PQ magazine, July 2022

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July 2022

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LATEST AUDIT REFORMS A MISSED OPPORTUNITY

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he UK’s government is claiming its revamp of corporate reporting and audit regime is going to help restore trust in big business.

The dominance of the Big 4 audit firms is being tackled, it said, along with the creation of a new regulator “to reduce the risk of sudden big company collapses, safeguard jobs and reinforce the UK’s reputation as a world-leading destination for investment”.

But there is a problem - not everyone is convinced this will actually happen!

And it’s not just the usual critics who think this. Lord Sikka told PQ magazine that the reforms will do nothing to improve the audit regime. Where, he asked, were the reforms of audit independence, liability and public accountability?

Lord Sikka said: “The government has missed an opportunity to restore confidence in audits and corporate governance.”

He was joined by an unlikely ally, ICAEW CEO Michael Izza, who claimed the government’s approach has been “half-hearted and lop-sided”. Izza is really worried that the lessons from Carillon and other recent company failures have been ignored. He

even suggested that ministers were wrong to believe what they have served up will help to restore public trust in big business.

Another critic, Professor Richard Murphy, said the government is clearly not willing to embrace the idea that market failure is possible.

He is concerned that auditing has been left to reform itself, and this means the government has copped out, he said.

A real worry will be the fact that even the Financial Reporting Council (FRC) is not enamoured by this once-in-a-generation reform. OK, it likes the creation of the Audit, Reporting and Governance Authority (ARGA), but said: “The Government’s decision not to pursue the introduction of a version of the Sarbanes-Oxley reporting regime is, the FRC believes, a missed opportunity, to improve internal controls in a proportionate, UK-specific manner.”

The ACCA sees this as a major omission too, saying companies and company directors need to report on the internal controls over financial reporting.

• Check out more about the changes on page 18 and 19 of this issue.

Your ACCA June exam feedback W ho are the ACCA TX examiners, asked one sitter after the June exam. They felt they were “either a super smart person or someone with a twisted sick mind. I am so angry!” Many PQs found the exam ‘difficult’ and ‘hard’, but what really annoyed them was the questions were nothing like the mocks. This really gets a student’s goat big time!

Many sitters also struggled with the SBL sitting. They found the questions poorly worded and just ‘too vague’. One sitter said: “I thought it was bad, nothing like the mock exams.” Many struggled to use to the exhibits, too.

Technical issues with remote exams are still causing problems for many. One SBL PQ said their system froze four times, and “after the

last one it did not allow me to join”. Another said their screen froze in the last 15 minutes and they were not allowed to write anything else.

For one PQ their OnVue shut down 30 minutes before the end of the exam, and PQ magazine has heard of frozen screens for AAA sitters, too.

• See page 26 for all the feedback.

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July 2022

IN THIS ISSUE A note from the Editor PQ magazine has been out and about a lot this month, which is good. First there was Accountex at Excel, where we joined a record 8,000 accountants who all seemed gagging for the chance to meet real people again! I was also wandering around the impressive new Tottenham Hotspur Stadium recently for the Digital Accountancy Show. I bumped into Dominic Noakes, and we got chatting. I soon discovered he’s a director with Haysmacintyre (and a Spurs fan, so no one is perfect), and he was full of praise for PQ magazine. As an ACCA self-studier he said that PQ was a life-saver when he was studying, and really helped get him to where he is today! That’s exactly what we are here for Dominic, glad to have been of service. It was also great to be ‘master of ceremonies’ at Future Connect Training’s inaugural awards ceremony. It really was a great celebration of success.

So, what do we have for you in this month’s issue? There’s our take on the government’s audit reform, feedback from the June ACCA exams, and we take a look at the new Q2022 AAT qualification. We also like the idea that June pass rates, in the UK at least, could rise because of the four-day bank holiday. We will keep an eye on that one.

And please don’t forget to send the magazine link to your fellow PQs. Graham Hambly, Editor and Publisher, PQ magazine News 04 Sustainability Accounting can answer the planet’s ‘big questions’, says new report

12 Tech news Accountex bounces back with record attendances as software firms turn out in force for accountancy’s top fair

06 International standards UKEB green lights adoption of IFRS 17 Insurance Contracts

Features, etc 14 Have your say I need a better work-life balance as I’m too tired to study, says one PQ; and the shocking attitude of some firms towards modern slavery. Plus our social media round-up

08 AI Robots outperform humans when it comes to hiring staff 09 Online Sales Tax AAT speaks out against proposed new levy 10 Health Top advice to hay fever suffers on getting through the exam season

17 AAT spotlight #1 Out AAT guru Teresa Clarke walks you through a breakeven point and target profit calculation

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18 Audit reform Is the audit regime revamp an opportunity missed?

21 CIMA spotlight How to interpret your exam marks so you can do better next time 22 The profession in Africa New report highlights a worrying lack of environmental accounting acumen 23 ACCA spotlight Fintech is creating a whole new world of opportunity for accountants 25 Accounting degree Fast track your career with Robert Gordon University 26 ACCA exam feedback So how were they for you? We highlight the good, the bad and the ugly of the latest exam diet 28 AAT celebration All the action from the inaugural Future Connect awards in London 29 AAT Q2022 Top tutor Nick Craggs explains all you need to know about demand curves 30 Wellbeing Why happiness

p22 in the workplace brings many rewards 32 Mark-up and margin Karen Groves explains the concepts with the help of some practical examples 40 A question for Tom How do you define a subsidiary?

35 Careers Life at… is back!

So meet a PQ awards winner; advice on getting through the holiday season from Hays’ Karen Young; and our book review 36 Fun The lighter side of life; and more great PQ giveaways The columnists Lisa Nelson How small changes 4 can bring big rewards Robert Bruce Accountancy and cricket fighting same old fights 6 Prem Sikka Government policy does nothing to tame cost of living 8 Anna Kate Phelan Remote invigilation is here to stay

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Vikki Bean Late payments push small firms to the brink 12

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PQ the

LISA NELSON Learning by making marginal gains One reason why problems can be hard to solve is because people look for the one big thing that will make the difference. Consider a student who has just failed an exam by 10 marks. One way of improving would be to identify your weakest subject area and focus on that. However, there is an alternative, and it’s called the aggregation of marginal gains.

Back in 2003, Dave Brailsford became Performance Director for the British cycling team; until then Britain had only won one Olympic gold medal since 1908. Five years after Brailsford’s appointment the British team dominated cycling, winning eight golds at Beijing and another eight four years later at the London Olympics. But how was this turnaround possible?

Brailsford applied the principle of marginal gains by breaking everything down that went into riding a bike and improving each process by just 1%. The result was that when these small changes were combined there was a significant increase in performance.

But how would this work for studying? What small changes could be made to improve exam performance? Maybe getting a good night’s sleep, increasing the amount of water you drink, studying 10 more minutes every day or having a bespoke study area.

Each relatively insignificant on its own but together they might add up to 10 more marks!

Lisa Nelson is Dir ector of Learnin g at Kaplan

There is no right answer Accounting can play a major role in answering the planet’s ‘big questions’ and help solve its ‘wicked problems’, according to a new paper from the IFAC Knowledge Gateway.

However, first accountancy educators need to get their students to think differently. The authors of ‘Redefining accounting for tomorrow’ stressed that students must stop asking “what is the right answer?” Instead, they need to be able to argue positions that are developed and held based on the use of judgement, decision-making acumen and an appreciation of accounting’s effects. That means accounting turns into an intellectually stimulating discipline.

And that in turn means accounting education has to move away from being regarded as a process for implementing

regulatory compliance, where the emphasis is on accounting as a technical practice alone.

The challenge now is to position ‘accounting of tomorrow’ as a combined technical, social and moral practice to help shape a better world.

• The authors also put forward a

The Jubilee effect Top tutors believe UK accountancy pass rates could shoot up in June, and they are putting it all down to the Queen’s Platinum Jubilee.

Students sitting exams in the week beginning 6 June – and we are talking ACCA, ICAEW, CIPFA, and AAT PQs here – had two extra days to practise questions and get themselves exam ready.

As one tutor told us: “If students weren’t too distracted with the celebrations and nice weather they had four straight days to get up to

Are AAT tutors ready?

Question marks have been raised about AAT’s approach at Level 2 to accounting software and how this translates to the real world. A top tutor told PQ

magazine: “It seems strange that students won’t be using real software programmes like Sage, and instead will have to wait until Level 3 for that.”

Check out the #stateoftheprofession report on page 22.

Another PQ agreed that the prices looked expensive, especially if you are financing yourself.

Pap ACCA puts up exam fees by 5% Some ACCA PQs were shocked when they realised the ACCA exam fees had been increased by 5%.

“Have you seen the hike?” asked one student. She pointed out that early entry is no longer available, so the standard entry fee is £245.

“Last time I paid it was £181 for early entry, that’s so expensive.”

Pap Time for some SWOT analysis?

CIMA has reminded students who might have failed their exam that “building momentum in your studies keeps your learning fresh

new definition of accounting: “Accountancy is a technical, social and moral practice concerned with the sustainable utilisation of resources and proper accountability to stakeholders to enable the flourishing of organisations, people and nature.”

exam speed. You may have missed Her Majesty sharing a Marmalade sandwich with Paddington Bear, but those extra days of study will really have helped.”

A leading provider also recently said that 10% of ACCA exam students fail by less than three marks. The extra days will mean they could watch the Examiner report debriefs and practise even more exam questions – and gaining those three marks could be more achievable.

The sheer size of Level 3 is another worry and students need to start studying here in midSeptember. It was suggested that anyone who begins their course in October may not have time to study the whole syllabus.

See page 24 for more insight.

In brief Pap The profession in Africa The authors of a new report have suggested the profession in Africa is going to find it hard to build ethical and sustainable businesses because of the lack of environmental, social and governance (ESG) acumen. Some 57% of respondents to an ACCA/ PAFA/PwC survey said this is limiting the involvement of Professional Accountancy Organisations (PAOs) and their members in climate change and ESG agendas.

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and maximises your potential”. It has also produced a Resit Guide to help, where it encourages all PQs to create their own personal SWOT analysis. By reflecting on your strengths, weaknesses and threats it will offer insights that can help shape your future studies.

Check out the guide at http:// view.ceros. com/aicpa/ resittersguide/p/1 PQ Magazine July 2022

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PQ the

ROBERT BRUCE The more things change…

I was leafing through what my wife calls ‘your stuff’ but which I prefer to call my newspaper archive.

Looking back at what you wrote years ago is both entertaining and illuminating, and as it’s in newspaper form I’m frequently entertained at what else was going on at the time. For example, I found a story about a cricket controversy almost 30 years ago. Rebel MCC members had called an extraordinary meeting of the club to deplore the team that had been selected and the manner of its selection. Déjà vu all round. Furious MCC members are currently threatening another rebel meeting even as we speak. These things come round. A small number of the membership are always furious about something.

One of the more startling points was that the story 30 years ago was written by the same journalist who wrote the current story. I pinged the two stories across to a friend, a head teacher. He came back with a teaching joke. At a retirement party the long-serving caretaker is asked about all the changes he must have seen. ‘Yes’, he responds, ‘and I’ve opposed them all’. I turned to some of the accounting controversies I was writing about 30 years ago. They were remarkably similar to now.

We should always remember this.

We always need to break out of the circular arguments. Concentrate on looking forward and remembering to think afresh.

Robert Br uce is an aw ard-winnin g wri ter on accountan cy for The Times

UK Endorsement Board adopts IFRS 17 The UK Endorsement Board (UKEB) has approved the adoption of the International Accounting Standards Board’s (IASB) IFRS 17 Insurance Contracts for use by UK companies. It is the first major standard adopted by the UKEB since the UKEB received delegated powers from the Business Secretary on 22 May 2021.

IFRS 17 is a significant new accounting standard for the insurance sector and is the result of many years of work by the IASB, with extensive input from a wide range of international stakeholders.

IFRS 17 represents the first comprehensive international accounting standard that can be

applied to all types of insurance contracts, aiming to ensure that entities provide relevant information that faithfully represents those contracts.

IFRS 17 is effective for annual

periods beginning on or after 1 January 2023, with early application permitted for entities that apply IFRS 9 Financial Instruments on or before the date of initial application of IFRS 17.

Chair of the UKEB Pauline Wallace said: “The UKEB has carefully considered the statutory criteria for adopting new IFRS for use in the UK and is satisfied that IFRS 17 meets them all.

“Overall, the UKEB considers that the adoption of IFRS 17 will lead to substantial improvements in financial reporting for insurance contracts and that its application will be conducive to the long-term public good in the UK.”

CTA licence for South African institute

In an effort to develop the Chartered Tax Adviser (CTA) brand as a leading international standard in tax, the Chartered Institute of Taxation (CIOT) has licensed its ‘CTA’ designation to members of the South African Institute of Taxation (SAIT).

This follows the granting of the same right to the Irish Tax Institute (ITI) and The Tax Institute (TTI) in Australia in 2012, and the Taxation Institute of Hong Kong (TIHK) in 2020.

Under the agreement, qualifying members of SAIT will be able to transition to Chartered Tax Adviser status, joining the existing 19,600 CIOT members, 5,800 TTI members, more than 5,500 ITI members and over 1,600 TIHK members who can already call themselves Chartered Tax Advisers.

Keith Engel, Chief Executive of the South African Institute of Taxation, said: “SAIT and its members now have the international recognition we have worked so hard to obtain from our humble beginnings some 15 years ago. SAIT members with the Chartered Tax Adviser designation will now have the globally recognised status they deserve.”

The ICAEW ACA Graduation Ceremony for 2020 and 2021 intake recently took place in Nicosia, Cyprus. Some 300 qualified accountants came together to celebrate their success.

In brief Pap Abacha millions recovered The UK National Crime Agency has recovered $23.5 million that was siphoned out of Nigeria in the 1990s by the associates and family of former Nigerian head of state, General Sani Abacha.

The funds form part of a larger pool of monies identified by the US Department of Justice (USDOJ). Following seven years of protracted litigation and international negotiation, the funds have now been transferred 6

to the Home Office for onward transfer to the USDOJ. The ultimate intention is for the monies to be repatriated for the benefit of the Nigerian people.

Pap AFM exam – Black-Scholes The Advanced Financial Management exam has a change that will take effect from September 2022 and affects what candidates will need to do when they receive a question requiring the use of the Black-Scholes Option Pricing model. You can

find out more in a new YouTube video at https://tinyurl. com/2p92bvu3. Moving forward, candidates will be presented with a BSOP spreadsheet template only when it is required to be used.

Pap WFH a ‘total joke’ One of those highlighted in the Sunday Times Rich List 2022 is Lord Sugar. He comes in at 166 with a fortune of £1.88bn. Quick to weigh in on current issues facing business, Sugar has called

the trend of working from home a ‘total joke’. When Big 4 firm PwC announced an early finish on Fridays for staff he said: “The lazy gits make me sick.” In response, PwC simply said Sugar was out of touch.

PQ Magazine July 2022

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PQ news the

PREM SIKKA Economic policy is fuelling cost-ofliving crisis The high cost of energy and a deepening cost-of-living crisis raises questions about economic policies. Should essential industries be publicly-owned or privatelyowned? The French state controls/ owns energy companies and has capped domestic energy price increases at around 4%, in line with the annual rate of inflation.

It expects energy companies to absorb losses and may subsidise them through the public purse.

In contrast, the UK has privatised energy production and distribution.

The average domestic bill has already increased by 54% from £1,277 to £1,971. Another £800 increase is expected in October.

Instead of capping energy bills, the UK government has provided £37bn of financial support to households.

However, this does not check corporate profiteering or the rate of inflation, currently over 11%.

Over 75% of the inflation is attributable to energy prices, but the cost of producing oil, gas and energy has not increased. The selling price has. Energy companies are making exorbitant profits yet domestic energy prices are soaring.

The high rate of inflation is due to corporate profiteering.

Brits will use government subsidies to pay energy bills and in turn companies will continue to profiteer. Some excess profit is subject to a windfall tax, but there is no price ‘cap’ or public ownership to check profiteering. The cost-ofliving crisis is set to continue.

Prem Sikka is Em eritus Professor of Accountin g at the University of Essex

Robots outperform humans in job hiring Artificial Intelligence (AI) job hiring is equal to or better than human hiring, but people react negatively towards it, says a new study by The Inclusion Initiative (TII) at the London School of Economics.

Researchers said AI hiring improves efficiency in hiring by being faster, increasing the fill-rate for open positions and recommending candidates with a greater likelihood of being hired after an interview.

Their review demonstrates that

while AI had limited abilities in predicting employee outcomes after being hired, it was a substantial improvement over humans. The authors also assessed whether AI

could decrease biased decisionmaking and improve the diversity of selected candidates. Overall, AI hiring resulted in more diverse outcomes than human hiring.

Dr Dario Krpan, assistant professor in behavioural science at LSE, said: “The media typically portrays AI hiring negatively and emphasises how AI can discriminate against candidates and disadvantage them. Our analysis, however, shows that even if AI is not perfect, it is fairer and more effective than human recruiters. Rather than focusing on AI in isolation, it is important to compare it to the alternative hiring practices to understand the value it brings to the recruitment process.”

EY looks to spin off audit division EY is exploring a global restructuring that could see it spin off the audit division from its advisory business, according to reports in the national newspapers in the

UK and Australia.

The Big 4 firm confirmed it was in the very early stages of separating from the rest of the businesses.

This would be a far bigger step than just ‘operational separation’, which

An Accrual World?

Top tutors Tom Clendon and Ben Wilson have linked up to create an exciting new podcast and video series to help make financial reporting and auditing ‘interesting’.

Clendon explains: “Each episode is 10 minutes long. We take the accounts of a famous real-life company, and then we chat about

the accounting and audit issues that interest us.

We have enjoyed putting the series together.”

For example, in one episode Clendon discusses how Netflix account for the costs of producing Bridgerton. In another episode Wilson explains how the wage bill of Manchester Utd is

commentators are now saying the OCED-brokered deal might never happen.

The deal has two parts. Pillar 1 would reallocate profits from major multinationals (such as the US tech companies) to countries where they made their sales. Pillar 2 would bring in a minimum global corporation tax rate of 15%.

understand the off-payroll working rules they now owe the government (themselves) £263 million in back taxes?

Not surprisingly, the Commons Public Accounts Committee has said it is “not acceptable” that central government is now paying out to cover tax owed by individuals who had been wrongly assessed as self-employed.

seems the preferred choice of the other Big 4 firms.

Such a move would have to gain consent among EY’s 12,000-plus partners and is still months away from a vote.

Interestingly, it has been suggested if the firm breaks into two just one will be able to retain the EY name.

audited!

Wilson said: “As financial statements are becoming increasingly more complex and serious; we think it is important to make understanding them accessible. There are currently no podcasts looking at auditing and financial reporting in a light, entertaining manner, using global examples. Accrual World fills this gap.”

Accrual World is now available on YouTube, and anywhere you get your podcasts.

Visit www.accrualworld.co.uk to find out more.

Taxwatch Pap Historic global tax deal delayed The international tax deal that promised to make the world’s biggest multinational companies pay a fairer share of tax will now be delayed until at least 2024.

The secretary-general of the Organisation for Economic Co-operation, Mathias Cormann, told the World Economic Forum in Davos that negotiations have been painstakingly slow.

Although Cormann is confident that a deal will be struck, some 8

Pap Government owes itself £236 million in tax Did you know that due to the failure of Whitehall departments to

Pap HMRC tracking businesses in tax havens HMRC is tracking hundreds of UK

businesses and individuals that it suspects of using offshore tax havens to help lower their tax bills ‘artificially’, says City law firm Pinsent Masons.

A Freedom of Information request found that HMRC has requested 429 records for 277 UK taxpayers in the past year. They were able to do this because of the OECD’s initiative that allows authorities to access information from 12 low or no-tax areas – which includes Jersey, Barbados, the British Virgin Islands and Bermuda.

PQ Magazine July 2022

news PQ

Do you need unconscious bias training?

KPMG will make unconscious bias training mandatory and linked to bonuses from June, just over a year after the previous boss called the idea “complete crap”, according to a report in the Daily Telegraph.

The accounting giant's 15,300 UK staff could have their bonuses slashed if they refuse to attend future lessons on bias, which will highlight how discussing skiing holidays, gap years and private schooling can isolate others.

Kevin Hogarth, KPMG UK's chief people officer, told the Telegraph that the mandatory training will ensure inclusion and diversity “gets the attention it deserves”.

He said: “We want all our people to come as they are, and that can only be made possible by challenging ourselves, confronting biases and listening and learning from each other.”

A spokesman also revealed that completion of the module will be “closely monitored and failure to complete the training will be flagged with performance leaders”. This could “impact a colleague’s performance rating, and by extension their bonus”.

AAT says no to Online Sales Tax AAT recently became the ‘first and only’ professional accountancy body to publicly oppose HM Treasury’s proposals for an Online Sales Tax (OST).

AAT has repeatedly said that the business rates system is in need of reform, but also makes clear that an OST is not the solution.

The latest retail sales data shows the popularity of online retailers continuing to rise. Taxing such activity,

suggests the AAT, could potentially stifle this upward trend, at a cost to consumers, businesses and the wider economy.

Phil Hall, AAT’s Head of Public Affairs and Public Policy, said:

“The government consultation puts forward a very vague idea of introducing a new tax in limited circumstances, with limited applicability, that it will not replace business rates but may help reduce them for some retailers in unspecified circumstances – all in the hope of partially addressing the fact that businesses that mostly operate online appear to pay less in business rates than ‘bricksand-mortar’ competitors.”

Should members fines go back to their body?

The accountancy profession is facing mounting pressure to explain why it pockets tens of millions of pounds in fines rather than giving it back to the victims of the wrongdoing.

Darren Jones, the chair of the Commons’ business energy and industrial strategy committee, has now written to the ICAEW to justify why it keeps the fines from the misconduct of its own members.

Some were shocked when it was revealed a KPMG fine of £14.4 million for forging document in connection with the audit of Carillion went straight into the ICAEW’s bank account.

Both ICAEW and ACCA have now reportedly told City AM that they would be happy to give the millions they reaped through fines against the Big 4 to the Treasury instead.

Join Tom Clendon & Ben Wilson for

ACCRUAL WORLD! Interesting, funny and entertaining. Do you associate these words with IFRS and auditing? Accrual World with Tom and Ben will convince you!

FIND US ON

PQ Magazine July 2022

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PQ news the

ANNA KATE PHELAN Is it time to say goodbye to the exam hall?

According to research conducted on behalf of Eintech, remote invigilation (RI) of exams is here to stay. The research focused on evaluating the current experience of candidates taking online assessments and achieving an understanding of what online assessments may look like in 2027. It found that remote invigilation currently had a user friendliness score of 89%, with only one in 10 people giving RI a rating of average to poor.

The main benefits of remote invigilation highlighted by survey participants were that they felt it was more comfortable and relaxed than paper-based exams (44%); that it was more flexible and convenient (21%); that is was easier and more straightforward (20%); that there were fewer distractions (8%); and that they felt no travel time was beneficial (6%).

The research also suggests that with online assessments already being seen as valid as in-person assessments it is likely that by 2027 they will have replaced a majority of them. It may be that the modern learner begins to demand online assessment and opts for assessments that can be taken from home.

The automation and expanded volume capacity means assessment can happen in any time zone – available 24/7. It is anticipated demand for online assessments will only increase, developing growth opportunities through market expansion and diversification.

Remote invigilation is here to stay.

Ann a Kat e Phelan is Senior Produ ct Manager at Eintech

Hay fever impairs exam performance Hay fever is not a trivial condition when it comes to exams, and you need to take the symptoms seriously.

Exams that take place from midMay to the end of June coincide with the height of the grass pollen season. Weed pollen then takes its place from June to September!

Research has proved that students with hay fever symptoms are 40% more likely to drop a grade between their mocks and final exams. Despite guidelines, many students also opt for the sedating antihistamine medication,

New tax technology diploma to be launched Responding to the impact technology is having on the tax professional, the Chartered Institute of Taxation is launching a Diploma in Tax Technology.

Incoming CIOT President Susan Ball explained the new diploma qualification is aimed at both existing tax professionals, who wish

to enhance their awareness of tax technology, and those outside the profession who might wish to work in this area. “We aim to launch this new qualification by the end of the year,” she said.

Ball stressed that

Your free Back to Basics video series PQ magazine’s Back to Basics series is there to provide accountancy students with short, sharp videos on some of the key topics they struggle with. Among those recently added is Jo Tuffill’s look at cost behaviours. Her video runs for just seven-and-a-half minutes and explains exactly what a cost is, looking at both variable and fixed costs.

Don’t forget we also have videos on double-entry bookkeeping, assets, and trial balance.

Here’s the list in full of the videos

More partners needed Deloitte in the UK has promoted 124 people to partner, a 57% increase from 2021. Of these promotions 44 (35%) are women, increasing the number of Deloitte’s women partners to 323 (26%). Some 22 new partners are from ethic minority backgrounds, which equates to 18% of the promotions.

The Big 4 firm now has 11 black partners in the UK. Partners identifying as ethnic minority now number 104 and represent 9% of Deloitte’s total partners. It is committed to achieving 12% ethnic minority and 3% black partners by 2025, plus targets across other grades to create a pipeline of talent.

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and the drop in a grade rises to 70% if you are taking these treatments.

The Allergy UK website (www. allergyuk.org) lists a number of ways to reduce exposure, including the following: • Monitor pollen forecasts daily

and stay indoors wherever possible when the count is high.

• Limit outdoor trips to rural areas – sea breezes blow pollen inland, so escape to the sea instead.

• Minimise exposure to freshly mown lawns.

• Wear wrap-around sunglasses when outdoor to minimise eye exposure to allergens.

• If travelling by car, keep the windows closed – cars should have an effective pollen filter.

• Consider applying a ‘pollen barrier’ to the edge of each nostril (available as balms or gels), or use petroleum jelly as an alternative.

• Avoid drying clothes and bedding outdoors when pollen counts are exceptionally high.

• Don’t let pets get close to your face as their fur will carry pollen.

on offer: • Cost Behaviours, with Jo Tuffill https://vimeo.com/680501310 • Double Entry Bookkeeping, with Tom Clendon https://vimeo.com/429252329 • Financial Maths for AFM and FM students, with Sunil Bhandari

KPMG fined £3.4m over 2010 audit The Executive Counsel of the Financial Reporting Council has fined KMPG £3,375,000 for failures over the audit of the Rolls-Royce Group plc in 2010. Partner Anthony Sykes was fined £112,500, and both received a ‘severe reprimand’.

The Adverse Findings against each of the respondents relate to failures to address matters identified in the audit that indicated risk of non-compliance by the company with laws and regulations. The matters concerned two sets of payments made by the company to agents in India. These payments gave rise to allegations of bribery and corruption which later formed

technology will change the work of tax advisers, and they will increasingly have to think not just about how they provide their services but how technology will change how members work and what kind of tax system they are advising on.

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two (out of 12) counts in a deferred prosecution agreement with the Serious Fraud Office in 2017, under which Rolls-Royce plc paid large fines.

Big 4 push into India The Big 4 accountancy firms have gone on an ‘aggressive hiring spree’ in India, according to City AM. It says among the four EY had the highest job postings during the first quarter of 2022, followed by Deloitte, PwC and KPMG respectively.

What is really standing out is the number of big data and cloud roles the firms are recruiting for. However, the Big 4 are also recruiting for sustainability roles, too.

PQ Magazine July 2022

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PQ tech the news

Accountex London’s record attendance

VIKKI BEAN Late payment cliff edge for SMEs Tougher economic conditions caused by rising inflation has left the UK’s small businesses squeezed tighter between soaring energy bills and wages on one side, and slower consumer spending power and late payments on the other, according to our latest data.

Xero’s Small Business Index fell 11 points to 83 in April. This is the lowest reading since February 2021 and the most dramatic monthly fall in the index since the initial impact of the pandemic in April 2020.

SMEs had to wait an average of 29.9 days to be paid in April.

There was also a similar-size rise in late payment times, up 1.8 days to 7.7 days. This is the longest small businesses have had to wait to be paid since September 2020.

Xero’s UK & EMEA MD, Alex von Schirmeister, has said late payment should be referred to as ‘unapproved debt’, and small businesses are being pushed to the cliff edge by large firms who hold on to their suppliers’ money.

He explained: “Even a single unpaid invoice can set off a chain reaction that leads to delays, instability and dire consequences across entire supply chains.”

With a recession looming, Schirmeister is now calling on the government to provide appropriate incentives for large businesses to pay their suppliers on time, and stricter penalties when it comes to paying late.

Check out the latest metrics at https://tinyurl.com/2ra8eff7 Vikki Bean is Dir ector of Global Edu cati on and Delivery at Xero

Over 8,000 accountants returned to Excel London recently for Accountex, after a three-year wait.

Some 250 companies were on hand to demo their latest technologies and solutions, ranging from payroll to tax and mobile apps. The line-up included Dext, FreeAgent, Intuit Quickbooks, IRIS, Sage, Silverfin, TaxcCalc, Thomson Reuters, Wolters Kluwer and Xero.

Portfolio Director Caroline Hobden said she was overwhelmed by the reaction: “The show was absolutely brilliant! Visitors, speakers and exhibitors didn’t stop commenting on the great atmosphere and turn out. We’re delighted to be able to reunite the community after three years apart, it’s clear that people are ready to get back to face-to-face business and really valued their time

at Accountex this year.”

She added: “I am overjoyed that 85% of stand space has already rebooked for next year. We have broken all previous records and are so excited that more exhibitors than ever want to secure their spot. We’re ready to start planning an even

ICAEW wards off cyberattack

ICAEW was recently the subject of an attempted large-scale cyberattack from multiple global locations, according to CEO Michael Izza.

He revealed this was done through staff accounts; however, the ICAEW defences held and it is now closely monitoring the

Sage buys Futrli Sage has announced the acquisition of Futrli, the UK’s premier cash flow forecasting software solution for small and medium-sized businesses (SMBs) and accountants.

It said moving forward ‘Futrli

by Sage’ will be integrated with Sage for Accountants, helping to combine workflows across practices in one place, with a simple perclient pricing model.

bigger show.”

Accountex Summit Manchester, formerly known as Accountex Summit North, is returning on 12 October 2022 at Manchester Central. It will bring together over 90 fintech suppliers under one roof and offers free and extensive CPD.

situation.

Izza reminded all businesses of the critical importance of remaining vigilant and developing cyber resilience, particularly at this highly volatile time. He said: “The finance profession specifically is a lucrative target for cyber criminals, and successful

attacks can have devastating consequences”.

He is recommending all companies take advantage of the extensive resources of the National Cyber Security Centre.

ICAEW also runs its own Cyber security hub, providing a focal point for members managing their cyber risks, which you can access at https://tinyurl.com/ra2e4jxa

In addition, Futrli by Sage will remain a market solution and will continue to be available to SMBs as a standalone product postacquisition.

Hannah Dawson, CEO and Founder of Futrli (pictured), said: “For nearly a decade, we’ve had a sole focus of helping our customers to better manage their cash flow, which in

turn helps them to make intelligent business decisions. We pride ourselves on our unique three-way forecasting solution that allows accountants to tailor and personalise based on client or industry need.

“We couldn’t be more excited by the opportunity to scale our expertise and bring this to Sage customers.”

Tech briefs Pap 3,500 techies needed KPMG has launched a new digital solution business, which will see the number of data scientists and engineers it employs double to over 7,500. Some 1,000 of these new people will be based in London, helping clients deliver their digital strategies and creating new digital tools.

KPMG Products wants to offer banks, insurers and asset managers access to big data analytic tools to help them understand their environmental, social and corporate govern12

ance (ESG) risks.

Lisa Heneghan, Global Chief Digital Officer at KPMG UK, said: “The consulting industry is evolving, and this considerable investment signals a significant change in how we operate and serve the organisations we work with.”

Pap London retains tech hub crown in Europe London has kept its crown as Europe’s most technologically advanced city, according to the latest

Smart Cities Index from Z/Yen Group.

The English capital’s infrastructure and access to highly-skilled talent pool, along with the widespread adoption of new technology, means London beats rivals from the continent. Despite topping the poll in Europe, London lost out to New York for the top slot worldwide.

Executive chairman of Z/Yen Group, Professor Michael Mainelli, said: “Global centres that create spaces and places for people to gather and extend the reach of our

technological development will be the commercial success stories of the future.”

Pap High skilled graduates have new route to UK Graduates from the top 50 non-UK universities can now apply to come to the UK through a new visa scheme. The government is hoping this ‘high potential individual’ route will attract the ‘brightest and best’ in areas such as science, engineering, medical research and cyber security to create their careers in the UK. PQ Magazine July 2022

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Too tired to study Last month you featured a caba survey that found half of respondents said they were ‘often’ or ‘always’ too tired because of their job/and or study. I am one of those 50%.

Sleep for me has become a big issue, especially in the lead up to exams, which it right now! I would love 6.5 hours uninterrupted sleep a night, but I am waking up every two or three hours. That means I start the day tired and never seem to feel in control. After a full day at work (having to commute again) I never feel like I can give 100% to my studies.

I do feel it is starting to affect my mental health, too. I know caba said we (accountants) seem

reluctant to seek help, but I just don’t have the time. I get stressed thinking about getting help for stress.

Their advice was good, but staying away from social media is so difficult. I use it to unwind rather than let it wind me up! At least Love Island is about to start and I will have a new release…

Name and email address supplied The Editor says: Creating a real balance in your life is incredibly tough for PQs. They often have families and a job to cope with on top of the study. Routine is key and setting yourself proper boundaries. You need to give yourself some ‘me’ time. That’s why I liked the Danish tradition – we all need to find our ‘hygge’, creating a warm atmosphere to enjoy the good things in life with good people. Even if that’s just on a Sunday night!

Our star letter writer wins a fantastic ‘I love PQ’ mug!

Modern-day slavery I was shocked by your story about modern-day slavery in the latest issue (page 6, June 2022). How can one company in 10 not provide a modern-day slavery statement when it is a legal requirement?

Surely the FRC should be dishing out lots of fines here.

Slavery is still very much with us, and it has been estimated that 40.3 million people worldwide are currently living in slavery. The UK government says that around 10,000 people in the UK are slaves; however, leading experts believe this figure could be closer to 100,000 – so much more than the official figures. Women and girls account for 99% of victims in the commercial sex industry and 58% in other sectors.

What we don’t need is companies adding to the confusion with ‘boilerplate’ language in their anti-slavery policy, which are often fragmented and unclear.

Accountants need to take on this challenge and ensure modernday slavery is top of the agenda and doesn’t get lost behind other important issues.

Name and email address supplied The Editor says: I totally agree. I don’t understand that if something

is a legal requirement why companies aren’t doing it or being held to account. Vulnerable people need to be protected and modernday slavery should be in every company’s KPIs. This issue has to be mainstream, and now.

Back with a bang!

A big thank-you to all at PQ for inviting me to your fantastic awards.

You say they are the best and they are! I didn’t win this time, but I will be back next year trying my best.

A shortlisted finalist

One of PQ’s favourite people to follow on LinkedIn is accountancy exam and career coach James Perry (pictured). He recently posted his top hacks for exam success, and here is a selection: Hack #1 – The early bird catches the worm. It really does work!

Getting up early means you are fresher so you learn more, make the most of the day and, if you feel you’ve done enough, you can take the evening off.

Hack #2 – Snack on ‘brain food’.

Keep your body and brain well fuelled by choosing nutritious foods that have been proven to aid concentration and memory, such as fish, nuts, seeds, yogurt and blueberries.

Hack #3 – While studying speak out loud instead of simply reading.

You will be surprised how much more you can remember when you’ve said it out loud.

Hack #4 – Teach what you have learned. The best way to test if you really understand something is to try to teach it to someone else.

Hack #5 – Use Google for research. Use certain operators in order to search Google like a pro – for example by using quotation marks you search the exact term.

Hack #6 – Make your study space portable. Information retention actually improves when you vary the places where you study.

PQ Magazine PO Box 75983, London E11 9GS | Phone: 07765 386489 | Email: graham@pqmagazine.com Website: www.pqmagazine.com | Editor/publisher: Graham Hambly graham@pqmagazine.com | Associate editor: Adam Riches | Art editor: Tim Parker Contributors: Robert Bruce, Prem Sikka, Lisa Nelson, Anna Kate Phelan, Tony Kelly, Phil Gammon, Edward Netherton | Subscriptions: subscriptions@pqmagazine.com | Origination services by Classified Central Media If you have any problems with delivery, or if you want to change your delivery address, please email admin@pqmagazine.com

Published by PQ Publishing Ltd © PQ Publishing 2022

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AAT spotlight PQ

How much lolly?

Our AAT guru Teresa Clarke walks you through a breakeven point and target profit calculation

L

et’s put formulas aside for a few minutes and try to understand the calculations instead. My students love this, as it helps them to understand breakeven point, rather than just trying to memorise how to calculate it.

I sell ice creams at £5 each.

The cost to make one ice-cream, including the cone, the ice-cream and my time is £2.

This means that I make £3 on every ice cream I sell. This is called contribution.

I rent my ice cream van at £100 a day. This is my fixed cost.

How many ice-creams will I need to sell to cover my rent?

I am making £3 on every ice-cream I sell, so I need to work out how many I need to sell to cover that rent. £100 of rent divided by £3 = 33.33333. We round this up as I can’t make and sell part of an ice-cream.

So I will need to sell 34 ice-creams to ensure that I cover the rent. This is the breakeven point.

34 ice-creams sold at £5 each will mean I need to take £170 through my cash register each day. This is the breakeven point in revenue.

I would like to make £80 a day for myself, my

PQ Magazine July 2022

target profit. So how many ice-creams will I need to sell to cover the rent of my ice-cream van and my target profit? £100 rent for the van plus £80 profit. I want to cover £180, so how many ice-creams will I need to sell when I make £3 on every ice-cream I sell? £180 divided by £3 = 60 ice-creams. This is the number of units, or ice-creams I need to sell to reach my target profit.

If my plan is to sell 100 ice-creams a day, this is 66 ice-creams above the breakeven point. This is my margin of safety. The difference between the breakeven point and my planned sales.

We can use ice-creams to tackle a more complex question: A company sells units at £60 each. They are planning to sell 4,000 units next month. The direct labour for each unit is £12 and the direct materials are £16. The company’s fixed costs for the period are £75,000. What is the breakeven point in units?

Ok, let’s look for ice-creams in this question.

The selling price of the unit or ice-cream is £60.

The variable costs for each unit or ice-cream are the direct labour and direct materials of £16

and £12 respectively, so the total variable cost if £28.

The amount the company make on each unit or ice-cream is £32. This is the contribution.

The fixed costs or rent of the ice-cream van is £75,000. This is the fixed cost.

How many units must I sell to cover the fixed costs or rent of the ice-cream van when I make £32 on each unit I sell? £75,000 divided by £32 = 2,343.75, so 2,344 units. This is the breakeven point.

2,344 units sold at £60 each will mean I take £140,640 through my cash register. This is my breakeven point in revenue.

The company are planning to sell 4,000 units, so this means that they are planning to sell 1,656 units more than the breakeven point. This is the margin of safety.

Try a question yourself now using my ice creams method. I am confident it will help.

If you like my style of teaching, you may like my workbooks. These are available on Amazon in paperback and as e-Books at very reasonable prices. You can use this link to find them – https://www.teresaclarke.co.uk/books/ • Teresa Clarke FMAAT

17

PQ audit reform

Is the audit regime revamp an opportunity missed?

Will the latest overhaul of the audit regime help restore trust in big business? Only time will tell…

T

he government has finally unveiled its long-awaited revamp the UK’s corporate reporting and audit regime. They have promised a new regulator, greater accountability for big business, and are addressing the domination of the Big 4 accountancy firms.

The Minister for Corporate Responsibility, Lord Callanan, said: “Collapses like Carillion have made it clear that audit needs to improve, and these reforms will ensure the UK sets a global standard.”

However, the Financial Reporting Council’s Sir Jon Thompson said: “The Government’s decision not to pursue the introduction of a version of the Sarbanes-Oxley reporting regime is, the FRC believes, a missed opportunity to improve internal controls in a proportionate, UK-specific manner. We know that well-run companies contribute to a stronger, healthier economy overall.”

The FRC will now be replaced by a new, stronger regulator – the Audit, Reporting and Governance Authority (ARGA) – with tougher enforcement powers and funded by a levy on industry. Work on this has already begun, with the government acting to enable the regulator to ban failing auditors from reviewing large companies’ accounts.

To curtail the unhealthy dominance of the ‘Big 4’ audit firms, FTSE350 companies will be required to conduct part of their audit with a challenger firm. The new regulator, ARGA, will also be given the power to make big audit firms keep their audit and non-audit functions operationally separate and to enforce a market cap if the state of the market doesn’t improve.

For the first time, the largest private companies – not just those listed on the Stock Exchange – will come under the scope of the regulator, reflecting the impact they have on the wider economy.

No extra regulations will be added to smaller businesses through the reforms: the focus is on the UK’s largest companies because so many jobs, suppliers and pensions depend on them. Unlisted companies with over 750 employees and with over £750 million annual

18

turnover will come under the scope of the regulator, a threshold set following consultation to ensure the reforms are as targeted as possible and minimise unnecessary burdens.

Directors at the biggest companies who breach their legal duties to be open with auditors, or lie about the state of their firm’s finances, will face sanctions such as fines, and the government said it will act to address ‘rewards for failure’ – where bosses pocket bonuses despite their company collapsing.

Large businesses will have to be more transparent about their profits and losses too – not dishing out dividends while on the brink of collapse – while also providing more information to investors and the public about what they have done to prevent fraud, which company metrics have been independently checked and about the risks their company faces.

The government said that previous corporate collapses have had a significant impact on individuals and the economy: • 9,000 redundancies were made, 555 retail stores closed and 1,286 companies and government entities owed money following the collapse of Thomas Cook.

• 11,000 jobs put at risk by the collapse of BHS. • 7,000 suppliers and contractors impacted by the collapse of Carillion.

Meanwhile, the Department for Levelling Up Housing and Communities also unveiled plans to strengthen the local audit framework in response to Redmond Review. This includes establishing ARGA as the system leader for local audit, which will ensure councils and local bodies are delivering value for money for taxpayers.

Following the announcement, Lord Sikka told PQ magazine: “Who can forget the BHS audit where a PwC audit partner spent two hours on the audit and thirty-one hours on consultancy.

The audit team was effectively led by a person with only one-year's post-qualification experience and most of the audit was deficient.

To appease directors, a PwC audit partner also backdated the audit report.

“The government's proposed reforms will not

prevent any of the above. There is no reform of auditor independence, liability, transparency or public accountability. In the absence of effective pressure points audit failures will continue.

The government has missed an opportunity to restore confidence in audits and corporate governance.”

ICAEW CEO Michael Izza was not too impressed, either. He said: “Taking these measures as a package with the draft audit reform bill outlined a few weeks ago, the government’s approach has a half-hearted and lop-sided feel to it. Lessons from Carillion and other recent company failures have been ignored, with little emphasis now on tightening internal controls and modernising corporate governance.

“If ministers really think this is enough to restore public trust in business or reinforce the UK’s position as a leading global destination for investment, their confidence is misplaced.

“We support government’s ambitions to increase choice and improve quality in the audit market, but the challenge will be to achieve this while sustaining and growing capacity in the sector. The new regulator, ARGA, will be key to this – which is why it is a great pity that we will have to wait years for it to be established.”

Richard Murphy, Professor of Accounting Practice at Sheffield University Management School, a chartered accountant and economic justice campaigner, said: “This is a missed opportunity. Audit failure is evidence of market PQ Magazine July 2022

audit reform PQ

failure. The government is clearly not willing to embrace the idea that market failure is possible.

“As a result, the need for regulation to protect people from market abuse is not recognised and auditing is left to reform itself, by and large. In a telling sentence on page 90 it is said that ‘the Government will leave the market – companies, directors, investors – to shape the development of an enhanced wider assurance services market in the coming years’. In other words, the government has copped out. That's the most succinct summary of these reforms that I can offer.”

Murphy then outlined the big issues that audit reform had to address: • That IFRS accounts are not fit for purpose, being too subjective and splitting the reporting of income over up to three statements, meaning that no one can really tell what is going on. This has not been addressed, meaning that auditors are still

auditing garbage. The ‘garbage in, garbage out’ rule still applies as a result.

• Environmental reporting, which is the biggest challenge facing both business and society.

The new resilience statement does nothing to address this because it only extends audit risk appraisal from the short term to the medium term, and the environment is a longterm risk. As a result these reforms duck the biggest audit issue that we face.

• Audit failure, most of which resulted from the payment of excessive dividends by quoted companies. This could have been tackled by requiring that groups disclose their distributable profits, as distinct from those that are generated from unrealised revaluations or by intragroup transactions.

The government has ‘avoided’ this issue, only requiring that group parent companies disclose distributable reserves in their own accounts, and recommending that group

consolidated accounts refer to the matter, but not mandating it, which means that every auditor will ignore it. Audit failures will continue as a result.

• The audit profession has been left untouched. If it was responsible for the market failure that current audit disasters suggest, the government has not tackled this problem.

However, ACCA gave the long-awaited announcement a cautious welcome. Mike Suffield, director of Policy and Insight, explained: “ACCA will need to work through the details of the Government’s proposals, but the main omission at this point looks to be the absence of any legislative requirements upon companies and their directors to report upon internal controls over financial reporting. We saw this option as an important element of a reform programme that should look across the corporate reporting ecosystem as a whole, and not just at the auditors.”

On the plus side he said ACCA was pleased to see that the ARGA has been given the teeth it needs to bite!

Peter Swabey, Policy and Research Director at the Chartered Governance Institute UK & Ireland, said the Institute has consistently argued, throughout the various reviews of the audit market, that there are three fundamental issues to be addressed: • The expectation gap – the difference between the political, press and public expectation of the role of audit and what an auditor would perceive it to be.

• The delivery gap – the FRC has indicated that only 71% of audits reviewed last year did not require improvement or significant improvement.

• The perceived capability gap between the ‘Big 4’ and the challenger audit firms.

He felt the government’s plans go a long way to addressing these issues. Key amongst these is the creation of a new regulator for the audit profession, the ARGA – with tougher enforcement powers; powers which the FRC sorely lacked.

Swabey was also encouraged to see the largest unlisted companies brought within the scope of this regulation, as such companies have a significant impact on the wider economy and benefit from the privilege of limited liability.

A key concern remains a practical one of the balance between the need to address the unhealthy market dominance of the ‘Big 4’ audit firms and the need to improve the quality of audit. He claimed: “It is not easy to see how this balance can be achieved.”

• For more go to https://tinyurl.com/ye7cb63c

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CIMA spotlight PQ Performance feedback for each core activity.

Like Objective Tests, Case Study exams are scaled. There are multiple versions of each Case Study exam, ranging in difficulty, throughout the testing window. Scores are scaled so results will be consistent regardless of which day you sat the exam. Like the Objective Tests, this means that all candidates with the same level of competence will receive the same score.

As of 2019, CIMA no longer requires you to meet the minimum threshold for each core activity. That means you only need to focus on the overall passing standard for your Case Study exams.

Review the exam timetable to see when your results will likely be published.

Your CIMA exam results are here.

But now what?

Mark Foley explains how to interpret your exam marks so you can improve your future exam hall performance

Y

ou have just sat one of your CIMA exams. A wave of relief washes over you — or at least until the results arrive. But what do your exam results mean?

That depends on whether you’ve just completed an Objective Test or Case Study exam. Read on to understand what your marks mean and how you can make the most of them.

Understanding your OT results You will receive a provisional pass or fail immediately after taking an Objective Test.

Then, within 48 hours, your finalised results will be available on your MyCIMA account and will include: Your overall grade (pass or fail).

Your scaled score, which is between 0 and 150, with a passing score being 100 or above.

Performance feedback for each syllabus topic area.

Note that your provisional score will be scaled.

Objective Tests are scaled because there are multiple versions of the exam that range in difficulty. The exam you just submitted may have been slightly easier or more difficult than average. Scaled scoring ensures consistent results regardless of what day you sat the exam, meaning that all candidates with the same level of competence will receive the same score.

How do I know where I can improve?

For each subject area, you will be marked ‘proficient’ or ‘not proficient’. This evaluation is PQ Magazine July 2022

based on how many questions you answered correctly within each area. You will also receive performance feedback for each syllabus topic area, with suggestions on ways to improve.

Performance feedback is valuable whether you have passed or failed the exam because it clarifies strengths and weaknesses. For example, if you have received a ‘not proficient’ under the heading ‘organisational change’ topic on your Strategic level Objective Test exam, you will know to focus on that area when preparing for your Strategic level Case Study exam. If you need to resit an exam, you should ensure that you revise the entire syllabus and practice a range of exam questions. The resit exam is not ‘a top-up’ exam so you must be prepared to answer a fresh set of questions from across the syllabus, not just the ones you weren’t proficient in.

Read the feedback under each syllabus topic and review linked resources. For more information, this video covers how Objective Tests are marked.

Making sense of your Case Study exam results Case Study exams are human marked, so you can expect results about five to six weeks after the exam window closes.

Results will be available on your MyCIMA account and will include Your overall grade (pass or fail).

Your scaled score, which is between 0 and 150, with a passing score being 80 or above.

How do I know where I can improve?

You will receive feedback for each core activity described in the exam blueprint for the level you’re pursuing.

For example, if you have just completed the Operational Case Study exam, core activities would have included: Preparing costing information for different purposes to meet the needs of management.

Analysing performance using financial and nonfinancial information.Preparing information to manage working capital.

Each core activity is meant to test skills today’s employers value. An exam marker will assess how well you performed in the simulated role (e.g. Finance Officer in the Operational Case Study exam) you were assigned.

For example, under the category of analysing performance, you will be deemed ‘strong’ if you show you can: Identify information that allows managers to review performance.

Interpret variances to review functional and organisational performance.

Identify appropriate KPIs for different functions of the organisation.

Explain company performance using KPIs. Prepare performance reports for use by different functions and different purposes in appropriate formats and media.

If you partially meet the marker’s standards, you will receive a score of ‘moderate’. If you don’t meet their standards, you will likely receive a ‘fail’ in that core activity.

Performance descriptors for each exam level are available: • Operational Level performance descriptors • Management Level performance descriptors • Strategic Level performance descriptors • CIMA Gateway performance descriptors The marker’s feedback can help you figure out where your strengths lie and where you could improve.

If there’s room for improvement, consider reviewing post-exam materials once they’re released. These resources include the examiner’s report, variants, model answers and marking schemes. You can also use the CIMA study planner at any time to better understand the types of answers markers are looking for.

• Mark Foley, Director of Relationship Programmes – Management Accounting at the Association of International Certified Professional Accountants, representing AICPA & CIMA 21

PQ world view

#Stateoftheprofession in Africa

How is the accountancy profession doing in Africa? There may be a worrying gap in environmental accounting acumen

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id you know that around 123,000 of Africa’s 1.3 billion population are qualified accountants – that’s 0.012%!

A ground-breaking study into the profession in Africa has now revealed just 55% of these accountants are optimistic about the continent’s economic prospects, and skills shortage, especially in the areas of technology and strategy are a major concern for respondents.

ACCA, the Pan African Federation of Accountants (PAFA) and PwC joined forces to develop the latest State of the Profession in Africa report.

The authors suggest the results revealed a startling paradox for the profession in building ethical and sustainable businesses while lacking in environmental, social and governance (ESG) acumen. Some 57% say this is limiting the involvement of Professional Accountancy Organisations (PAOs) and their members in climate change and ESG agendas.

Alarmingly, 92% of accountants working in the mining industry do not see ESG among the industry’s top three future-altering trends, and worryingly 40% of all surveyed members highlighted the ability to incorporate climate change and ESG into financial reporting as a

major skills gap.

Jamil Ampomah, director of ACCA Africa, said: “Respondents’ views about ESG are certainly a wake-up call. Hurdles need to be overcome as accountancy professionals have a unique opportunity to lead ESG adoption in their organisations, in their own countries, right across Africa and globally. One of the strong recommendations in the report is for the profession to skill up here – the tools and qualifications are available to do this, so the opportunity is waiting to be grasped.”

The top ten statistics from the report show that: 1. When it comes to global accounting standards, 81% of respondents say International Financial Reporting Standards

(IFRS) have been adopted across Africa.

2. 71% of accountants expect that digital transformation of accounting functions would be the profession’s biggest game changer over the next decade.

3. 64% have seen professional accountants become CEOs or directors in their organisations.

4. 53% say stricter regulatory and statutory compliance will have an impact on the profession.

5. Almost half – 49% – of respondents believe that the accountancy professional contributes to strategic direction and development of business insights in the upper echelons of organisations.

6. Accountants in Africa are most optimistic about the implementation of environmentally friendly policies and investment in infrastructure – each at 30%.

7. 43% are pessimistic about the uncertain political situation and for 39% it is policy uncertainty.

8. 45% indicate that most senior professionals in their organisations are involved in the traditional roles of organising, controlling, processing and reporting on financial related transactions.

9. 47% say another significant trend is predictive accounting software such as forecasting and data analytics tools.

10. 47% say changes in tax policy is an important future trend.

ACCOUNTING FOR A BETTER WORLD:

Priorities for a transforming profession The accountancy profession can play an essential role in transforming the world to deliver a more equitable, green and inclusive future.

This report identifies seven key priorities for the future of the profession, where accountancy will play an indelible role looking ahead.

bit.ly/3OEd1gp

22

PQ Magazine July 2022

ACCA spotlight PQ

Fintech: the future is here

Fintech is opening up a whole new world of opportunities for today’s accountant, says Narayanan Vaidyanathan

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intech is now firmly part of our lives and has been since the arrival of the ATM more than 50 years ago.

It’s a thriving sector with many diverse parts including online or neobanks, payment systems, payment gateways/application programming interfaces (APIs), investment banking back-end infrastructure, insurtech, wealthtech and regtech.

And then we have the newcomers like central bank digital currencies, cryptocurrencies and non-fungible tokens.

But what does fintech in the 21st century mean for accountants and finance professionals?

To help answer this question, we’ve recently launched with our strategic partners CA ANZ a report called Fintech state-of-play: opportunities for finance professionals It’s a must-read for anyone wanting to understand fintech, and also for those PQ readers keen to work in the sector. As the title says, we see many opportunities ahead for accountants and financial professionals within this dynamic sector.

We polled some 5,700 ACCA and CA ANZ members to understand their views about fintech. Some 50% see career opportunities for themselves in fintech, while 14% do not.

The remainder either don’t know (10%) or are undecided (26%), perhaps keeping future possibilities open.

When asked about cyber security risks linked to fintech adoption, 83% say they are concerned given the data-driven nature of fintech and the need for it to gain the trust of governments, businesses and the public. Our research also shows that respondents are keen to see PQ Magazine July 2022

government interventions to support fintech adoption, including building links internationally to learn best practice (86%) to working with education partners to improve skills and training in fintech (85%).

Our report reveals 10 different job roles for professional accountants within fintech and illustrates how their contributions and skillsets can add value to the organisations that they work with or represent. Roles showcased include CFOs and auditors to digital transformation experts and entrepreneurs.

For example, as a CFO your purpose is to provide the strategic direction and stewardship of financial resources and other assets such as IP. And the finetch skills valued as a CFO are understanding how to link the numbers and strategy into a compelling story that investors would find attractive and having the ability to build a finance team and set professional norms, in the absence of mature processes and procedures.

To ensure you’re well placed to benefit as fintech grows in scale and scope, our report offers recommendations for accountancy and finance professionals: • Build awareness of the products and services within the fintech landscape globally and the competitive dynamics that will shape it looking ahead. This is a multi-dimensional sector with both business-to-consumer (B2C) and businessto-business (B2B) propositions.

• Understand the regulatory considerations relevant to the areas of fintech you’re exploring.

In many instances – particularly for emerging areas like cryptocurrencies – there is a need for

those who can help to shape the standards and regulatory treatment as well.

• Reinforce an innovation and purpose-driven mindset. Fintech is extremely fast paced and dynamic, and benefits from individuals who are excited about new ideas that can drive sustainable value; and who can pivot fast to changing business requirements.

The fintech future is really exciting. And we know that accountants and finance professionals are already bringing a wide range and high-value portfolio of skills into the sector – from understanding new business models, commerciality, and the ability to tell a compelling financial story to investors, to driving trust through assurance and clarity of financial information with emerging norms in corporate reporting.

Working in fintech demands a digital-first mindset that can operate without vast paper trails. It requires a flexible approach that can pivot to changing needs in a fast-moving industry. The accountancy profession abounds in skills like these as it has always been adept at engaging with and managing technology.

To access opportunities in fintech, professional accountants will need to draw upon the balanced, broad ranging set of skills across both technical and behavioural attributes, as highlighted by the competency frameworks of ACCA in our career navigator and also in CA ANZ’s Capability Model which can be found online.

We wish you luck in exploring the fintech world and securing your own opportunities within it. For more go to https://careernavigator. accaglobal.com/gb/en.html and https://tinyurl. com/5n89bscy • Narayanan Vaidyanathan is head of policy at ACCA 23

PQ AAT Q2022

AAT’s Q22 – are your tutors ready?

We asked some AAT experts what they saw as some key things for PQs to look out for with the new AAT syllabus being introduced in September

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AT’s new qualification is coming, and some tutors are only now finally getting to grips with the task ahead.

AAT’s new Principles of Costing at level 2 introduces studiers to cost recording systems in organisations, how to use cost recording techniques, how to provide information on actual and budgeted costs and income, and how to use tools and techniques to support cost calculations. But there has been some concern that students won’t use real-life programmes like Sage here – for that they have to wait until Level 3. “AAT is supposed to be a practical qualification but it is letting itself down here,” said one leading tutor. Another explained: “People are saying this because the unit Using Accounting Software, which is a practical unit, has been taken out. Although accounting software is mentioned in the two bookkeeping units at this level, the assessing of the practical skills has disappeared.”

Level 2 also sees the introduction of the Business Environment Synoptic Assessment (BESY). This is a big unit, and students will be expected to interpret and analyse to pass this one. Something they aren’t always comfortable

with. It will still include elements of the two bookkeeping units and also elements of law and a study of the business environment and structure of different organisations. The inclusion of an analysis of the business environment is something that experts have been looking forward to for some time.

We have also been told it is going to be difficult to fit Level 3 into one academic year, as

it too is bigger. Colleges that start in October may struggle to finish the syllabus by the summer.

The advice here is to sign up to courses that start in mid-September, as these colleges understand the enormity of what lies ahead! One leading tutor told us: “The Business Awareness Unit, follows on from the Business Environment Unit at level two and again brings in the external environment which is something which has been missing from the AAT qualification. It also brings the syllabus more up-to-date with its inclusion of big data, artificial intelligence and block chain, among other things. There is quite a lot of analysis in this one, too!”

They added: “The joining of the two financial units into one big one is great because it avoids duplication, but it makes for a really long unit, so make sure you are ready for that.”

Another top tutor old PQ magazine they liked Level 4, but weren’t as enthusiastic about level 2 and 3. Overall, it was felt Level 4 has been streamlined and now seems to follow a more logical pattern.

• Each month we have being looking at new subjects that are being introduced in Q2022.

The latest feature can be found on page 27.

ACCA Careers is dedicated to helping ACCA students develop their careers.

With hundreds of entry level global job opportunities and over 400 career advice articles, we’re here to help you every step of the way.

Visit jobs.accaglobal.com today

24

PQ Magazine July 2022

advertorial PQ

Fast track your career with Robert Gordon University

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s a part qualified accountant, in just 12 months online you can earn an honours degree in accounting through a course that fast tracks your career.

The online BSc (Hons) Accounting course starts this September. It's a fast-track 12-month top-up degree from Robert Gordon University (RGU) specifically tailored for those holding the CIMA Diploma in Management Accounting; the ACCA Diploma in Accounting and Business (along with three from six of the Applied Knowledge level papers (F4-F9)) —or an equivalent professional accounting qualification, along with specific relevant work experience.

Combine your existing qualifications and work experience with new academic knowledge. Delivered fully online through RGU’s CampusMoodle platform, you'll have the flexibility to complete your degree without a career break.

CampusMoodle is much more than a repository of information—it is the university online. It’s a space where students can engage with their peers, lecturers, and course content, as well as access help and advice from support services. This virtual campus is open 24 hours a 25

day, 7 days a week so you can focus on learning, free from distractions.

Rochelle, a current student, says: “The support and course delivery from RGU has been fantastic, and I would recommend this course to anyone looking to advance their career in accounting.”

RGU is the third largest provider of online learning in the UK, with around a third of its students regularly choosing to study online.

Whether online or on campus, all students receive the same high-quality standards for teaching, learning, and student experience.

This is especially true for this top-up course, with RGU ranking first in Scotland for student satisfaction in Accounting and Finance (Complete University Guide 2022).

You’ll grow your accounting and academic skills with the Business School of the Year 2020 (Times Higher Education 2020 Awards) while solidifying your experience in organisational strategy, innovation, and enterprise. Personal and professional skills such as research, oral presentation, and teamwork will be developed throughout the course and in business-led workshops, enhancing your employability and

setting you apart from other graduates in your field.

New for 2022, the BSc (Hons) Accounting degree now includes a fully funded or reduced fee option for those who reside in Scotland – meaning you could qualify to have your fees fully funded by the Student Awards Agency Scotland, or qualify for significantly reduced course fees.

Both of these funding options are subject to eligibility.

And, in fast tracking your career with RGU, your graduate prospects will be among the best around: it’s second in the UK for the Graduate Employment Rate measure (QS Graduate Employability Rankings 2022), and it’s the top modern university in Scotland for graduate prospects in Accounting and Finance (Guardian University Guide 2022).

As an RGU student, you would also gain access to the University’s dedicated Study Skills and Employability teams as well as its online employability hub, helping you to make the most of your educational experience and thrive throughout your professional career.

Find out more and apply now at www.rgu.ac.uk/fast-track-accounting.

PQ Magazine July 2022

PQ ACCA exams

Your ACCA June exam feedback Here’s the feedback from the people who sat the exams – your fellow PQs! How did they go?

Audit & Assurance (AA) Sitters seemed to like the June sitting, so it was all quiet on the AA front. As one said: “The exam was easy to me, the MCQs were regular brain tasking, elimination kinda questions, and the theory was picked across the exam kit.”

Another felt all the ‘typical question types’ were there – risk and response, control deficiencies and recommendations, and substantive procedures. “I feel like I have passed already, but let’s wait and see.”

There was a word of caution from one PQ: “Strangely everyone always found the exam easy, but the AA pass rate is always one of the lowest… wonder how!”

These thoughts were picked up in the Open Tuition Instant Poll where some 60% said the exam was OK (60%), and just 6% called it a disaster.

Taxation (TX) On the Open Tuition Instant Poll some one in five sitters said the June exam was a disaster for them. As one PQ said: “I felt confident going into the exam, but the examiner made it so hard. Really unfair and evil.”

Another said they had gone over the BPP practice kit, but not a single June question looked like them! “So unfair.”

Students found the wording confusing, particularly for the last 15-marker question. As one sitter said: “The 15-marker on corporation tax was rough, I have never seen a question like it and I found the capital allowances difficult. It felt really ambiguous, but hoping I gained some marks on the pro formas!”

A sitter asked: “Who writes these questions?

26

It’s either a super smart person or someone with a twisted sick mind. I am so angry!”

Performance Management (PM) The June sitting was deemed ‘incredibly hard’ and even ‘vile’. As one sitter said: “The exam was awful, I just stared at some questions and thought WTF!” Another said: “PM today was so hard – hardest exam I’ve ever had.”

A common theme of complaint is the fact that the actual exams are nothing remotely like the specimen or mocks. Some students have started to question the need to do mocks at all if they don’t relate to what they see in the exam room.

We also heard of more IT system problems too: “My system broke down and I cried my eyes out.”

While PQs still seemed surprised that there is more than one exam paper, the ones who got the linear programming question admitted they found it a challenge.

Financial Reporting (FR) ‘Quite hard’ and ‘time pressured’ was the general consensus. There were some that also found it ‘relatively fine’ and ‘surprisingly OK’.

That said, more time was wanted! “I wish I had 20 minutes more to go over every section A and B question,” explained one sitter.

Another PQ said: “I felt that time just sucked away near the end, but maybe that was my own fault as I took too long with the presentation of answers on section C Q1.”

Financial Management (FM) It seems section C was ‘nicer’ than what was

set before! Many admitted to struggling with sections A & B. As one PQ said: “Section C was decent and A & B were a bit wordy”.

Others said the exam gods were kind. Another sitter wanted to know why Islamic finance hadn’t come up – they knew it so well!

Overall, sitters thought this test was OK. Someone even ventured the June exam was ‘good’.

Strategic Business Reporting (SBR) For students jumping on to the Open Tuition Instant Poll the SBR exam was a disaster for 31% and hard for another 40%. Just 26% felt the exam was OK. A PQ posted: “Brutal exam, I reckon I got 40 marks at best.”

PQ Magazine July 2022

ACCA exams PQ Good exam technique is vital and one sitter said: “I spent too much time on Q1 – this might fail me.” What annoyed another was the fact that “the whole paper tested a tiny percentage of the syllabus and some questions were pretty repetitive. I wasted a lot of time learning the whole syllabus and not much of a range came up, which is all pretty disappointing”.

Strategic Business Leader (SBL) One sitter said the June test was “nothing like past papers”, so they didn’t think it was a fair test. Another agreed: “Tricky paper indeed, nowhere near past ones.” ‘Horrible exams’ was yet another description we received!

A sitter explained: “Not a great paper.

Not many models that you could have used to format answers, which made it harder to structure answers.” They felt “the markers will have a great laugh correcting the dribble I wrote”.

Some sitters struggled using the exhibits to create enough discussion points too. As one said: “Don’t think I used a lot of the exhibit either, my answers were just pulling from general knowledge and trying to apply them to the scenario.”

Advanced Taxation (ATX) Although there was too little information provided for the requirements, the exam was deemed ‘okay’ and ‘fair’.

PQ Magazine July 2022

If you hadn’t revised for EIS relief you could have lost out, and the split year basis threw some too.

In the Open Tuition Instant Poll 40% agreed the exam was OK with 37% finding it hard and 18% a disaster.

One PQ even admitted there were some tricky bits and so much of the syllabus not tested, but overall they were very pleased. In fact, it went so well they were celebrating with a G&T! Advanced Audit & Assurance (AAA) Described by sitters as ‘not bad’ and ‘that went OK’.

Time pressures still play a major role here, and many sitters admitted they couldn’t complete the exam. As one PQ said: “It’s so time pressured there’s no time to think about how to word anything clearly or quickly read back your answer to check if you are making sense. I just about finished my last sentence with 2 seconds to go.”

Some sitters were also thrown by the fraud question, which one PQ felt belonged in an AA exam.

Some students suffered from frozen screens.

And, while some were able to rebook for the following Monday there were also stories of people who couldn’t! PQ magazine heard of at least one AAA (UK) sitter who couldn’t.

That aside one said: “I’m still shaken after the experience.”

The Open Tuition Instant Poll had 30% saying this was a hard exam and another 16% found it a disaster.

Advanced Performance Management (APM) A third of those taking part in the Open Tuition Instant Poll found the June sitting hard, with another 18% calling it a disaster.

Overall, a nice paper, ventured one sitter, but they went on to admit they struggled with the balance scorecard question.

Time was again the real enemy for many.

“I ran out of time and struggled to link the answer to the scenario.” One PQ felt “the exam had too much info to digest.” Another revealed they had spent two hours on the ABM question, and yet another did not even attempt Q2, sadly.

There were also complaints that the ACCA spreadsheet just isn’t as easy to use as excel.

Advanced Financial Management (AFM) How was AFM? – well, lots of people found their 50-marker hard and time pressured.

One sitter said: “I found it horrible, a couple of things came up that I’ve never seen before and I wasted so much time worrying about them that I could not finish the bits I did know.”

The Open Tuition Instant Poll confirms this one was OK to hard, rather than a disaster though. Let’s hope that’s reflected in the pass rates.

27

PQ AAT celebration

A celebration of success Future Connect Training Institute recently held its inaugural award ceremony for its AAT students at the wonderful Central Hall, Westminster

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uture Connect’s team from across the UK and its AAT students recently descended on Westminster Central Hall for what it hopes will be a yearly ‘celebration of success’.

AAT’s regional manager Kareen Lawrence was on hand to present the certificates to all the successful students and PQ magazine’s editor, Graham Hambly, was master of ceremony.

Employer Sheryar Malik of Tax Well Accountants also gave a pertinent speech. He told the audience if there is two pieces of advice

to take away from the day it was to get qualified – you need to finish the qualification to the end, and to keep up-to-date and never be frightened to invest in yourself.

Future Connect’s Umar Tariq thanked his fantastic teams who “always go that extra mile” and explained just how far FC had come in four short years.

But the day really belonged to the AAT studiers and their families who were finally able to collect their hard-earned certificates.

PQ magazine editor, Graham Hambly, kicks off the ‘celebration of success’.

AAT Level 2 Foundation Certificate in Bookkeeping student, Foyin Olusola (centre), receives her certificate from AAT’s Kareen Lawrence (right) and FC’s Palwi Sood.

Tax Well Accountants’ Sheryar Malik entertains the packed hall!

Future Connect’s Harrow team enjoying their success.

Future Connect’s AAT students finally have their hand on their AAT certificates!

Sangavi Sachithananthan gets her picture taken – a memory to cherish.

People came from all over the UK to be at the Central Hall, Westminster

28

PQ Magazine July 2022

AAT Q2022 PQ

Demand curves explained Nick Craggs takes a look at a new subject that will come up in the business awareness unit at level 3 – demand and supply

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he new Business Awareness unit at AAT level 3 looks at a wide variety of factors that affect a business, from interest rates and exchange rates, to factors such as the behaviour of competitors and customers. One of the most significant influences on a business is the market that the business operates in. The market can be broken down into supply and demand.

This month I am going to look at demand, and next month I will look at supply. Demand is how much people want a product and how much they want to pay for it. Whereas supply is how much of a product there is available and how much a supplier wants for their goods. Sounds simple, right? Well not so much, as we all know things never stay the same.

Typically, most goods follow what is known as the Law of Demand. This means that demand for a product goes up as the price goes down. This also works the other way in that if the price goes up, the demand goes down. At different prices you will have different demand, and at these points you can plot this demand as a graph, known as the demand curve (even though typically it is a straight line). This gives you a graph which shows that as the price goes up, the demand goes down. Imagine this as a graph with the demand on the horizontal axis and the price on the vertical axis. You will have line graph that looks like the below:

You can then use this to predict demand at different price points.

However, just when you think you have everything in hand, something can occur that will shift the demand curve either to the left or the right. This means that that quantity demanded will be more or less than it was at a certain price point. So, what could cause the demand curve to move? If the curve moves to the left the demand at the price point will be less, if it moves to the right the demand at that price point will be greater.

We all know about the cost of living at the moment, and this will change how much income people have. Some products will see a fall in demand if people have less money, these are known as normal goods.

Most items are normal goods. There are goods however, which will see their demand increase if people have less money. In this case the demand curve will move to the right, and there will be more demand for a product at a certain price point. These goods are known as inferior goods, and an example of these might be supermarket’s own brand goods. People may buy the less premium goods if they feel they have less disposable income.

Finally, we then have the goods where demand will not change depending on people’s income. These are known as necessity goods. You don’t buy more of them if your income goes up, but you don’t buy any less of them if your income goes down. A good example of this is your water bill. You generally don’t get a pay rise think that you will splurge it all on flushing the toilet more! The demand curve doesn’t move.

What else can cause the demand curve to move?

PQ Magazine July 2022

Changes to customers tastes and preferences will mean that there is now more demand for some products at a certain price point, and perhaps less demand for other products than there was previously at certain price points. For example, there might be more demand for more sustainable clothing now, and there is less demand for what you could describe as more cheaper, disposable clothing than there was previously.

A change in price of a different product can affect the demand for your product. How might you ask? Well, your product might have a complementary product that goes along with your product. You might sell diesel cars, and if the price of diesel goes up, the demand for your diesel cars goes down.

A substitute product is a product that customers can use instead of your product. A change in the price of a substitute product can change the demand for your product. Going back to our diesel car example, if the prices of electric cars fall, you may well see that demand for diesel cars fall, and the demand curve moves to the left.

Why don’t you have a go at the below questions to see if you know what will happen to the demand curve for various situations: 1. Which of the following are likely to be necessity goods: a. Tobacco b. Milk c. Air travel d. Laptops 2. If the price of a substitute product increases, will the demand curve move to the left or to the right?

3. If the price of a complementary product increases will the demand curve more the left or to the right?

Answers 1) A and B 2) the demand curve would move to the right as people are less likely to buy the substitute product and more likely to buy your product. 3) the demand curve would move to the left, as if the demand for your complementary product falls, the demand for your product will fall.

• Nick Craggs is a tutor at First Intuition 29

PQ wellbeing

Happiness in the workplace brings many rewards

Rebecca Wright explains the importance of making sure trainees are well looked after, and has some advice for PQs on how to look after their mental health

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s a mother I frequently find myself echoing phrases from my parents when I was growing up, such as “You only get out what you put in” and “Try your best, be the best version of yourself, no one can ask for more than that”. Having always resented hearing “You have it so much easier than we did in our day” I have always managed to stop myself from repeating this dreaded phrase.

As ICAEW Course Leader at USW I have the privilege to witness my students’ academic and professional development. During this process I am always acutely aware of their mental health and welfare. It is without question that there is no ‘one size fits all’ when it comes to anyone’s mental health. Each student is on their own unique journey, with their own challenges and demons, the Professional teaching team at University of South Wales try their best to ensure everyone has time, care and support throughout their Professional journey.

As the UK finds its feet after the pandemic, damaged, bruised and cautious, I am asking the question – are we fully appreciating the impact and recovery of our trainees? Most trainees in accountancy have had little respite during Covid19, they have had to keep pace with their studies, with training in the workplace moving online, and quickly get to grips with new processes and procedures. With unwavering energy they have without doubt ‘kept calm and carried on’.

However, more than two years into the pandemic I have explored how this has this impacted our workforce, and outlined small changes we can make to ensure we are doing enough to echo our parent’s words within our workforce – “You only get out what you put in.”

Investment All trainee accountants are provided with an opportunity to obtain their Professional Qualification at no cost to them. While this is an excellent opportunity, is this where our investment stops? Could we take time to invest in our employees’ soft skills such as working as a team, time management and customer service, valuable transferable skills which encourages well rounded development.

LinkedIn Learning have an excellent pool of resources on their online platform enabling professional and personal development. When I was discussing this with a firm of accountants at a networking event recently they responded 30

to say, “we don’t want to encourage employee engagement on LinkedIn, they might be recruited.” To which I responded, they will only leave if they are not happy in their current role.

Why might that be?

There are many training and development platforms that enable employers to support and develop employees’ softer skills. These are often on-demand, and relatively cheap. In addition to this, many training and development platforms offer employees the opportunity for personal development, encouraging wellness within the workplace.

As an employer if you are doing a good job in supporting your employees you will be attractive to the recruitment market, people will always move roles, but this shouldn’t prevent us from actively investing in our work force.

Working week Since Covid-19 many of the bigger firms have publicised their flexibility to offer employees the option to regularly work from home, encouraged ‘no meetings Fridays’ and are acknowledging that good things can come from the pandemic.

However, are we offering this flexible working for the benefit of the employee, or providing an impression of flexible working, but expecting more from our staff?

If we are encouraging working from home we need to ensure both the employer and the employee are not increasing their working day by replacing their commute with their work; this is unhealthy, unsustainable and unproductive to a person’s mental health.

There are small changes that we can make to our working week, a weekly wellbeing hour, encouraged regular breaks, exercise, etc. If your employee wanted to go to the gym at 11am on a Tuesday, would you be amenable to this?

If the trainee is an ICAEW student, they have access to CABA resources for mental health and wellbeing. If you are an ICAEW firm with non ICAEW members you have access to a fortnightly wellbeing webinar available for all staff. Many employers are unaware of the services that CABA can offer, why not give them a call and see how their services can support your trainees?

Investment in your studies When considering mental health in the workplace, the onus cannot simply be on the employer; the employee will also have to take responsibility for

their own time management when it comes to juggling studies, work and social activities.

As students, are you taking the recommended time required to invest in your studies?

I am clear to my students about the commitment they need to make to their studies, and how they need to make room for this intrusive, unwelcomed fiend in their lives.

However, as exam week approaches and their pale, sleep-deprived faces with dark eyes stare back at me, all I can see is confidence replaced with hopeful hindsight.

If you do not make time for your studies, you are putting yourselves under undue and preventable pressure.

Mentors We are all aware of substantial changes to society in the past decade, that tell us that just because something was deemed to be acceptable in the 1980s and 1990s does not mean it is acceptable now.

The professional path for trainees is a totally different experience to that of many of our established practice partners. We have seen events around the world unfold that have been unplanned, unpredictable and unprecedented.

At the age of 20 our young trainees are having to manage the bombardment of information, fear and despair that some of us have never had to endure, and if we are honest, we have struggled to adapt and persevere. The generation of trainees today live their lives in a window, often feeling critiqued and judged in every aspect of their lives. The pressure of their exams and training, and feeling of failure, is huge and often leaves them feeling vulnerable.

Telling students that they have it easier than when you did is not productive and is unrelatable.

Students have more uncertainty, and have to be more adaptable and more resilient than ever before. Social media has infiltrated every aspect of their lives, they live in a life of pressure, PQ Magazine July 2022

wellbeing PQ scheduling in regular one-to-ones to talk about work/study/home life provides opportunities to address smaller issues before they become bigger issues, enabling plans to be put into action. It can be hard to ensure that all trainees have this time, so perhaps consider introducing mentors in the workplace. This will enable sharing of best practice, better communications and relations and share the burden of giving enough time to your trainees. It is also likely that a newly qualified accountant can be more relatable to trainees and has a better grasp of the challenges they face.

As a student, don’t be afraid to say if things are not feeling as you would expect. Whilst a career in accountancy is certainly not one without pressure, it is perfectly normal to feel overwhelmed, and often an opportunity to sit and speak to more senior qualified staff will enable you to regroup and gain perspective. More often than not, they will be able to offer guidance and advice as to how you can make small changes to your working week, work plan or revision plan that will make the world of difference.

expectation and continual observation, and this is exhausting.

It can be very challenging to find time in the working week to talk to our trainees but

Planning and communication How much do we plan? Another parental phrase springs to mind: “Failing to plan is planning to fail.” Planning is such an important role in accountancy when it comes to audits, recruitment and deadlines, but are we doing enough to reiterate the importance of planning with our trainees?

Communicating the plan is as important as the

plan itself. If you are aware of the work plan and deadlines but your team are not, it is difficult for them to understand the urgency or challenges faced when trying to accommodate annual leave, emergency leave and study leave.

When a trainee is overwhelmed, it is important that they feel they can take a break. A trainee shouldn’t have the burden that they are unable to take leave. While it is important for longer periods of annual leave to be booked in advance, it is vital that a trainee feels they can take leave ad hoc, when they feel they need to rest and recharge.

How effective is our long-term planning?

Managing deadlines and audits is a huge logistical challenge, and when we get this wrong there are significant consequences. However, it is not up to our trainees to work longer, harder and faster to accommodate our errors, and when it does happen our procedures and policies should be reviewed to ensure it does not happen again.

Trainees require investment, beyond facilitating their qualification, and investing in our workforce will provide efficiency and effectiveness. As always, communication is key. Next time you start to tell them how hard you had it, pause and ask them to tell you how hard they are finding it, using your hindsight and experience to help support them moving forward.

• Rebecca Wright is an ICAEW Course Leader and lecturer in accounting at the University of South Wales

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31

PQ AAT exams

Mark-up and margins: the lowdown Karen Groves explains how to approach mark-up and margin questions and tests your knowledge on the subject

So: Sales

%

£

100

10,000

Cost of goods

70

7,000

Gross Profit

30

3,000

If you were given the cost of sales figure of £7,000, you can calculate the sales figure as follows: £7,000 x 100 = £10,000 70 Both mark-ups and margins can be used in incomplete records assessment questions to help find missing sales or cost of goods figures.

Example A costume retailer has a gross profit margin of 30% and has provided the following information: Purchases = £20,000 Opening inventory = £3,000 Closing inventory = £4,000 We now need to calculate the sales for the period:

O

Mark-up example A furniture retailer uses a 25% mark-up on cost to set the selling price. The cost of the goods being sold is £200, so we calculate the actual selling price as follows using percentages known as the cost structure: % Sales

125 (cost figure + 25% mark-up)

Cost of goods

100 (this is 100% being the cost figure)

Gross Profit

25

We know that the cost is £200, so: % Cost of goods Gross Profit

£

125 100

200

25

If the £200 is equivalent to 100%, the sales of 125% will be: 32

%

Sales

100

Cost of goods

70

Gross Profit

30

Cost of goods sold

ne method that can be used to reconstruct missing figures is to use mark-up and margins. A business will typically set the selling prices by using either: • A profit margin, where a percentage profit is used on the net selling price, so a percentage of the sales figure; or • A mark-up, where a percentage profit is added to the net original cost of the item to reach the sales price.

VAT is ignored in the calculations if you are a VAT registered business. Once you have calculated your mark-up or profit margin selling price, this will then be subject to VAT as appropriate.

Sales

Cost structure

£

£200 x 125 = £250.00 100

Opening inventory

So: %

£

Sales

125

250

Cost of goods

100

200

25

50

Gross Profit

If you are given the sales figure of £250, equal to 125%, the cost can be calculated as follows: £250 x 100 = £200 125 Profit margin example A clothing retailer operates with a 30% profit margin. Her sales this week are £10,000, so we set up the cost structure; however, this time the sales figure is 100%: % Sales

100

Cost of goods

70 (cost must be 70% if sales are 100%)

Gross Profit

30

We know that the sales figure is £10,000 Sales

%

£

100

10,000

Cost of goods

70

Gross Profit

30

As sales are £10,000, the cost is calculated as follows: £10,000 x 70 = £7,000 100

Purchases Less: Closing inventory

3,000 20,000 4,000 19,000

The sales figure can now be calculated: £19,000 x 100 = £27,143 70 Once you have your sales figure and know how to put together the cost structure, you can then find the total for cost of goods sold, and other missing figures such as purchases or inventory.

Now have a go 1 The sales for a shoe store were £20,000 for the month and the business operates a 25% mark-up on cost policy.

What will the cost of goods sold be?

• £20,000 • £25,000 • £16,000 2 The cost of goods sold for a men’s clothing store was £15,000 for the month, and the business operates a 40% profit margin.

What will the sales for the week be?

• £21,000 • £15,000 • £25,000 Answers: 1. £16,000 2. £25,000 • Karen Groves is an AAT tutor and AAT Course Director at e-Careers PQ Magazine July 2022

Get a step ahead with Xero Advisor Certification Having a sound knowledge of cloud accounting software is invaluable in a competitive job market.

Get the Xero Advisor Certificate and stand out from the crowd.

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PQ subsidiaries more than 1% individually. None of the other shareholders have any arrangements to consult any of the others or make collective decisions.

Since Whitstable purchased the investment in Oyster it has actively participated in establishing the operating and financial policies of Oyster.

Required: Discuss whether Whitstable’s purchase of the shareholding in Oyster should be accounted for in the consolidated financial statements as a subsidiary.

A question for Tom Top tutor Tom Clendon looks at the important question of how you define a subsidiary

Student’s question What is a subsidiary?

Tom’s answer This is a great question because it is so important! Important because where an investment is identified as a subsidiary then this triggers the preparation of consolidated financial statements (group accounts). This is where the financial statements of a parent and its subsidiaries are presented as if they were a single economic entity. This means that the subsidiary’s income, expenses, assets, and liabilities are fully aggregated into the group accounts.

Principles not numbers are key: A principlesbased approach is taken to defining a subsidiary.

In simple terms a subsidiary is an entity that is controlled. It must be noted that the definition of a subsidiary is not a number, rather it is based on the principle of control.

Control is though normally, but not exclusively, evidenced by the investor holding a majority (50% +) of the voting rights. But there are exceptions where control can be achieved by holding less than a majority of the shares.

34

Principles prevent creative accounting: The principles-based approach is important as creative accountants, trying to adopt a legalistic approach, may wish to try and argue that an investment is not a subsidiary, on the basis that the investor’s shareholding is less than 50% (when it is actually controlled). This (false) argument can be trotted out where the investment is highly geared. In which case, what the creative accountant is trying to do, is to take the investment’s liabilities off the group balance sheet, as if the investment is defined as a subsidiary, then their liabilities are aggregated in full in the consolidated accounts.

Consider all the circumstances: In determining whether an investment is controlled, and therefore a subsidiary, it is important to consider the substance of the relationship and not just the size of the shareholding.

Let us learn by considering a question.

Question: Whitstable & Oyster Whitstable has recently acquired 40% of the equity capital and voting rights of Oyster. The other 60% of Oyster’s shares are held by a wide variety of investors, none of whom owns

Answer: Whitstable & Oyster Oyster will be a subsidiary in the Whitstable group if it is established that Whitstable controls Oyster.

On a first review, Whitstable does not have the power to control Oyster on account of its the absolute size of its shareholding. After all it does not hold a majority. A holding of 40% gives a rebuttable assumption of significant influence (associate status) rather than control.

Whitstable will be able to control Oyster if, and only if, it has all of the following elements: • Power over the Oyster, i.e. Whitstable has existing rights that give it the ability to direct the relevant activities (the activities that significantly affect Oyster’s returns).

• Exposure, or rights, to variable returns from its involvement with Oyster.

• The ability to use its power over Oyster to affect the amount of Whitstable’s returns.

Whitstable will have to consider all relevant facts and circumstances when assessing whether it controls Oyster.

It is noted that the other shareholdings in Oyster are all small and widely disbursed.

Further it is noted that none of the other shareholders have any arrangements to consult any of the others or make collective decisions.

This means that at a shareholder meeting of Oyster, Whitstable should be able to appoint the directors it wants. Many of those small investors may abstain or support the appointment. This assumption is validated by the assertion that since Whitstable purchased its investment it has actively participated in establishing the operating and financial policies of Oyster.

Whitstable therefore has power over Oyster, and there are no stated restrictions on its ability to use that power. Further with a 40% holding in Oyster, then Whitstable also has exposure to variable returns.

To conclude, despite owning less than a majority of the shares in Oyster, Whitstable does actually control Oyster and is therefore a subsidiary of Whitstable, albeit with a noncontrolling interest of 60%!

• Tom Clendon FCCA is an online ACCA SBR lecturer and podcaster. www.tomclendon.co.uk

PQ Magazine July 2022

careers PQ

Dear Karen Ask PQ’s very own agony aunt Karen Young when you need advice from a real expert.

Email your dilemma to graham@pqmagazine.com, and he will pass on the best ones to Karen THE DILEMMA Quite a lot of my team are currently on annual leave, and this has resulted in a heavy workload for me to pick up. Do you have any advice on how we can prevent this going forward and what we can do to help the situation now?

Life at MegaChem UK Hanni D. Owens is an Accounts Executive who has now completed AAT. She has a qualification in Linguistics and is the current PQ magazine Distance Learning Student of the Year What time does your alarm go off on a working day? 6am.

What is on your desk? Two screens, two trays for mail and documents, a folder with finance codes and a notepad.

How long is your commute to that desk and is it better now?

Depends how one defines ‘better’.

I commute to the office again – I like working in the office but miss home working very much.

Do you have a favourite lunch?

Egg-fried rice with vegetables – colourful food makes me happy What are your favourite websites for work? The AAT’s website and

Excel help forums.

How many hours a week do you spend in online meeting rooms?

Eight hours a week on Zoom and 10 hours on Teams.

Are you spending more time working now than normal? Yes, definitely.

How do you relax? I love reading, both fiction and non-fiction. I prefer travel journals and historically accurate fiction.

What is your favourite tipple?

Peach Bellini.

What’s your favourite TV show?

Firefly and Mr Robot.

What is the best film you have

watched recently? Pay It Forward.

Summer or winter? What happened to Spring?

Do you prefer pubs or clubs?

Clubs. I prefer discussion, music and dance to a drink.

Do you have a hero? My husband, 100%.

What was the first thing you did when lockdown was over? I took a trip to Norway.

If you had a time machine where would you go? I would not want to change anything, but I would have liked to travel to the younger me and tell her that ‘in the end all will be ok’.

In brief

KAREN’S RESPONSE During summer this is not an uncommon position to find yourself in, but there are steps that can be implemented to help prevent this from being a regular occurrence.

Firstly, plan ahead! Keep an up-to-date online diary detailing when individuals are taking their annual leave days, and where there may be crossover among other employees. Recommending and implementing better planning on holiday dates really can help with avoiding too many people off at the same time.

Secondly, communication is key.

It is pivotal to communicate to your team the projects that you are currently working on – this transparency will encourage fairer work allocation and prevent one individual from feeling burnt out.

Regarding the current workload, if the team is feeling overwhelmed it is important to divvy up outstanding work into two sections: mandatory work that must get done, and tasks that can wait until the individual is back – not all tasks deserve the same importance!

• Karen Young is a director at Hays. She is passionate about helping people to find the right job, and companies to find the right person

PQ Magazine July 2022

Pap Napping with your pet Half of all millennials want to regularly take naps during office hours, according to a new survey from Kitt. Being able to bring your pet to work also appealed to one in five millennials, as both are struggling to be apart! Other top perks for a third was the idea of an on-site gym, and one in four would welcome a rooftop bar for post-work drinks. Kitt’s CCO, Lucy Minton, said: “The pandemic has transformed what we expect from work, particularly for millennials, and those on the entry end of the jobs market.

With the line between home and the office becoming harder to

said this was an absolute ‘no go’.

distinguish, people are looking for a company that provides them with a space that reflects the new ways of working and replicates the various luxuries of their home.” There appears to be a growing divide among workers, too. Some 39% of entry-level staff think wearing casual clothing in the office is a ‘musthave’, while 75% of directors

Pap Tesla ends WFH Telsa boss Elon Musk has said everyone at the company needs to spend a minimum of 40 hours in the office a week, and if you don’t show up “we will assume you have resigned”.

Obviously not a fan of WFH, Musk tweeted that people who are unwilling to abide by the new rules can “pretend to work somewhere else”. Musk also claimed he would personally review any request for exemptions to the new policy.

The new directive was shared via email, but these were quickly leaked on social media.

The PQ Book Club: books you should read Auditing, 12th Edition (2022)

by Alan Millichamp & John Taylor (Cengage, print £50.99, eBook £40.79) This revised and updated 12th edition is a well-written and comprehensive introductory text on UK auditing. John Taylor is carrying the mantle after Alan Millichamp’s passing, and the 33 chapters give a comprehensive introduction to and overview of current UK auditing practices and procedures. The Millichamp text has for many years been a popular core undergraduate text for first courses in auditing. By its own admission, however, it is not an academic text as it has a very practical focus, and

the multitude of supporting case studies, self-test questions and examination questions will appeal both to undergraduate audit students and professional accounting students alike.

Of particular interest in this latest 12th edition is Chapter 33 on Current Issues, which includes a concise summary of recent developments in audit regulation, including the Brydon Report, and a discussion of the emerging audit challenges arising from developments in data analytics, cryptocurrencies and blockchain. Also new are real-world auditing cases, including an analysis of Carillion’s going concern status prior to its collapse in the early

months of 2018 (chapter 23).

Whilst the professional study manuals will continue to dominate the audit market for ICAEW and ACCA students, this latest Millichamp text will be of much interest to ACCA Audit & Assurance (F8) students in particular, and also ICAEW Assurance & Audit students.

P/Q rating 5/5 A comprehensive guide to current UK auditing practice and procedures.

• Martyn Jones is Senior Lecturer in Accounting, University of Winchester 35

PQ got the a story, funny or serious, you want to share? Email graham@pqmagazine.com

One full-time job is never enough As of 1 April 2022, the basic annual salary for a UK MP rose to £84,144 (£81,932 – 2021). MPs also receive expenses to cover the costs of running an office, employing staff, having somewhere to live in London or their constituency, and travel between Parliament and their constituency. If they are a chair of a select committee, they can add another £16,865 to the total.

But that is not enough for some MPs, and in March the Conservative government abandoned plans to limit MPs’ earnings from any paid work they do outside their parliamentary role. Research by TopRatedCasinos. co.uk found Geoffrey Cox earned the most from a second job, a cool £1,835,399.89. In second place is former PM Theresa May, who enjoyed a sizeable £1,564,076 pay day. In third place is current Secretary of State Sajid Javid (pictured), who pulled in an additional £758,670. In total MPs pocket £13 million from ‘second jobs’.

Rich getting richer, as always The Sunday Times 34th annual guide to wealth in the UK is out.

The Rich List 2022 identifies record wealth, with 177 billionaires, six more than 2021.

The combined wealth of the UK’s 250 most affluent individuals and families has climbed to £710.723 billion – an 8% rise in just 12 months. Interestingly, only 38% of the wealth of the top 250 comes from those born in the UK – a decrease from 45% a decade ago.

Just one billionaire in the top 10, Sir James Dyson, was born here. Britain’s second richest man, with £23 billion, is sandwiched between two sets of Indianborn brothers: the Hindujas (£28 billion) and Reubens (£22 billion). A new entry this year is Akshata Murty and Rishi Sunak (the Chancellor), who are worth £730 million, which puts them straight in at 222=.

’ WEV E

Calling all gamers

Gamers playing Angry Birds, The Sims, FIFA, Sugar Blast and others will be targeted by adverts calling on workers to check they are being paid properly following the annual increase in the minimum wage.

With younger workers among those set to benefit most from the rise, a 15-second animation paid for by the UK government will play during game play to remind players of the higher rates with a link to the check your pay page.

Known as reward video, the adverts will run during natural pauses in the game play and players will be incentivised to watch the entire video to gain an in-game reward such as coins, points or extra lives – for example, receiving an extra ‘bird’ when playing Angry Birds.

The National Minimum Wage rates increased on 1 April, with the largest ever rise to the National Living Wage to £9.50 per hour.

I don’t like parties!

A US medical worker was recently awarded a whopping $450,000 after a surprise workplace party trigger an anxiety attack that in turn lead to his sacking. Kevin Berling had told his boss he didn’t want a party, but it went ahead anyway. Berling became so upset that he told the court that he finished his lunch in his car before texting his complaint to his manager.

The next day he was castigated for his “sombre behaviour”.

After a two-day trial a jury awarded him $150,000 in lost wages and $300,000 for the embarrassment he suffered and for loss of self-esteem. The company has said it will be challenging the verdict.

The ICAEW coat of arms Ever wondered why there is lady holding a ship’s rudder, rod and dividers on the ICAEW’s coat of arms?

You have to go back to the College of Heralds, which granted the institute its coat of arms in 1880. The ‘Institute Lady’, as she is called, is Economia (pictured is the original illustration), taken from the book ‘Iconologia’ by Cesare Ripa (1603) which is now held by the ICAEW in its collection of rare books.

Librarian Cosmo Gordon explained in 1948: “The rod signifies command, the rudder guidance; with the dividers she measures her powers and so estimates what she has to spend.”

GOT THE L OT

Word Fall Wordle is the addictive word game that’s take the puzzling world by storm. It inspired bestselling puzzle author Dr Gareth Moore to create 350 all-new Word Fall puzzles to enable you to practice your favourite word game offline. You can play as many times as you like, challenge yourself and improve your skills.

PQ magazine has three books to give away to readers. To be entered into the free draw simply send your name and address to giveways@pqmagazine.com and we will do the rest. Head up your email ‘Word Fall’.

Keep yourself hydrated!

Don’t worry if you didn’t get to the ACCA stand at Accountex, PQ magazine picked up a drinks bottle for you! We also pocketed up a sleep mask from Chaser, which explains ‘Even when I sleep my invoices get paid’. To create the ultimate accountancy goodie bag we also picked up some great swag from the Digital Accountancy Show, which took place at the Tottenham Hotspur Stadium recently.

We have three goodie packs to give way. To have a chance of winning send us your name and address to giveaways@ pqmagazine.com. Head up that email ‘Goodie bag’.

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 15 July 2022. The main draw will take place on Monday 18 July 2022.

TO ENTER THESE GIVEAWAYS EMAIL GIVEAWAYS@PQMAGAZINE.COM 36

PQ Magazine July 2022