vertical sectors like agriculture, construction and retail. They are arming themselves with solution packs of accounting software, plus a range of analytics, cash flow management, payroll HR, CRM, retail point of sale and time tracking/costing applications. The same is happening for roles in industry – showing the emergence of a new breed of business altogether. With your core financial acumen and skills you are brilliantly placed to take advantage of these new opportunities. Nice! Just make sure you gen up on the pace of change on the enabling technologies side and you are sorted. Mike Day, Director, UK Education Sector, Xero
The unbiased recruiter Job hunting PQs could soon be faced with a new recruitment robot, called Tengai. The invention of Furhat Robotics and recruitment consultants TNG, the aim of the new robot is to create the first unbiased tool for the early stages of the recruitment process. Tengai only records candidates’ speech, which it converts into text in real time. No other variables are involved, such as a person’s accent or the pitch of their voice, their looks or gender. Furthermore, Tengai does not know anything about the candidates. The only thing accessed is the candidate’s name and email address.
Tengai also has built-in social skills and will apologise if it interrupts the candidate, ask them to “take their time” answering questions, and will gentle ask questions again if answers are
Government lambasted by NAO over use of data Data is not seen as a priority by the UK government, the importance of investing in quality data is not well understood, and there is a culture of tolerating and working around poor data, says a damning National Audit Office (NAO) report. The NAO said the effectiveness of government programmes is often compromised because data is inadequate. It emphasised the consequences of this was demonstrated by the Windrush scandal, where the Home Office
Send in the clouds Well over half (58%) of the UK’s SMEs reveal they do not use cloud-based computing, according to new research by Close Brothers. That does, of course, mean 42% do. The reasons given for not using the cloud for business vary. Over a third (36%) of those asked do
vague and not to the point! Some 80 interviews have already taken place and the vast majority of candidates described their encounter with the robot as warm, friendly and easy going. So not creepy at all! TNG’s CEO, Asa Kallstromer, said: “The collaboration with Furhat will take unbiased recruitment to the next level.” He felt the new tool will help to increase diversity in the workplace. took action without fully accessing the impact of the quality of its underlying data. The audit watchdog also found there was no cross-government standard on how data was recorded across different departments. A new national data strategy is now planned for 2020, led by the Department for Digital, Culture, Media and Sport (DCMS). The NAO stressed the government must resolve the challenges around how to use and share data safely and appropriately, and how to balance competing demands for public money in a way that allows it to invest in data. Silo working in different departments could also inhibit progress, it warned.
not trust that it is secure enough; while a further 29% believe transferring to the cloud would be too time intensive; and 16% say that they simply cannot afford to invest in it. There is also a knowledge gap when it comes to cloud technology. Three-quarters of SME senior business decision makers admit they do not understand it well. One in 10 say they do not know what it is!
Tech briefs A Sage investment Sage has announced a £40m investment, over the next three years, in a new major hub in the North East of England. Sage also revealed that it is hiring for 500 roles. From late 2020, some 2,000 staff will be based at the new hub at Cobalt Business Park – the UK’s largest business park. Sage CEO
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Steve Hare said: “The UK’s tech sector is fast becoming a centre of global excellence, and Sage is particularly proud to be part of this, and to have such a significant home in the North East.”
with Mircosoft services. Oracle has lost a lot of ground recently to AWS. Current rankings have AWS with 65% market share, compared with 25% for Microsoft and 10% Google.
Joining forces Microsoft and Oracle have joined their cloud services in an attempt to woo big business and take on top dog Amazon Web Services (AWS). The combined service will enable users to connect Oracle’s autonomous databases
More money for 5G The government has said that £40m is to be invested in 5G testbed and trial projects across the UK, as part of its plan to improve mobile connectivity. The latest round of investment is through the £200m project to test 5G
technology that is 10 times faster than 4G and able to support more than a million devices per square kilometre. Digital secretary, Jeremy Wright, said: “5G is about more than mobile consumers having a fast and reliable connection anywhere in the country. It’s a vital piece of technology that can be used to improve the productivity and growth of our industrial sectors. That’s why we are excited to develop new trails in areas such as manufacturing and logistics that can really benefit from 5G.” PQ Magazine August 2019
tech news PQ
Tax justice is on its way Where is your data secure? Social media and mobile apps are perceived to be the least trusted digital platforms for keeping consumers’ personal data secure, reveals EY’s latest research. When asked which types of company would best keep your personal data secure and use it appropriately, only 2% responded with mobile app providers – the lowest in the poll. This was followed by 3% of respondents who felt they could trust social media platforms. Broadband providers were top of the pile, with 28% of respondents confident in their data protection abilities. UK consumers feel despondent about data protection, with 41% of respondents believing it is impossible to ever secure personal data online.
PQ Magazine August 2019
The US tech giants have been warned that loopholes which help them minimise their tax bills could be closed as early as next year. The G20 countries have agreed to speed up an overhaul of the global tax code, aimed at extracting more from the likes of Google, Facebook and Apple. A meeting in Japan recently of finance ministers
agreed to complete the reboot by the end of 2020, following lobbying from the Organisation for Economic Co-operation & Development. The G20 has now committed to a ‘twopillar’ approach, removing incentives for technology companies to shuffle profits to offshore tax havens. The first pillar would allow countries to tax those who sell
digital goods in their country even if they do not have a physical presence. The second pillar is the introduction of a minimum global tax rate to prevent profits being moved into tax havens. RSM’s Rob Mander said the UK and France’s digital tax measures had helped to “turn up the volume”. Both government’s have said they would drop their taxes if the OECD could agree a package of reforms.
Uber set to take to the Australian skies Uber has announced that it has added Melbourne, Australia, to its list of trial cities for the Uber ‘flying taxis’. The ride-hailing company has already announced that Dallas and Los Angeles will start commercial services by 2023. Test flights are due to begin as early as 2020. Global Head of Uber Elevate, Eric Allison, said:
“As major cities grow the heavy reliance on private car owner will not be sustainable. Uber Air holds enormous potential to help reduce road congestion. For example, the 19-kilometre journey from the CBD to Melbourne airport can take anywhere from 25 minutes to around an hour by car in peak times, but with Uber Air this will take around 10 minutes.”
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PQ interview
The future is here PQ magazine talks to Rogo’s CEO James Carter about how tech will change the way future PQs will qualify
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t’s time to study. So you walk over to the study pod and take down your virtual reality glasses. You go online and join your virtual colleagues looking at an old case study into the demise of M&S in 2022. You are in the boardroom, the acting CFO, having to make the big decisions all over again. Guessing what the future will look like can be fun. Will accountancy have oral exams rather than written tests at the final stages? Maybe the examiner comes live to your webcam and you have to explain a dilemma, rather than write down what you know. Online written exams might even be a thing of the past, too. Instead, the testing could be embedded in the learning, and you are officially passed or failed at the end of your course. Isn’t that a better way of doing it? These are just some of the things you talk about when you meet Rogo’s founder
and CEO James Carter. He is in no doubt that technology will change the way we do everything, and exams, assessment and learning will be no different. Carter and the IT industry have come a long way. Ten years ago CBEs were oversold. They were just simple multiplechoice questions. Today, students are tested with complicated case studies where a computer interrupts them to move to the next section – just like work! But, for now and for the foreseeable future, as all examiners say, what
Carter: technology will change the way we learn
students need to do is practise, practise, practise exam-type questions. And this is where Carter and his team come in. Rogo’s exam practice platforms provides the vital tools for students to practice live tests, and help ensure they are ready for the real thing. Its platform was also initially built exclusively for accountancy. He explained: “There was not much out there that really understood the needs.” And Rogo can help create the perfect platform to free up tutors’ time to be more constructive, too. But Carter knows there is no resting on laurels in this industry and his platform offers colleges even more whizzes and bang. CIMA, CIPFA and AAT have, of course, been testing their students via CBEs for some time. The others are catching up. The ICAEW’s transition to computerbased exams is nearly complete, with the final case study moving online in July 2019. Now the ACCA has also announced its final level exams (Strategic Professional) will start moving over to total CBE from March 2020. Rogo understands CBEs – it what it has been doing for over 16 years. Perhaps that’s why it has become such a success story, used in over 130 countries, helping both small teams and multinational companies create competent professionals. PQ
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“I chose ACCA because it’s the largest and most global professional body, and I believe it can take my career much further than other qualifications.” Joanne McCourt, Commercial Insight Manager, New Look
PQ Magazine August 2019
ACCA TX exam PQ
Taxing times ahead Ask Caron
Allowances, exemptions or reliefs Dear Caron, I have only just started looking at income tax and I am already confused by the different terminology that seems to relate to that tax-free element. What do the terms allowance, exemption and relief mean? Yours faithfully, Troubled by terminology Caron writes: The terms are used in many of the other taxes as well. My best tip is to remember to refer to the Tax Rates and Allowances that are provided in the exam room, as that will help you to identify which one to use and where. Let’s look at an example of each: • A personal allowance (PA) is the threshold up to which no income tax is payable. It’s the taxfree deduction from an individual’s net income. Above the PA limit, the balance is taxable. • Interest on an ISA is exempt. If the account has been set up as an ISA, then the criteria has been met for the interest to not be taxable and it has no impact on the savings rate bands. • Rent-a-room relief allows the taxpayer to choose whether to calculate the taxable income from renting a room in their house as normal, or whether to just tax all rental income over and above the £7,500 tax-free portion. • All have the same effect of reducing the amount of income that remains taxable. When do I use IHT or CGT? Dear Caron, In a question a gift was made of a house to a connected person and I correctly used the open market value (OMV) for the disposal proceeds. But then I was stumped. Should I be working out IHT, CGT or both. How do I know?
PQ Magazine August 2019
The ACCA Taxation (UK) (TX) syllabus has a range of different taxes, each with its own set of challenges. We’ve asked Agony Aunt Caron Betts to solve the more pressing problems Yours faithfully, Doubting my decision
Caron writes: In this TX exam the multi-tax questions are quite straightforward. The examiner writes: “Although the interaction of IHT and CGT is not examinable at TX (UK), the two taxes could be examined within the same question… and where a question covers more than one tax you will be given clear guidance notes as to exactly which taxes you need to consider.” Therefore, in the example you quote, the question will state which tax you are expected to calculate. Do take care as you may need to value items differently for each tax. For example, the IHT transfer of value will be based on the diminution in value of the donor’s estate and with unquoted shares that may not be the same as the OMV. Follow the golden rule of reading the question carefully.
Too many rules to learn Dear Caron, I am really struggling to understand the detailed rules in the tax administration section – which are different for individuals and companies! Do you have any tips on how to remember them? Yours faithfully, Daunted by details Caron writes: This is a common problem and the answer is repetition, repetition, repetition. Try preparing a table summarising the key dates and rates. Do lots of question practise where you apply the rules to different scenarios. Remember to produce full, written answers as these can appear as a constructed response question. And check carefully what you have been asked to calculate. Remember that interest is charged because the HMRC have received the tax late and penalties are charged for failure to comply. What’s a ‘thinking’ question Dear Caron, What does it mean when the examiner talks about a ‘thinking’ question? Yours faithfully, Thinking throughout Caron writes: These questions often appear as the 10-mark question in Section C. You’ll recognise them because the question will require you to “calculate the reduction in x’s income tax liability…” or “determine if there will be an overall saving of tax…”. That means you will be expected to advise on the tax implications of a change in circumstances. For example, a director/shareholder may be considering a switch from remuneration to dividends and wants to know the tax and NI implications. Often these can be follow-on questions worth only a few marks. Rather than doing lots of lengthy calculations, if you think more and write less you can identify how to work out the tax implications of the marginal changes only. Practising these types of questions will help you to save time in the exam. PQ • Caron Betts is an ACCA tutor at AVADO
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PQ ACCA SBR exam
Three top tips Students studying for the Strategic Business Reporting exam face three main challenges, but they can be overcome, says top tutor Tom Clendon 1. The (potential) problem of being rusty on the basics: Those of you who studied the lower level FR/F7 paper some time ago, or even got an exemption from your university studies, may well be rusty on your basic knowledge of accounting. The solution is to get up to speed on the basics of group accounts; cash flow statements; and the key accounting standards, such as impairment (IAS36), provisions (IAS37) and intangibles (IAS38), etc, before diving into the brand new areas of SBR. Make sure you study from up-to-date and ACCA approved material. This way you will be learning the new version of the lovely and essential IASB Framework for Financial Reporting, as well as the latest standards on revenue (IFRS15) and leases (IFRS16) 2. There’s lots to learn: SBR has a wide syllabus that contains a raft of accounting standards that you will not have seen before – the ACCA have saved the tougher ones for this paper! There is no easy solution; no quick short cuts to learning these more technical accounting standards. This is because the accounting for
pensions, financial instruments and overseas subsidiaries are just not straightforward matters. This challenge can only be overcome by you putting in some hard graft. You will need to read textbooks and articles, listen to a lecturer, make
your own notes, practise illustrative examples, reflect with a study buddy how the topic relates to the IASB’s Framework, and also review reallife financial statements to see how the standards are actually applied. Mix it up. 3. Explanation of principles and application to scenarios: Having hopefully learnt the necessary knowledge, the next challenge is to appreciate how it is examined. SBR basically requires written answers. The examiner’s reports stress again and again that it is never going to be good enough just to copy out (rote learn) definitions. You will need to be able to demonstrate your understanding by explaining principles and applying your knowledge to practical scenarios and by giving appropriate professional advice. The key here is past exam practise, but it does not end there. You will need to review your answers and think about how you can improve. ACCA have published some very useful videos debriefing past SBR exam questions and have published the article ‘Read the mind of an SBR marker’ that gives invaluable insights to help you reflect. The optimum, though, is to attempt an original SBR mock exam, including questions on current issues that have yet to be examined (eg on how to account for crypto currencies such as bitcoin). Get it marked by a lecturer who will give you advice as to how to earn more marks next time. This is exactly the service I can offer you for SBR through www.accapass.com PQ • Tom Clendon is the lead tutor for ACCA SBR at AVADO
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PQ Magazine August 2019
ACCA AAA exam PQ
Auditing a sausage A good understanding of audit risk is vital for success in the ACCA’s Advanced Audit and Assurance (AAA) exam, says Steve Widberg
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et’s see if we can IDENTIFY AND EXPLAIN the AUDIT RISKS in the following scenario (in the exam, the scenario will have much more detail).
Scenario Dionne McScuggery, Chair and CEO of Vegan Sausages International, a listed company, summons the audit manager to her office in order to discuss the following: 1. An equity settled share-based pay scheme for senior company executives was introduced this year, but the company is not proposing to recognise it in the financial statements because no one knows how to account for it. 2. A major retail customer, Bristles, has cancelled their contract after a pricing dispute. As a result of losing the contract 30% of the staff will be made redundant. Four points NOT to make in the answer: 1. It would be tempting to explain the ethical risk of our offering assistance with the calculation of the share-based pay – but we weren’t asked to, so don’t. 2. It would be even more tempting to discuss the business risks of losing a major customer and suggesting strategies to replace the customer – but that would be fishmarket gossip. 3. It is also be tempting to explain the audit procedures to tackle the audit risks identified – but that would make the examiner weep. Only give procedures if asked for them. 4. Finally, it might be very tempting indeed to DEFINE inherent, control and detection risks. Again, a very bad idea, because we weren’t asked for definitions. So, what are we supposed to write? When planning the answer we need to remember that audit risk exists at two levels: 1. The financial statement level: This means that some factors in the scenario could cause the whole set of financial statements to be wrong. There are three factors to look out for, and they are all in the scenario above:
a. The business may not be a going concern. We can link this to the loss of the major customer as follows. “As a result of the loss of the contract with Bristles, the client may not be able to cover its fixed costs, and therefore may not be a going concern.” b. The business may have weak internal controls. We could link this to the governance issue, because Dionne is both Chair and CEO. “There is a governance weakness because Dionne is both Chair and CEO. Therefore, decisions to manipulate accounting policies may go unchallenged.” Alternatively, we could link it to the lack of financial expertise as follows: “Lack of expertise in accounting for share based pay indicates poor internal controls at the financial reporting level. There may be further complex transactions, such as derivatives, which have not been recognised.” c. There may be an incentive for fraudulent financial reporting. In the scenario above, the incentive is the share-based pay scheme. Thus, we could write: “The share-based pay scheme is
an incentive for management to overstate profit in order to maximise the share price. There is a risk for example that liabilities may be understated or assets overstated”. 2. The balance or transaction level: What does this mean? It means that individual balances, such as inventory, or transactions such as revenue, may be under- or over-stated. Why? Generally, because they are COMPLEX or JUDGEMENTAL. This is where you must use your financial reporting knowledge in your explanations (remember that you should only study AAA after completing SBR or P2). If we consider the two issues raised by Dionne at the meeting: a. Share based pay. Think about the accounting (debit expense and credit equity). Remember that the fair value of the instrument has to be calculated by an expert, and that the accounts preparer must form a judgement about the number of options that will vest. Thus: “Risk of mis-statement of share-based pay expense in the profit and loss and equity in the statement of financial position, because the calculation of the fair value of the instrument requires expertise and the calculation of the number of options expected to vest is subjective.” b. Redundancies. Where have we met accounting for redundancies? When we studied provisions. Think about the accounting (debit expense and credit provisions). It would be very tempting to ‘knowledge dump’ because this is a much easier accounting standard to understand. But what we need to do is to focus on the complex (calculation of redundancy payments) and the judgemental (redundancy payments will be an estimate). So: “Risk of mis-statement of provisions and the related expense because the calculation of the liability will be complex and will inevitably involve judgement.” What should you do now? Review the model answers to a couple of past AAA questions asking for audit risk – try to identify the risks at the financial statement level, and think about what might be complex or judgemental at the balance or transaction level. When reviewing the model answers you may find it helpful to make notes on the types of risk identified. PQ • Steve Widberg is a freelance tutor
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PQ ACCA exams
P papers: which to choose? Liz Hulls tells you all you need to know about the optional papers, helping you to make the right choice when the time comes
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am regularly asked by students approaching their ACCA professional papers about which option papers they should choose. Students must select two out of the four professional optional papers: APM Advanced Performance Management; AFM Advanced Financial Management; ATX Advanced Tax; and AAA Advanced Audit and Assurance. For many, the choice is simple. As one of our students remembers: “My first stage of selection was elimination. I was never going to do AAA. I have no idea how I got through F8 (AA)!” For some, it’s a question of aligning their studies to their work; for others it’s a matter of choosing subjects that they will enjoy and options where they’ll hopefully achieve exam success. Some students are worried about the impact of their choices on their CV, but they should rest assured that future employers will be looking for the ACCA badge and be more concerned with their practical experience. With pass rates dipping as low as 29% and peaking at 41%, these exams are specialist and are not going to be easy. So what to choose?
APM Advanced Performance Management Exam Sitting Jun 18 Sept 18 Dec 18 Mar 19 Global pass rate 35% 33% 33% 32% This paper wants students to look at key ways of assessing business performance and to develop skills and techniques relating to strategic performance, management techniques and systems. You should be prepared to address issues at strategic and operational levels and to understand the connections between the two. You will need to be numerical, comfortable with both PM and FM and possess good written and analytical skills. Passing the exam requires you to write good answers to the ones set and not the ones you wish you had been asked. Why choose APM? “Strategy is an area I work in,” said one of our students, while another claimed they “loved the subject area and the tutor was brilliant!” AFM Advanced Financial Management Exam Sitting Jun 18 Sept 18 Dec 18 Mar 19 Global pass rate 40% 35% 41% 35% This paper wants you to take FM further and expand on areas you’re familiar with, such as investment appraisal. A large part of the paper centres on risk management, with particular focus on currency and interest rate hedging. Topics are considered in the overseas and home context; acquisitions and valuations are looked at, with reasons why some acquisitions work and some don’t. Among other areas, AFM will look at how investment is financed, take WACC further 18
and look at how cost of capital is derived for a firm’s credit rating. Students will need to be very good numerically but not a top mathematician. As our tutor often reminds students, he has a grade C in maths A-level and he can do it. You will need robust written skills, to be comfortable with equations and, very importantly, be aware of current business affairs. Why choose AFM? “I chose this paper as I wanted to learn more about the commercial aspects of accountancy. I wanted to know how accountancy was used in more than just the traditional roles,” said one AFM student. ATX Advanced Taxation Sitting Jun 18 Sept 18 Dec 18 Mar 19 Global pass rate 40% 30% 40% 33% This paper helps you progress from being a tax comp number-cruncher to an analytical, professional tax adviser. You will need to produce notes, emails and reports for your manager or client, and be able to give practical advice in various real-life scenarios in which several types of interacting taxes must be considered and analysed. While calculations are not completely abandoned, you will need to be able to clearly explain and justify your computations and, ultimately, provide some robust tax planning advice to both individuals and businesses. You should be numerical, logical, have good written skills and be prepared to learn a large volume of material. Why choose ATX? “This is seen as a hard exam. I wanted the achievement of passing it on my record,” said one studier. “I weirdly like tax,” admitted another ATX student.
AAA Advanced Audit and Assurance Sitting Jun 18 Sept 18 Dec 18 Mar 19 Global pass rate 34% 30% 31% 30% For any students who do not like writing this paper is to be avoided. The only potential use of your calculator is to work out a couple of ratios or perhaps the time allocated to each question. Assessing risk in the three key areas of business, audit and material misstatement is a common feature in the paper. You will need to challenge every piece of information and make sure you apply your knowledge to the scenario. You will also be required to bring forward both FR and AA knowledge from previous studies and be prepared to communicate concisely, keeping time management in mind at all time. Why choose AAA? “I wanted to understand the impact and implications of audit from the auditor’s and the business’s perspective,” said one current AAA student. The option papers remain consistently challenging to pass. You should be prepared to dedicate many hours of study to these papers and so ideally should opt for a subject you vaguely enjoy. If you’ve been doing self-study up to this point, it is now worth considering getting the valuable guidance of a tuition provider. As Alan Hatfield of ACCA said: “The pass rates for students attending approved learning providers, combined with ACCA’s own resources, are much stronger than for those who do not.” Do not be too overwhelmed with your choice. As one of our recently qualified students said: “P papers are just big F papers and sometimes so big they take a couple of goes to pass!” PQ • Liz Hulls is a director and tutor at Vale Financial Training PQ Magazine August 2019
derby.ac.uk/ACCA
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PQ CIMA syllabus changes
Making CIMA more relevant Rebecca Evans explains recent changes to the CIMA qualification
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n 31 January, CIMA announced an update to their professional qualification. Shortly after I ran a webinar with Stephen Flatman, Vice President of Examinations, CIMA, where we invited attendees to ask any questions they had about the update. To help you understand the changes and how they may impact you, here are my answers to the most common questions we were asked. 1. Why has CIMA updated the qualification? Firstly, this isn’t unusual; historically CIMA have updated their qualification/syllabus roughly every five years. With the last update in 2015 this one wasn’t a surprise. It is necessary for all professional bodies to keep their learning content fresh and reflect the skills their members need in the workplace. CIMA are refreshing their content to reflect how digital transformation is affecting the shape and role of finance. Ultimately, this keeps the skill set of CIMA students relevant and allows them to add real value to an organisations digital strategy. 2. What is changing? Firstly, let’s start with what is not changing as I think you’ll find it reassuring. The qualification structure is unchanged; Certificate level still underpins the
Professional level. There is no changes to the Certificate level syllabus. At the Professional level, there are still the three pillars and three levels. Within each level there are three objective test subjects that must be completed ahead of attempting the case study exam. So, what is changing? First off, the syllabus content, most significantly within E1, E2 and the Strategic level. As a result of these changes E1 and E2 will see a name change, E1 becomes ‘Managing Finance in a Digital Word’ and E2 becomes ‘Managing Performance’. Overall, there is a greater focus on digital issues, recognising the increased use of technology in the workplace and the rise of digital products. This is reflected in the Competency Framework with the addition of digital skills. 3. When does it take effect? The first exams for the objective test subjects (E, P or F subjects) will be on 4 November 2019. There is no crossover between the 2015 and 2019 syllabi, so the final objective test exam on the 2015 syllabus will be on 3 November 2019. My advice is to plan ahead, don’t leave it until 3 November to sit your final objective test exam. Give yourself a bit of a buffer and aim to sit your
last objective test exam, on the 2015 syllabus, in mid October. The first case study exams on the 2019 syllabus will be the February 2020 sitting. Students who sit the November 2019 case study and are unsuccessful will have an opportunity to resit, under the 2015 syllabus, using the November 2019 pre-seen. This option will only be available in February 2020 and only for those that are resitting. First-time attempts much be on the 2019 syllabus. 4. When will learning materials be available? The official CIMA learning materials will be available from 1 August 2019. 5. I’ve just completed a level and not started the next, should I stop studying and wait for the 2019 syllabus? No, in general you should try to complete a level ahead of the new syllabus, including the case study by the time the syllabus changes, so ideally aim to sit a case study in either August or November 2019. However, if you have just completed a level there is no need to stop and delay your path to qualification. You just need to plan the best route. To help you plan CIMA have created a transition tool, which is available on their website. In simple terms though, if you find yourself in position where you can’t complete a level before the introduction of the 2019 syllabus, my advice is to attempt those subjects that are changing the least before the syllabus changes and leave those that are changing the most until the 2019 syllabus. That way you are minimising any knowledge gap you may have when you sit the case study and when you progress onto the next level. So, if you are the Operational level and you can sit just one more subject before the new syllabus I’d recommend F1, if you can complete two, do F1 and P1. At Management level, either (or both) P2 and F2. However, at Strategic level the decision is a little more complicated as every subject will see reasonable changes so it is a personal choice. However, if it were me, I’d sit E3 before the syllabus change as it doesn’t involve calculations so the assumed knowledge needed for case study will be the easiest to pick up (case study doesn’t include calculations, but you still need to understand the theory behind them and what the calculations are telling you). I hope this reassures you that the syllabus update really isn’t anything to worry about. With carefully planning the impact on you should be minimal, so plan ahead and keep studying! For further details or advice please refer to the CIMA Global website www.cimaglobal.com PQ • Rebecca Evans is head of product management at Kaplan Financial
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PQ Magazine August 2019
useful apps PQ
Apps that help you work, rest and play Forest: Stay Focused Do you struggle with staying focused during revision or work? Worried you spend too much time staring at your phone? Well, the developers of Forest are. This app’s purpose is to improve focus and encourage productivity in users. With rave reviews from The New York Times and Business Insider, Forest has garnered a high profile. The concept is simple. When you want to be productive you open the app and plant a virtual tree. The longer you keep the app open, the more your tree grows. Once you’ve left the app open for long enough, your tree finishes growing and is added to your digital forest. If you leave the app or use your phone for anything else the tree withers, and if you stay off the app for too long and browse social media or other apps, your tree may even die. Its simple but highly addictive. The visual representation of your productivity helps encourage you to stay off your phone while you work, revise or even partake in some face-to-face socialising. In addition, users earn ‘coins’ from their time spent off their phones. These coins can then be used to help grow real trees. This is done through the app’s partnership with Trees for the Future. When users collect enough coins they can use them to have Forest and Trees for Future plant a tree. So far the app has helped plant more than 465,800 trees so it’s helping the planet, too! • Forest: Stay Focused is available on both Android and iOS.
Evernote Evernote is a note app downloaded by 225 million users. What makes it so popular? The app is incredibly ergonomic and user-friendly. It has a clean user-face and features responsive controls. Where the app flourishes is how you can easily integrate the app with third-party sources and information. For example, the app PQ Magazine August 2019
is accompanied by a browser extension called Web Clipper. This allows you to snap information from websites, whether that be articles, images, PDFs or even the whole web pages, and save and organise it into your Evernote folders. You can even scan documents, such as receipts, and digitise them. This means all of your exam and revision work can be easily accessible in a single location, allowing you to de-clutter your workspace from numerous paper documents and folders, without losing any information. You can tag your notes and files, making it easy to categorise documents and articles, and have numerous folders all within the app. Even more useful is the fact that your notes are saved to your account, meaning you can access them across numerous devices, and even download them to use the app offline when out and away from the internet. Additionally, Evernote lets you share your work with ease. You can share files and folders with other users, and even send them to colleagues or friends who don’t even use the app. • Evernote is available on iOS, Android and for desktop, and has both a free and premium version.
A good night’s sleep If you have trouble with sleeping, or find yourself waking up feeling exhausted you may find yourself tempted to use one of the many sleep apps that are available. However, experts warn that using sleep-tracking apps may have the opposite of their intended purpose. Sleep disorder specialist Dr Guy Leschziner has warned that over-analysing and dataobsessing your sleep may cause you to find it hard to doze off. Leschziner said: “My view of sleep trackers is fairly cynical. If you wake up feeling tired and you’ve had an unrefreshing night’s sleep then you know you’ve got a problem,” he said. “If you wake up every day and feel refreshed, are awake throughout the day and are ready to sleep at the same time every night then you’re probably getting enough sleep for you and you don’t need an app to tell you that.” So, if you’re struggling to sleep, maybe no app is the answer. PQ • Compiled by Edward Netherton 21
PQ ICAEW spotlight
How you can apply your Technical knowledge is a vital part of being an accountant – but it’s not the be all and end all...
skills should be but it was very much left to the employers to develop them,” Birt says. In recent years, employer preferences have shifted. “Since 2013, the skills aspect has become the key area that employers and clients look for – from all professions really, but particularly from chartered accountants,” Birt reflects. The perception these days, he says, is that the technical knowledge is almost a given. Now, those studying to become an ICAEW accountant should expect not only to be confronted with learning the technical knowhow, but also with developing the portfolio of skills both through assessment in the exams and application in the workplace.
B
eing a successful ICAEW chartered accountant increasingly relies on developing soft skills rather than crunching numbers,” says Adam Birt, head of qualifications strategy and development at ICAEW. However, with so many people focused on the figures, both in and out of the profession, that message can sometimes be hard to communicate. With businesses changing their attitude towards ‘soft’ skills in recent years, and many more changes on the horizon, chartered accountants need the skills to adapt now more than ever.
Assess to progress Passing the exams is one of the ACA requirements. The exams assess the knowledge required to become an ICAEW accountant. “ICAEW writes the exams, sets the exams, marks them, assesses them – so we understand everything about the exams and know when the students have passed,” says Kevin Butler, training manager at ICAEW. “That’s a tick in the box of what makes a chartered accountant.” It’s understandable, therefore, that students concentrate so much on exams. However,
A sea change Soft skills and technical skills, according to Birt, have been assessed in the ACA qualification for as long as he can remember. However, it has become increasingly more prominent. “Previously, student focus had mainly been on learning the technical knowledge to pass the exams, while development of skills was primarily on-the-job. The ICAEW did indicate what these
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PQ Magazine August 2019
ICAEW spotlight PQ
skills in the workplace through the ACA. A big portion of the training file is also dedicated to the skills the students are developing through work. “The big chunk of a student’s time in completing the training file is taken up by them completing the professional development ladders,” Butler says. The professional development ladders, a system for quantifying skills development across a broad range of areas, were developed by ICAEW to ensure that students are developing all the skills required of a chartered accountant. However, this is not as daunting as it may seem, Butler explains. Students develop many skills in the workplace that they’re not being trained in directly and may not even realise they’re developing.
which we examine,” says Birt. He points out the four areas of skills development the exams focus on covering: “The first is assimilating and using information, the second is structuring problems and solutions, the third is applying judgement (professional scepticism and critical thinking) and the fourth is concluding, recommending and communicating.” One of the main reasons for developing these skills is that, unlike technical knowledge, which may be subject to change, the skills provide tools through which a chartered accountant can be responsible for their own continuing development. “The knowledge we give during the training is up-to-date at the point at which we give it,” Birt explains. However each student must undertake continuous professional development to ensure that they have the most up-to-date knowledge and specific skills particular to their role.
Climbing the ladder Although they might not be receiving specific training in these skills they’re still hugely important, says Butler. “I tell students: ‘Without them you wouldn’t be able to talk to anybody, you wouldn’t be able to communicate either upwards, downwards, or across with your colleagues, you would be scared to make decisions and wouldn’t be able to sort out any problems you had. You really wouldn’t be useful to your business in the slightest.’ This is where it starts to click with them.” And he’s right, the areas focused on in the professional development ladders are essential to being able to function in a workplace and apply the technical knowledge gained through study. As the steps increase and the skills the student is required to demonstrate get more complex the student may even have to look outside work to achieve them. “Or the employer might have to think long and hard about how they might challenge their student to demonstrate that,” says Birt. According to Butler, something that he particularly appreciates is employers changing what they’re doing to accommodate the development of a student.
The training file As students pass exams, their results will be recorded in their training file. A training file is confidential and specific to each student. But it is not just a digital record of exam results. Alongside this, they keep track of how much work experience they have acquired and, of course, the hugely important ethics covered
Log it or lose it “When I first read about it I thought it was going to be a bit of a formality but, now I’ve actually been through the process, I think peer reviews helped me massively,” says Jeremy Cooper, finance analyst at Aston Martin. Now approaching his final year of study, Cooper explains that going through the log and
keeping track allowed him to see what he needed to focus on and he learned how to justify the things he’d worked on. “I got in a process of logging everything I worked on, on a frequent basis,” he says. This means that now, when presented with a given scenario, he is confident that he’s been through that and can justify it in his training file. Having to achieve specific skills also drives an individual to seek out opportunities. “At the beginning of this process I found it quite difficult, as I tried to match an example from my work with a point, where now I don’t do that at all,” Cooper says. Instead he considers a point he wants to achieve and spends the next six months working towards that. This led to Cooper becoming involved in a systems deployment in his previous workplace. After discussing the skills he needed to demonstrate on the professional development ladder with his qualified person responsible for training (QPRT), it was decided that this was the best way to achieve them. “We spoke to the finance director and asked if I could be part of the systems deployment because it helped my learning and I had to at some point because of my development log,” Cooper explains. It is the requirement to reflect upon and consider the specific ways in which skills can be achieved that Butler thinks is the purpose of the professional development process. “Students have got to think of an example of how they have gained skills. This process helps achieve two things; it is a step on the ladder and, hopefully, it also makes them realise that, as each month and year goes by, they are actually so much more capable of coping with the real world they are about to enter.” With the right direction and reflection, a student will become far more than a regurgitator of knowledge. For Cooper, this is essential as he says it gives you all the attributes and ammunition you need to be able to push further in your career and attain better and better positions. He also thinks it enables you to become a better leader and nurturer of others. “What this process does is it gives you the confidence in yourself to know you’ve covered all the bases and now it’s time to share that knowledge.” PQ • Thanks to the ICAEW for this article Reproduced with the permission of ICAEW, this article was first published in Vital (June 2019)
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ACCA & CIMA Exams Visit OpenTuition.com to benefit PQ Magazine August 2019
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PQ Global Learning Providers Conference
Here’s more great feedback from the ACCA online GLPC. The examiners tell you exactly what you must do to get a pass PM The examining team started with the areas that students do better in. They said calculations are generally performed well – when students have variance calculations they are done competently, as are ROI and RI calculations. One good thing is that students have got the message that attempting all OTs is a good idea. However, while variance calculations are done well, students seem to struggle with discussing variances in relation to managers’ performance. PQs don’t really understand why they are calculated, or what they tell us about how the company is performing. Similarly, whenever there is a transfer pricing question students seem to recoil in horror, no matter how easy the examiner tries to make them. Students just don’t like them and there are always problems. Sitters need to bring forward MA knowledge. They don’t seem to have that knowledge (flexed budgeting was cited as one example here). Discussing performance measurement in a public sector context, when not just talking about profit, is also a problem for students. The examiner asked CBE students to be familiar with the functionality of the spreadsheet. It makes certain calculations quicker. There were no significant changes to the syllabus in 2018. Just A3b, where profit was added to life cycle costs in manufacturing and service industries. From September 2019 to June 2020 there will be more of a focus on information systems and technology (A) in the PM paper. The existing syllabus area has been reordered. Additions to syllabus A1a: Explain the role of information systems in organisations. A1b: Discuss the costs and benefits of information systems. A1c: Explain the uses of the internet, intranet, wireless technology and networks. A3b: Includes customer relationship management systems (CRMs). A3c: Describe the characteristics (volume, velocity, variety) of big data. A3d: Explain the uses of big data for enhancing decision-making. Amendments Clarifications on learning outcomes related to topics, which include graphs/diagrams. You will need to interpret rather than draw them! Removal of some learning outcomes, eg C2f on spreadsheets, is out. Finally, watch out for new articles on relevant costing and short-term decision-making, and role of technology and systems in the PM framework. The already published budgeting articles are also worth a read! TX The examiner said that when it comes to the 24
What exam
CBEs quite a few (too many) candidates come to the exam unable to use the spreadsheets. He said it was like they had never seen a spreadsheet before! Some candidates are using the spreadsheet like a Word document, which makes it difficult to mark. The examiner wants you to practise using the CR workspace via ACCA Student Support. You need to be familiar with functions before the exam, and not become familiar at the exam terminal! Candidates need to practise on up-to-date questions, too – this is a tax exam after all. When it comes to the SUM function many students are either not using it at all or not using it properly – they are adding up manually or add up each cell individually (A1 + A2 + A3, etc). You will still get the marks, but you are wasting your precious time. The examiner also wants negatives to be included as negatives. When it comes to working in cells he only wants simple calculations included. Something like a corporation tax calculation (200,000 x 19%) is OK. What isn’t recommended is a whole capital allowance computation worth three or four marks. Don’t net off figures in cells either; that will confuse markers and is not good practice. If in the spreadsheets you have done the workings then it is good practice to crossreference totals rather than copying the numbers over by hand. That helps markers find the workings. There is also less chance of errors. When it comes to the layout of workings, the examiner recommends, after marking quite a few papers, you make your answers vertical rather than horizontal. It is easier to scroll down for both students and markers. There appears to be a problem with spacing,
too. Students are leaving anything up to 100 lines between the main computation and workings – often without any reference, either. The best option is to move the workings up on completion (cut and paste), explained the examiner. Again, you should have practised doing this. Better students put negative numbers in brackets, which is better than a minus sign, and better still in brackets and in red (right click and format). That would be a good use of time if you have five minutes at the end, he suggested. The examiner reminded you there is also an undo button if you make a mistake. Perennial problems are too many workings. Another problem is candidates not showing workings, even for complex computations. Students need to always indicate by the use of a zero (0) any items not requiring adjustments, which are not taxation. The examiner said that written answers are typically quite short, but need to be precise. “This is the nature of taxation,” he stressed. He felt that the 10-mark questions cause problems for candidates. PQs are often all over the place here. A warning also went out that questions may be different from what has been set previously. The exam is moving on to the Finance Act 2018. Here are some of the changes: • Dividend rate being cut from £5,000 to £2,000. Makes incorporation more costly. • Childcare – out of syllabus. • Students must know the capital allowances – they have changed, so use up-to-date material. • Cash basis for property income has come in. Now the default option. • Corporate losses – some quite important PQ Magazine August 2019
Global Learning Providers Conference PQ
miners want changes there – set-off is now far less restrictive. • Indexation allowance frozen at December 2017. Calculation of factors no longer examined. Instead, indexation factors will be provided and students will still be expected to know they cannot create or increase a capital loss! One syllabus change is to do with loan relationships rules, and candidates will be expected to be able to identify whether loan interest payable is for trading or non-trading purposes. FR FR candidates might have been surprised by the sudden appearance of analysing a statement of cashflows, admits the examiner. This is something you might see more of, and it is very much in the syllabus. It just hadn’t been examined for a little while. The examiner said there are 25 accounting standards in the FR exams, and he is expecting students to have knowledge of the core principles of all of them. So you have to learn them all, perhaps by creating a one or two-page summary for each standard. That should include the key summary and key rule. So can you explain each standard and what it does? The examiner is trying to move this exam away from candidates just working the numbers and learning a technique. You need to know the ‘why’. He wants you to get to love the standards, or perhaps find a lecturer who is passionate about them. “Don’t be afraid to tell people the standard you love,” he said. His favourite is IS38 intangible assets, and feels IS8 is a dreadful one. No one is, he claims, too cool not to have a favourite – remember, this is an FR exam and no one is too cool for anything. Section A could be the trickiest section – it covers the entire syllabus, so there will be questions on niche areas. You need to learn to move on if you are taking too long answering one of the questions. Candidates can expect section B to be around the larger accounting standards. All five questions are standalone. The common scenario here will be one, or maybe two, different accounting standards. That will be a mix of narrative and calculations around a real life scenario. Section C has two big questions, on the preparation of financial statements and on interpretations. The examiner also believes we have now moved away from any ability to question spot. AA The examiner revealed that pass rates are generally higher in the June and December sittings. The pass rates for 2018 were 39%, 40%, 37% and 38% respectively. PQ Magazine August 2019
There have only been some minor recent syllabus changes, the main one being internal audit moving from syllabus area A to C. With OTs, she said candidates must have a good understanding of the IASs and their key requirements. You are apparently performing well with ethics and governance questions. However, many candidates struggle with substantive testing. She is worried that some PQs don’t seem to be able to identify the appropriate testing from a list of procedures, or able to differentiate between controls and substantive tests. Completion and reporting is another weak area. When it comes to the OTs, the distractors catch out many candidates, and there is a concern you are rushing through these questions. In June 2018, candidates spend on average two minutes on each question; in June that rose to 2.2 minutes, and in December it was 2.5 minutes. Candidates spending 1.5 minutes or less generally scored poorly in this section. When it comes to section B exam, sitters in recent sessions have noticeably performed poorly on pure knowledge questions. The examiner reminded candidates that the key knowledge areas include: audit risk; materiality; internal control evaluation; fraud; and law, regulation and responsibility. She pleaded that you don’t just write everything you know about a topic. Candidates who do don’t generally do well in this paper. When it comes to planning and risk questions candidates perform ratios well, although the examiner said you should know all the ratio formulas, and not just cherry-pick the key ones. Explaining audit risks is another key technique candidates need to grasp. She was pleased that there was less confusion between the auditor and management’s response in answers. When it comes to internal controls candidates are struggling to identify key controls. They are also not clearly explaining the implications of deficiencies, and their recommendations are not addressing any deficiency. Impractical recommendations are also common. The examiner is disappointed too, with the understanding of tests of control. She doesn’t want to see the repeat of the word ‘check’! Unfortunately, she said there were many poor answers to substantive procedure questions. When it comes to substantive testing the answers are often too vague (eg source without an action), not tailored to the scenario, just a generic list of tests, and/or provide an insufficient number of tests for the marks. Performance on reporting questions had improved – until 2018. Candidates continue to lose marks for not discussing the issue adequately. Answers must also clearly state when an unmodified opinion would be appropriate.
There are a few changes to the syllabus September 2019 to June 2020. The areas affected are quality control, internal controls, corporate governance, and data analytics (just need a broad understanding). Finally, from September 2019 all exam questions will be set at 1 July 20X5. FM The examiner began his session by stressing no part of the syllabus can be avoided – as far as candidates are concerned, anyway! Overall, the 2018 exam results were ‘encouraging’, he said. The figures for March, June and September, of 46%, 48%, and 47%, were all much of a muchness. December, however, saw a weaker performance, with a 43% pass rate, but the first exam in 2019 was much healthier, at 50%. This examiner has been an examiner for ACCA for 18 years, and he believes over this time the academic rigour has been maintained through the various updates. The examiner also felt the move to CBE exams has been successful in terms of assessment and the quality of marking. The big problem with this paper is candidates’ inability to ‘discuss’. He explained that many discussion answers are very brief, or in list format, or lack discussion and are more general in nature. The examiner stressed that when a question asks for ‘discussion’ it wants you to explore the subject. That’s the requirement. He explained that in extreme cases in investment appraisals questions candidates’ score full marks for the calculations but get very little for the discussion. They have learnt the various appraisal methods, as they know one will come up. But to pass this paper you have to be competent in both – calculations and discussion. You have to know why you are doing the calculations. Looking at some answers to questions set in 2018, he said there was a weak knowledge of the statement of profit and loss. For example, students didn’t realise they needed to recalculate tax liability after changing PBIT. “We expect candidates at this level to have a good knowledge of financial statements,” he said. Students need to have a better knowledge of rights issues, too. And answers to questions about Islamic finance also showed confusion. Another area to beef up is your understanding of probability analysis. When it comes to investment appraisal calculations some basic errors seem common – such as including interest payments and using the wrong discount rate. Some candidates lack knowledge of the EAC method. Additionally, you need to understand the difference between a working capital investment policy (good to compare companies) and a working capital financing policy (individual company). They are completely different things and you must understand the difference. The examiner keeps mentioning this in his reports. When it comes to CBEs, the examiner asked candidates not to write answers across cells that then spread across several pages of the spreadsheet. That makes it so much hard for markers. PQ 25
PQ your CIMA career
It pays to develop a
digital mindset Embracing all things digital will pay dividends in your career, says Martin Farrar
O
ur recently published ‘Future of Finance research’ establishes that to survive in the digital world you need a digital mindset, combined with strong human intelligence and technical skills. This is why since the launch of our updated Professional Qualification and CGMA Competency Framework, at the end of January, you’ve probably heard us talk quite a lot about the need to learn, unlearn and relearn. Before the advancements of new technologies accounting professionals could rely on their skill-base for a lot longer than you can now. Today, even the highest valued skills and knowledge have a rapidly decreasing shelf-life. ‘Agile
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Finance Unleashed’, a piece of research the Association carried out with Oracle, found only 10% of finance teams have the skills they need to support the digital ambitions of their organisations. This skills gap is impeding the ability of finance teams in all kinds of organisations to take advantage of new technologies and support enterprise digital transformation. In this environment to survive in a digital world you must embrace the process of learning, unlearning and relearning. So while previously it would have been enough to pass your CIMA exams with flying colours, to be successful in the digital age you have to
engage consistently and update your skills as you progress through your career. To develop full digital awareness you have to understand the opportunities and threats that could arise from the deployment of new technologies and issues such as cyber security. Awareness and understanding risks and appropriate responses in this area is critical for everyone from the board of directors to the entry-level employees. And especially so, since according to the World Economic Forum’s 2019 Global Risk Report, data fraud/theft and cyberattacks rank fourth and fifth on its list of topranked global risks. With 40% of transactional accounting tasks expected to be automated by 2020 (according to research by professional services firm Accenture), understanding the role of technologies like RPA (robotic process automation) and how they impact your role, is becoming ever more important. In addition, things like blockchain, which provides finance with a decentralised, anonymous and secure digital way to transfer assets between two parties without the need for a third party, may soon become part of your everyday working life. While you may not need to be a digital developer, you will need to understand the basics and their value to business and finance. To support you in your learning and ensure that businesses can get the staff with the right skills and mindset we have developed a mix of free opportunities including: our new learning and resource centre and fundamentals series, webinars, regional events and our blog site. All of these resources provide you with opportunities to understand how new technologies like blockchain and RPA are affecting the profession and your work. This is important, as we know the role of the finance professional is transforming for the good. The pay-off for those who invest in up-skilling and take on a digital mindset looks rosy, but the same might not be said for those who don’t invest in their professional development. So, be sure to set aside some time to advantage of the free resources. PQ • Dr. Martin Farrar, Associate Technical Director – Management Accounting, The Association of International Certified Professional Accountants
PQ Magazine August 2019
study advice PQ
Motivation mantras Struggling to get going with your studies or revision? Then these top tips from top tutor Cath Littler will help
S
tarting a big task can be daunting – and studying is no exception. When you throw work and home commitments into the mix it can be tempting to put learning off until tomorrow (and the day after, and the day after that…). However, it won’t do you any favours in the long run. Students of all ages often joke that the most mundane chores suddenly become urgent when you’ve got revision to do. But before you pick up the duster, try putting the short-term pain into context of your ultimate goal. Practising doubleentry bookkeeping today will bring you one step closer to that new job, promotion or your own business that you’ve dreamt of. If getting started is too hard then try breaking your tasks down into manageable chunks, such as simply switching on the computer or logging onto the website - this should help get you going. Many people find the ‘pomodoro’ technique helpful, whereby you focus for a solid 25 minutes, followed by a fiveminute break, as it puts some structure into study time. There are lots of apps that can help you with this, but a good
old kitchen timer can be just as effective! If you are prone to procrastination a more effective tactic may be to set out to achieve a certain goal, such as to complete five exercises rather than study for a set time. It can be very satisfying to count down the remaining tasks, and avoids the temptation to idle away allotted study time with something unproductive. In the short term, self-bribery can be an effective motivation. Your treat doesn’t have to be elaborate – you’ll be surprised what the promise of a cup of tea and a chocolate digestive does for your work
ethic. Treat your family too – if the children (or your partner) leave you alone to study, then reward them with some attention afterwards. It’s important to remember that accounting is a skill. Just as you wouldn’t expect to master the guitar after your first lesson, don’t be disheartened if you don’t pick up a concept straight away. Keep practising as you go and it will start to become second nature – which will make revision much simpler when it comes to exam time. Ultimately, studying is about the art of self-discipline. The more regularly you study, the better you will get at it – but it may be a challenge to begin with, especially if it’s been a while since you last hit the books. That said, there will be days when you truly can’t face it, and that’s okay. On these occasions it may be better to give it a miss and come back to it when you’re feeling refreshed, rather than slogging through material without fully taking it in. Just make sure you’re honest with yourself, and don’t make a habit of giving yourself lots of days off! PQ • Cath Littler is the Head of L&D (Accounting) at Mindful Education
PQ AAT awards
And the winners are…
Karen Walker
S
tratford-Upon-Avon, the home of Shakespeare, was the venue for the 2019 AAT Training Providers Awards. The starstudded night saw some familiar winners, with South Devon College picking up the Innovation in Course Design and Delivery, and Premier Training walking off with the Large Training Provider of the Year. The AAT Student of the Year award went to Samuel Bytheway. He said: “It’s an incredible honour to have all my work over the last year recognised with this award, and going forward it will help me remember that I can overcome adversity and achieve what I set my mind to.” Bytheway also thanked everyone at Peak Accountancy Training for their continual support and encouragement. AAT Tutor of the Year is Abingdon & Witney College’s Karen Walker. An overwhelmed Walker said: “To win an award doing a job that you really enjoy doing, it didn’t seem right somehow, but I feel absolutely privileged and honoured.”
The full list of winners are: AAT Student of the Year: Samuel Bytheway, Peak Accountancy Training AAT Distance Learner of the Year: Alex Thom, PQ Magazine August 2019
Avado AAT Apprentice of the Year: Rebecca Elliot, New College Durham AAT Tutor of the Year: Karen Walker, Abingdon & Witney College Apprenticeship Training Provider of the Year: The Apprentice Academy Distance Learning Provider of the Year: Accountancy Learning Pauline Sparkes Award for Best New Training Provider: Harlow College Small Training Provider of the Year: System & Skills Training Concept Medium Training Provider of the Year: New
College Durham Large Training Provider of the Year: Premier Training Innovation in Course Design & Delivery: South Devon College AAT Champion: Newcastle City Learning AAT Lifetime Achievement – AAT Tutor: Jeff Grimston (pictured below)
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PQ viewpoint
Infrastructure gap must be bridged Alex Metcalfe offers some advice to government on how to bridge the UK’s investment gap
funding schemes, such as value capture, and aligning long-term infrastructure plans with the annual budget process to minimise the use of more expensive private finance.
T
Planning and regulatory barriers The third and final barrier concerns planning and regulatory barriers, for example where governments fail to monitor and use proper oversight in delivering infrastructure projects. To guard against this here, the next Prime Minister should prioritise professionalising the UK finance function, while also bringing forward whistle-blowing legislation, to give public servants the support required to challenge unethical behaviour that can derail infrastructure projects.
ory members are electing their new leader and the next PM. Boris Johnson or Jeremy Hunt’s premiership will be dominated by a few issues – solving the Brexit deadlock in Parliament, funding public services and healing the country’s divides. While it hasn’t featured as prominently as the European issue, infrastructure is of key strategic importance to the UK economy. It is a major employer and driver of economic growth. No one would deny the challenge successive governments have faced in delivering significant infrastructure projects in the UK – whether Heathrow’s third runway, HS2, Crossrail or the A9 road connecting Falkirk with Thurso via Stirling, Perth and Inverness. Complex project and cost management is clearly required in infrastructure. Clear, consistent and effective decision-making are critical throughout the process as the projects are selected, financed and built to provide taxpayer value for money.
Infrastructure gap The term ‘infrastructure gap’ means the difference between the infrastructure investment needed and the resources made available to address that need. This global infrastructure investment gap is set to grow to $14 trillion by 2040, and meeting this challenge as a nation requires a vision from the next government about closing this gap with building new projects and maintaining existing ones. Although there are many obstacles to these
infrastructure needs being met, the biggest barrier the ACCA and our Canadian counterparts identified in a joint report this year was a lack of political leadership. Lack of political leadership The research found that a lack of political leadership can often manifest in the prioritisation of new (preferably high-profile) projects, over the necessary maintenance of existing public assets. To help mitigate this bias, the Government should collect data on the potential of existing infrastructure and on the performance of past projects. Another solution could be to publish an annual assets and facilities report, which includes detailed evidence on the backlog of maintenance of existing assets and the proportion of outstanding high-risk maintenance. Lack of finance and funding The second barrier we identified was around the lack of finance and funding – specifically the accounting for higher costs of private capital. To close this finance gap in the UK the next Government should consider innovative revenue
Accountants bridging the gap Our report also demonstrates how bringing accountants to the centre of infrastructure decision-making will improve the selection, financing, and delivery of projects. The accountant’s unique skills, experience and perspective can mean the difference between success and failure in these projects. Let’s bring them in across the entire life cycle and as a critical member of the professional team. We face the major challenges of needing to adapt to changing climates and demographics and respond effectively to increased cyber threats. The next Prime Minister’s attention may well be dominated by Brexit – but each of these trends together means our country needs quality infrastructure, and much more of it. PQ • Alex Metcalfe is the Head of Public Sector Policy in the Professional Insights team at ACCA
PQ the troubleshooter
A whole lot of costs going on PQ magazine’s troubleshooter Phil Dunn explains everything you ever wanted to know about costs Problem: I am a Level 3 student and wish to understand a number of terms associated with cost that includes: cost, cost centre, cost unit, cost allocation and cost apportionment, direct cost, indirect cost or overhead. This article should be of interest to AAT and ICB students and those preparing for Level 3 Apprenticeship. Answer: You will find as you progress your studies of cost and management accounting you will encounter a vast amount of terminology – enjoy your journey. • Cost: This is simply the amount of expenditure incurred or attributable to a specific item or activity. • Cost or expense centre: A location or activity to which cost can be allocated or apportioned. Such costs are the responsibility of the expense/cost centre manager. Example: Cricket ball manufacturer (cutting, stitching and finishing). • Cost unit: A unit of product or service to which cost can be allocated or apportioned. Examples: Education – per student hour Quarrying – per tonne Brewing – per barrel Hospital – per outpatient day. Restauran – per cover/meal served • Cost allocation: The allotment of whole items to cost centres or cost 28
units. Example: the analysis of payroll costs to specific cost centres by the use of cost codes. • Cost apportionment: The allotment of proportions of whole items to cost centres or cost units. Example: rent and rates would be apportioned to cost centres on the basis of area occupied. • Direct cost: One that can be directly identified with and allocated to a cost centre or cost unit. For example, in the manufacture of cricket boots the direct labour would be that cutting, stitching and finishing the product. The direct material would include the leather for the upper, the rubber sole and metal spikes, the eyelets and the laces. • Indirect cost or overhead. Such costs are jointly incurred and are apportioned to cost/expense centres. • These are classified as: production, administrative and selling and distribution overhead. Examples in the case of a business manufacturing cricket boots would include: production – heat light and power, repairs and maintenance and rent and business rates of the productive unit; administrative – expenditure on items such as office salaries, insurance of the office building, postage and telephone charges; selling and distribution – includes both marketing and costs related to the distribution of finished product. PQ • Dr Philip E Dunn is a freelance author and technical editor for Kaplan and Osborne Books PQ Magazine August 2019
careers PQ
What is your 1% better? Danny Crates, the former British Paralympic athlete and world record holder for the 800 metres, was the keynote speaker at the ICPA’s Practice Evolution London conference. There he revealed his five elements for success: 1. The true meaning behind a goal is key: What does success look like to you? And why do you want it? Tap into this motivation. In order to achieve something you need passion and ambition. It is important to constantly remind yourself of your goal AND the reason behind it. 2. Break big goals down into smaller ones: Something that may have once appeared to be unreachable can now be viewed as a lot more obtainable. When Danny needed to improve his time by four seconds over four years (the equivalent of 30m on the track) he broke it down to an improvement of one second a year, or half a second every six months, or a quarter of a second every 12 weeks. As Danny said: “Athletes always want to improve by 1%. What is your 1% better?” 3. When life is going well, it’s easy: Failure is ok – it’s inevitable. When you fail at something you can do the same two things you could have done had you succeeded – you can sit back and sulk or you can move forward and set
Danny Crates new goals. Learn from your mistakes and move on. 4. Sometimes we all need a kick up the backside: It doesn’t matter how motivated we are, sometimes we need an extra push because talent is not enough. Talent will only get you so far. It’s your work ethic that counts. 5. Control the controllables: Be as prepared as you can be for the situation you are facing, whether that’s an 800m sprint or an F3 exam. You can’t control the weather on the day, or how well the person next to you performs. But you can control your training, your diet and how much rest you got the night before. Make sure that at that moment before your race (or exam) starts you have no regrets about how you could have done something differently – because if you know you’ve done everything then there is no need to worry. • Francesca Cullaney PQ Magazine August 2019
Life at CIPFA Chris Glennie is the institute’s new Director of Education & Lifelong Learning. He has a degree in Modern Languages from Oxford University. His claim to fame? “Michael Gove was a contemporary of mine at university. He hasn’t changed much…” What time does your alarm clock go off on a working day? 6 am. What’s the first thing you do when you get to your desk? Fire up my laptop. What’s on your desk? Laptop, screen, phone, desk tidy, water bottle, Post-it Notes. What’s the best thing about where you work? Casual Fridays. Genuinely hilarious at times. Where’s your favourite place for lunch? For everyday, Lazio Sandwich Bar on The Minories. For business the Tank & Paddle, Minster Court – the best pizza outside Italy.
What (or who) can you see when you sit at your desk? The communications team. Creatives… Which websites are your favourites and why? Cricinfo, because cricket is life. Also Twitter, because it’s (sadly) addictive. Which websites do you use for work? Wikipedia – so as not to embarrass myself in meetings with accounting terms I don’t understand. Also LinkedIn. How many hours a week do you spend in meetings? 2530. What time do you leave the office? 5.15pm.
How do you relax? Listening to Test Match Special. What’s your favourite tipple? Classic G&T. How often do you take work home with you? As infrequently as possible, as often as necessary. What is your favourite TV show? Right now, Big Little Lies. Summer or winter? Summer. Pub or club? Pub. Who is your hero? Abraham Lincoln. If you had a time machine, where would you go? November 8th 1987, Calcutta, India, and I’d get a message to Mike Gatting not to play the reverse sweep.
schemes that help to invest in staff and impact on their career pathways.”
been a finance manager at Capita since 2003.
In brief Where are the mentors? Fewer than half of AAT members have ever received mentoring during their career, according to a new study from AAT. This is well below the industry average. More worryingly, just 7% of AAT members report that their organisation runs a formal mentoring programme. AAT CEO Mark Farrar said: “A company is only ever as good as the sum of its parts – which is why employers should be seeking to implement effective mentoring
Capita ‘worker’ promotions Finance manager Lindsay Browne has been appointed to the Capita board. Along with project manager Joseph Murphy, the pair are the first ‘rank-andfile’ workers to be promoted to the board. Both will be paid £64,500 a year on top of their salaries. The pair beat competition from about 400 other internal candidates. Browne has
Hotdesking a waste of time Workers who hotdesk waste up to two weeks a year just finding somewhere to sit! That means the average ‘hotdesker’ spends 18 minutes looking for a free workspace – with one in four spending up to half an hour finding somewhere to put their laptop. Research from Brickendon found hotdesking also reduces productivity levels by almost a third on average.
The PQ Book Club: books you should read Shoe Dog: A Memoir by the Creator of Nike, by Phil Knight (Simon & Schuster Ltd, £9.99) This is one of the best of the more recent business books. In 1962, Phil Knight borrowed $50 from his father and created a company with a single mission – to import high-quality, lowcost athletic running shoes from Japan. The rest is history. The book covers his early days as a long-distance runner and his post-graduation travels around the world, which led to an early association with the Japanese Onitsuka Company, who made Tiger running shoes. As always seems to be the case, however, the development of the business was far from smooth. After falling out with his Japanese suppliers, the mid-
1980s was a key time, and a marketing campaign with basketball superstar Michael Jordan proved to be of key significance. This is an excellent read for PQ accounting students, giving a fascinating insight into the growth of one of the world’s largest sports brands. Seeing the bigger picture is a recurring theme throughout the book, and one of the key career decisions made by Knight, a qualified CPA accountant, was to give up his role as an accounting academic at Portland State University in order to devote more time to developing the company. Of particular interest to PQs will be the almost perennial struggle Nike faced, even in its
established years, with cash-flow difficulties. The book also reveals the origins of the infamous swoosh logo, involving a $35 payment to a recent graduate and the inspirational choice of the name of the Greek goddess of victory, Nike – which just goes to show that sometimes the simple ideas are the best. PQ rating 5/5 As Phil Knight’s book demonstrates, an accounting background is an excellent springboard for a business career! • Review by Martyn Jones, Senior Lecturer in Accounting at Winchester Business School 29
PQ got a story, funny or serious, you want to share? Email graham@pqaccountant.com
FIND THE ENERGY
EPIC FAIL! The University of Manchester recently had to apologise after it sent an email to students telling them they had all failed their exams. The email told dozens of chemical engineering students on a master’s programme that they were being relegated to a bachelor’s course. A correction was quickly sent eight minutes later!
It appears the government’s sugar tax is having little effect on the sales of students’ and builders’ favourite ‘energy’ drinks. UK consumers knocked back 124.6m litres of the stuff last year. Total energy drink sales were up £11.8m to £67m. That said, there has been a move to diet versions from leading brands such as Red Bull and Monster. Here sales were up 16% to £9.3m. There was some good news, however – wider sugary soft drink sales have dropped 8.8% since the tax was introduced 15 months ago.
JET-SET HMRC Guess who came top of the UK government’s domestic jetsetting league? yes, you are right HMRC! Tax officials took more plane journeys in 2017/18 than the MoD, MoJ and Cabinet Office combined. In all workers took 36,636 domestic flights. The most common flight routes were between Gatwick and Glasgow, Manchester and Belfast, and Newcastle and Belfast.
THE QUEEN’S CHAMPION Accountant Francis John Fane Marmion Dymoke has an unusual claim to fame. He is in fact the Queen’s Champion and 34th Lord of the manor of Scrivelsby. The office of King’s Champion was originally granted to Robert Marmion, 1st Baron Marmion, by William the Conqueror. From then until the 19th century the officer’s role was to act as champion for the monarch at his/her coronation. In the unlikely event of someone challenging the monarch’s title to the throne the champion was required to ride in full armour into Westminster Hall and await the challenge to all comers!
’ WEV E Crystal Maze fun No more leaping around a room in ill-fitting jump suits for you! We have three great funfilled books to give away this month, based on the legendary TV show. ‘The Crystal Maze Challenge’ is packed with exciting activities and challenges inspired by the famous Crystal Maze zones. To be in with a chance of winning one of these books just send your details (name and address) to graham@pqaccountant.com. Head up your email ‘Crystal Maze’
CASHLESS MONOPOLY
The move to a cashless society has even moved the world’s most famous board game – Monopoly. The game’s maker Hasbro has launched a voice-activated version of its legendary game. You now get a large plastic hat in the middle of the board that serves as an electronic bank and banker. Gone are the paper money and bank cards. It is also claimed that no paper cash makes cheating impossible! But will it be the same game?
WILL TYRES BE THE NEXT TAX TARGET?
SME SHOCK A worryingly 70% of small business owners said they would not recommend their accountant to others, and perhaps unsurprisingly a quarter said they are likely to switch accountants, according to research from Xero. On top of that, a third of SMEs would tell others to avoid their accountant, as they feel they don’t understand their business challenges, don’t provide the right sort of support, or charge too much and aren’t keeping up with technology.
Tyres should be subject to an air pollution tax because they release thousands of toxic particles as they wear down, says leading environmental consultant Dominic Hogg. Hogg said tyres accounted for a growing proportion of particles from cars and a tax is needed to encourage drivers to choose ones that wear more slowly and have lower emissions. While regulations on exhaust emissions from new cars have become tighter there are no limits on emissions from brakes and tyres – both of which can damage lungs.
GOT THE L OT Pick and mix ‘Alive – Digital Humans and Their Organisations’ is just one of the books up for grabs this month. We also have books reviewed by the PQ Book Club: ‘How To Present To Absolutely Anyone’; ‘Live Like a Stoic – 52 exercises for cultivating a good life’; ‘Goliath’s Revenge – how established companies turn the tables on digital disruptors’; and the ‘Positive Thinking Pocketbook’. Send your name and postal address to be entered for our lucky dip. There will be five lucky winners for this giveaway. Head up your email ‘lucky dip’ and send it to graham@pqaccountant.com
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 August. The main draw will take place on Monday 12 August 2019.
TO ENTER THESE GIVEAWAYS EMAIL GRAHAM@PQACCOUNTANT.COM 30
PQ Magazine August 2019
Accountants will save the planet! Thursday 21 November 2019 The Business School, London South Bank University Following the success of our previous accounting conferences, we are hosting a packed day conference looking at green accounting issues. Hear from renowned experts and industry leaders on current and future aspects of green accounting. Network with other professionals and join the discussion.
If you’re interest e green ac d in counting issues, t his is to be mis not sed!
• What are the practice implications of carbon taxes? • How do we account for corporate social responsibility? • What are the developments in green financial reporting? • How can we maximise non-renewable resources as accountants? • Rather than accounting for profit or loss, how can we best look at the effect on the environment?
Booking will open in Autumn
Winner of Innovation in Accountancy PQ Awards 2019
304-1819-MAR-BUS-PQ CONFERENCE AD_270x210_V2.indd 1
03/06/2019 16:37
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