PQ magazine, March 2017

Page 1

PQ magazine March 2017

www.pqmagazine.co.uk / www.pqjobs.co.uk

Questionspotting: what is going to come up in the March ACCA exams?

CIMA updates exam rules

AUDIT ISN’T SEXY ENOUGH ANYMORE

The audit profession is at a tipping point. There is now real concern that few people will be attracted to a career in audit, and there could be a huge skills gap. The call has come for audit to be ‘repositioned’ and sold to the next generation by demonstrating the positive role it plays in society. Changing the perception of the accountancy profession in general, and audit in particular, will be no mean feat. However, recent discussions appear to show that there is an even bigger threat to the accountancy profession on the horizon as firms look to totally change the skill-set of their audit teams. Accountancy could be asked to take a back seat as firms look to recruit more data and risk analysts, and cyber security experts. One Big 4 firm admitted while it currently recruits 1,000 graduates for chartered accountancy training each year for its audit teams it may look to cut this to just 200. If the accountancy bodies want to keep ahead of the curve they may have to have to change the very essence of their accountancy qualifications. The recent joint report from the Financial Reporting Council and ICAS said that the profession needed to develop the audit skills base at the same time as the audit of the future evolves. Waiting for audit to change will be too The first ICAEW professional CBEs are upon us, with the Audit & Assurance and Tax Compliance exams the first to switch over from paper to computer in March. The ICAEW’s James Patrick told the recent tutor’s conference that the institute has learned a lot of lessons from the September and December pilots. While it might seem obvious, he said those sitting the CBEs had to become familiar

Colella: ‘audit needs to attract the most talented individuals’

late given the time-lag involved in recruiting, developing and training staff. There will undoubtedly be a greater emphasis on IT skills within audit teams, to complement the use of IT specialists. The report’s authors felt that the development of multi-disciplinary teams will clearly impact on how and who the firms recruit. To meet the challenges of today and tomorrow the report, Auditor Skills in a Changing Business World, said there are three key skills that need to be enhanced: business acumen, technology

and data interrogation, and soft skills. ICAS CEO Anton Colella said: “Audit quality relies on quality people. The challenge is that audit needs to attract and retain the most talented individuals – now and in the future. More and more we need to demonstrate what an exciting and fulfilling career choice it can be.” • See Author Skills in a Changing Business World and The Capability & Competency Requirements of Auditors in Today’s Complex Global Business Environment, both from ICAS and the FRC.

ICAEW CBEs about to launch with the exam software, and to this end the ICAEW has uploaded lots of support and guidance. Patrick stressed that students need to know how to show their workings and how to make their responses ‘visible’. To help this process the ICAEW has introduced a

little note on every screen, not just the opening screen. Patrick explained that a minority of students were trying to put too much in the answer cells and were not showing where their workings could be found. Markers can’t go hunting through all the cells to find these

answers, he explained. The ICAEW has also changed its online practice exam delivery service. Connectivity was an issue for those using their employer’s laptops. So these can now be downloaded in advance and run offline.


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comment PQ

CONTENTS

News 08CIMA exams Institute buoyant as pass rates rise year on year 10Jobs market Graduate recruitment is set to plummet 12Apprenticeships AAT a trailblazer for new initiative Features, etc 06Mind your Ps&Qs What’s the point of seeded questions?; exam review a waste of cash; and a nightmare exam hall experience 14PQ Awards 2017 We publish the short list ahead of this year’s event at London’s CafÊ de Paris 15CIMA changes CIMA updates exam terms and conditions to stay ahead of the cheats 16LSBF profile We talk to the college about its expanding product range for students

18Let’s get technical We explain how you can reclaim VAT

20ACCA exam tips Our experts

on what they expect to come up in the forthcoming exams

March 2017 28Apprenticeships Funding

changes to have a big impact 29Exam advice from the ICAEW 30Public sector fraud How to keep your organisation secure 31Careers #1 How to ensure longevity in your finance career 32Careers #2 Working in Cyprus; and our social media round-up 34Fun stuff – and our giveaways The columnists Robert Bruce CFOs must continue to develop their roles 8 Prem Sikka Banks should be more socially responsible 10 Carl Lygo What are the skills that graduates are lacking? 12 Subscribe to PQ magazine It’s FREE – go to www.pqmagazine.co.uk ABC July 2015 – June 2016

32,238

22Audit reports Recent changes

that affect the F8 and P7 papers

24ICAEW spotlight Why you

should get IT savvy; and advice on the Business Strategy paper

26Costing Absorbtion and

Publisher’s statement: We send a digital issue of the magazine to an additional 9,345 requested readers

27ACCA exams If you want to

Free to all accountancy students Annual subscription: ÂŁ35 (ÂŁ50 overseas)

marginal costing explained pass F9 then call a CAB!

Looking to the future Not a week seems to go by without another survey about robots taking our jobs. If it’s not 250,000 public sector staff being replaced by AI (a Reform study), then it’s accountants at the top of every endangered species list. Oxford University’s Carl Frey has suggested 93.5% of accountancy roles are at risk from the robots! Apparently, the safest people are occupational therapists, followed by surgeons – but I think it might be too late for me to retrain for these. Yet, at the same time, we have Wow’s Paul Bulpitt saying there has never been a more exciting time to be an accountant (see page 24). What I took from his recent talk at the ICAEW’s Higher Education Conference is that we all need to embrace technology and the new predictive roles that it will engender. As Bulpitt says, technology expands capability, it does not limit it. Taxing times On a slightly different tangent, who said tax isn’t sexy? The CIOT’s Irene Redman is rightly on my case (in the nicest possible way) telling me that it is. It has even created a new paper, called Human Capital Taxes, which looks to address the growing mobility of employment and its tax implications. Then we have David Beckman and the taxman clashing over who can be called a ‘sir’. It seems the taxman scuppered Beck’s chances of a knighthood because of the small matter of his investment in Ingenious Media. Not such an ‘ingenious’ move there, David! I also loved the fact that Bermuda accused Britain of operating as a tax haven for ‘non doms’. It appears the row erupted after MPs backed a plan to make 14 overseas territories open up their corporate registers. Bermuda’s deputy premier, Bob Richards, claimed the UK was guilty of double standards. He said that billionaires aren’t living in London for the weather. Perhaps those in greenhouses shouldn’t throw stones‌ Finally, well done to our Annual Bumper Quiz winners, who each win an Apple Watch. They are Thomas O’Neill, Victoria Laughton and Kay Lee. Graham Hambly, PQ magazine editor – graham@pqaccountant.com

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PQ have your say

email graham@pqaccountant.com Seeds of doubt What is the ACCA doing? Are we really going to sit questions we don’t get marks for? Can someone please explain how this makes the exams fairer? I am a little sceptical that the introduction of 10 seeded questions really will ensure all exams sat are comparable, as the number seems a bit low to be honest. It will only be natural for students to try to hunt these questions out. I’m also confused about how long we get in the exam hall. Am I right in saying the CBE are now three hours 20 minutes long and

the paper exams three hours and 15 minutes? PQ said all exams are three hours 20 minutes. I have also been told CBE exams are actually three hours 30 minutes

long, as there is up to 10 minutes for reading the pre-exam instructions. That said, I love the idea of being able to choose to sit either a morning or afternoon exam. That really helps me because I really am not a morning person! I also have the most terrible handwriting and I can no-longer fool myself into thinking I failed because the marker could not read what I wrote. The CBEs are so much closer to what happens in the world of work. Name and address supplied The editor says: Sorry everyone, I don’t think we helped with this. The exam durations are as stated above!

Our star letter writer wins a fantastic PQ memory stick! Waste of cash

I failed F9 in the December ACCA exam diet by 2% – I believe it was down to the extensive MCQ section. So I thought what I needed was a an ACCA administrative review, which will tell you: • That you have received an absent mark but you were present at the exam and submitted an exam paper. • That you were not present at an exam but received a mark for your paper. • That you feel ACCA’s quality controls have not been applied properly in arriving at your mark. There are also various other derriere-covering statements on their website, yet inexplicably they also say the following about the information they will provide: “This information will provide an indication as to where a good understanding of a topic area has been demonstrated, and should assist with revision in cases where students have failed an examination.” On the contrary, for the sum of £52, they will tell you if you passed or failed the MCQs (worth 60 marks) and passed or failed Q1 and Q2 of the written section. This gives me no indication whatsoever about whether the

service is not “for obtaining personalised feedback as this is not provided”. Name and address supplied

Hell of a Vue

I was somewhat surprised to see a picture of a Pearson Vue exam centre in the latest issue of PQ (February 2107). It looked very clean and professional. I have attended two Pearson Vue centres in my area and they did not look like that. They were on a floor in what looked like a derelict building from the outside. The building was damp and the decor dated. Chairs were scruffy, stained and creaked when you move. The headphones were broken, so I had to use in-ear sound protectors. The room was full of teenagers sitting their driving theory test, which meant the regular disruption of people coming and going. Not the standard you expect from CIMA! Name and address supplied

I finally did it!

Sorted, thanks to pqjobs.co.uk

Thank you for publishing my letter (‘More power to PQ’, February 2017). I am happy to say I did pass P6 and I am done, sir! Thank you again. Pantelis C. Fouli, by email The editor says: Well done, Pantelis! All that hard work paid off. Turn to page 32 to see Pantelis featured on our ‘Life at…’ section.

Keyboard plea

understanding of a topic area has been demonstrated. In fact, it gives no clarity, despite the association’s claims that it allows “ACCA to ensure transparency and fairness”. It does not refer to any ‘topics’. I would just like to advise other students to not consider using this

service – despite the quick turnaround it is a waste of money. I did mention I would be writing to you about my correspondence with them but they remain unabashedly cool about my desire for more information or the threat of complaining about it as the

It is amazing that students are still being required to write their answers. What is wrong with providing them with keyboards – without any facilities for memory sticks etc – but with some sort of security system? Keyboard skills are arguably more important than handwriting skills, so why are they not part of the examination process more than just limited to computer papers? I only send typewritten letters because it is so much quicker – my handwriting is now much confined to signatures. David Hunt, by email

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

Published by PQ Publishing © PQ Publishing 2017


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PQ news

ROBERT BRUCE CFOs need to continue to develop the role For a generation CFOs have fought hard to be the corporate lynchpin. For years they tried to get rid of the typecasting of being the nerd, the person who crunched the numbers. Then they moved on to the idea that they, alone of board directors, could see how things worked right across the business and weren’t trapped in a silo of their own specialisation. Then in a new era, post-Cadbury Report, they became the guardians of corporate governance. They are the ones who, theoretically, provide the ‘fair, balanced and understandable’ grounding in financial disclosures. CFOs have fought hard to become indispensable, and to embed themselves as those lynchpins. But they need to do more. A new survey of CFOs about their roles, published by EY, suggests they need to move across the very spectrum of their brains. They need to transition from their left-brains of logic to their right brains of “empathy, innovation and imagination”. The survey says they need to move to digital communication, from tweets to blogs, to reach the much wider range of stakeholders who need to understand the direction the company is taking. They need to take more responsibility for mentoring and coaching, making talent development one of the KPIs by which CFOs are judged. There also needs to be “fast-forwarding female finance leaders”. In the finance function women are still outnumbered. Just another challenge in the history of the chameleon-like role of the CFO. n Robert Bruce is an award-winning writer on accountancy for The Times

ACCA has said that it will look at reinstating a clear policy of releasing information around exam times, says director of qualifications, Catherine Edwards in an exclusive interview with PQ magazine. Previously, when the ACCA had two sittings a year, the policy was for no ‘announcements’ a month before or after the exams. The ACCA is now considering an information embargo of two weeks before and after each sitting. She acknowledged that the releasing of an IFRS 13 article by the P2 exam team a few days before the December sitting may 8

CIMA buoyant as pass rates rise year on year CIMA OT pass rates are on the rise, and there has been some dramatic improvements year-on-year. The OT exams have now been running for two years and CIMA has provided PQ magazine with the unique paper pass rates for 2015 and again for 2016. The rises in E1, E2 and F1 yearon-year have been minimal. However, these paper pass rates are already high. The 2016 overall pass rates for E1 is 87%, it’s 93% for E2 and 83% for F1.

For other papers the improving pass rate has been substantial. The F2 pass rate, for instance, has risen by 10 percentage points in a year. F3 and P3 pass rates are up by nine percentage points. Even P1 and P2 have seen year-on-year rises, although these are not as high and were five and six percentage points respectively. CIMA year-on-year unique pass rate rises: E1 0%; F1 1%; P1 5%; E2 1%; F2 10%; P2 6%; E3 5%; F3 9%; P3 9%.

ICAEW pass rates out

The December results are out, and the ICAEW has highlighted the Business Strategy pass rate of 90.7%. Students also excelled in Audit and Assurance, which had a pass rate of 81.7%, and Business Planning: Insurance, where 81.3% won’t be sitting that paper again. However, there is one paper that stands out for the wrong reasons – there was a slump in the Tax Compliance pass rate. The last three sessions had rates well over 80%, but this time it was 69.2%. The pass rate for students sitting one paper wasn’t great, either –

64.2%. For PQs who opted to sit two papers the number who passed both was 73.1%. Another 17.5% passed one of the two they sat. In all, some 6,070 students sat papers in December and some 4,188 passed all the papers they took.

ICAEW PROFESSIONAL EXAM RESULTS Dec 16 Sept 16 Audit & Assurance 81.7% 90.6% FA & Reporting 80.7% 78.6% Tax Compliance 69.2% 88.0% BP: Banking 77.0% 85.7% BP: Insurance 81.3% 81.8% BP: Taxation 77.6% 77.7% Business Strategy 90.7% 92.1% Financial M’ment 79.0% 78.2%

Jun 16 82.7% 83.5% 88.0% 91.0% 87.5% 78.0% 89.0% 78.8%

Mar 16 80.9% 87.4% 82.8% – – – 90.3% 84.9%

KPMG takes transparent approach

KPMG has published its workforce data outlining the socio-economic make up of the firm. It is the first business in the UK to publish such comprehensive data, which measures employees’ parental occupation and education, and type of school employees attended. KPMG also shared graduate and school leaver data from the past three years. The stats reveal that the vast majority of workforce, 74% of respondents, had a state school education. Some 60% attended a non-selective state school and 14% attended a selective state school. Some 23% of the workforce went to a private school. Of around 1,000 graduates and school leavers to join the firm in 2016, 11% and 18% respectively had been eligible for free school meals. KPMG’s Melanie Richards said: “When we talk about diversity, people immediately think of gender or race, but social background is equally as important. Professional services firms have often been cited as bastions of the so called social elite and it’s important we consign this stereotype to the past.”

Timely releases from the ACCA PQ magazine

EXCLUSIVE have unduly worried some PQs. However, she emphasised that the IFRS 13 piece was released because students performed so badly in the 25-mark question set in March 2016. Edwards stressed it was also very basic and aimed

primarily at students sitting P2 in 2017. Fair values is, however, an important topic and has appeared in all but two of the nine exam sittings of P2. So it being there in the December exam, be it only worth eight marks, should have been no surprise. Edwards (pictured)

also stressed the value of the bank of articles available online to students. She explained these are regularly reviewed, so all are relevant to the next sitting. There are certain triggers that lead to an article release. It could be a new area, or have been done badly in an exam, or there may be a change of focus. PQ Magazine March 2017


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PQ news

PREM SIKKA Banks should be more socially responsible In the past two years, 1,046 bank branches have closed and another 400 are earmarked for closure. The use of ATMs, internet banking, and standardisation of loans are major reasons for closures. But the robotic approach has consequences. Those without computers can’t easily use all banking services. Without a local branch, local shops can’t easily bank their takings. Without a local branch, banks can’t build a picture of local businesses, risks and opportunities. Banks should not easily be able to abandon towns and rural areas. The regulator should require banks to demonstrate that after branch closure, the local financial infrastructure would still be able to provide the required financial services. This could be done by requiring banks to support facilities in local post offices or supermarkets. The public should expect more from banks because it underwrites banking business, profits and losses. Taxpayers have bailed out banks. The state acts as a lender of the last resort and provides the deposit-taking licence, a key business advantage to banks. The state protects confidence in banks by safeguarding the first £85,000 of saver deposits. The low interest rate policy has hurt savers and ensured that banks receive their raw material, cash, virtually free. The state bolsters banks’ customer base by insisting that pensions and social security payments are made through banks. In return, it is not unreasonable to expect banks to provide social infrastructure to meet local needs. n Prem Sikka is Emeritus Professor of Accounting at the University of Essex

Graduate recruitment into the accounting and professional services sector is set drop by a whopping 8.4% during 2017, according to a survey conducted by High Fliers Research. In 2016, these firms recruited 4,899 graduates but this year plan to take on 4,489 into graduate positions. That is a cut of over 400 graduate jobs. High Fliers found that the number of graduate applications to accounting have also dropped yearon-year by 5%. The profession is definitely pulling back, with the number of paid work experience places being slashed by 18%, down from 2,337 to just 1,914. Many recruiters told High Fliers they have less money to spend on graduate recruitment this year. This included two of the Big 4 firms and

a number of the large employers from the banking and finance sector. The average starting salary for accountants will be static in 2017, at £30,000, although salaries range

CIPFA pass rates are a ‘mixed bag’ A mixed bag is the only way you can describe the latest set of CIPFA exam results. While the MA paper pass rate rose from 85% in June to a whopping 95% in November, the

Financial Management pass rate dropped from 69% in the summer to just 56% last time – the lowest pass rate at the winter session . Eight papers saw a drop in the pass rates compared with the June sitting. Four papers CIPFA 2016 EXAM PASS RATES saw a rise. One of the most Nov ’16 Jun ’16 Audit & Assurance 82.35% 90.71% dramatic drops Business & Change M’ment 58.73% 80.82% came with the Company Financial Reporting 63.27% 55.79% Business & Change Corporate Governance 84.56% 86.54% Management paper, Financial Accounting 80.00% 75.61% which slipped from Financial Management 69.12% 55.56% a healthy 81% pass Management Accounting 94.95% 84.62% rate to 59%. Another big dip PS Financial Reporting 61.45% 71.67% Strategic Case Study 73.02% 78.74% occurred in the Strategy & Development 81.95% 84.42% Taxation paper, with Strategic Public Finance 66.40% 72.00% a slip from 94% to Taxation 75.47% 94.12% 75% in just one sitting.

VW RULES THE WORLD Forget the billions the compensation it has had to pay out for cheating emissions tests, VW is now the world’s largest vehicle manufacturer. VW’s 10.3m cars has pushed Toyota off the top slot for the first time in BUSINESS four years. While the Japanese BRIEFS carmaker lost sales in North America, the Middle East and Africa, Volswagen was boosted by sales in China. THE ITALIAN JOB BT was recently forced to write down the value 10

Graduate recruitment going to be well down

of its Italian unit by £530m after years of so-called ‘inappropriate behaviour’. Shares plunged after the cost of the scandal rose from an estimated £145m to £530m. KPMG was involved in the independent review of BT’s Italian set-up, which discovered dodgy accounting practices on “a complex set of improper sales, purchase, factoring and leasing transactions”. LONDON BOUND Both Snapchat and McDonald’s have announced they are setting up new international HQs in London. Snapchat

from as little as £13,500 up to £33,000. This is some way short of the top salaries, which are currently coming in at £45,000. The top graduate salaries are being paid by investment banks.

Human capital is a taxing issue The Chartered Institute of Taxation is introducing a new exam in Human Capital Taxes for the May examination. The CIOT believes that Human Capitial Taxes, also known as People Advisory Services, and Human Resources Tax Services (among other titles), is a growing area of taxation. As global employment mobility continues apace so does the need for advice for employers with internationally mobile workforce, it said. The CIOT also believes that the UKs forthcoming exit from the EU will mean qualified tax advisers in human capital will be even more sought after. • Read next month’s issue for more on the CIOT’s Human Capital Taxes paper.

said it will book its UK sales here and those from countries where it has no legal entity. McDonald’s is moving its non-US international headquarters from Luxembourg as it battles with EU anti-trust regulations. RENT RATHER THAN BUY Education publisher Pearson recently hit the news after the bottom fell out of its US university textbook market, which accounts for 60% of its business. So what was the problem? The Amazon textbook rental service! This enables Amazon rather than the publisher to extract repeat value out of Pearson’s book. Pearson has now started a new print textbook rental programme, linked to a digital global learning platform. PQ Magazine March 2017


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PQ news

CARL LYGO So what skills are graduates lacking? This month I chaired a Policy UK Forum Conference entitled ‘Making Graduates Employable – Identifying Skills Gaps, Collaboration with Industry and Reviewing Destination Data Collection’. One big change coming is that universities will measure their graduate employability at 18 months following graduation and average salary details will cover a 10-year period after graduation. I was surprised to learn from the Association of Graduate Recruiters (AGR) that 77% of employers do not bother to measure the impact of training and education in which they invest on productivity levels. AGR found that on average graduate employers were providing 7.9 days of soft skills training and 12.3 days of technical training. Of the key ‘employability skills’ that employers see lacking in new graduates two new skills have joined the list. The first is ‘followship’, which I understand to mean the ability to follow orders. All that independent thinking apparently is producing graduates who are not great at following orders. The second is ‘managing upwards’ – how important it is to make your boss look good. Some CEOs hate ‘managing upwards’; they want employees to concentrate on doing a good job. Brown nosing and skulduggery for ladder climbing are often seen as what is worst about the corporate world. Most good leaders love to be challenged, but I don’t know many who like to think they are being managed by their minions. n Professor Carl Lygo is chief executive of BPP

AAT is a trailblazer for apprenticeships The AAT has been approved as an Apprentice Assessment Organisation (AAO) for the Accounting Trailblazer Apprenticeships, a government initiative designed to give employers the opportunity to take the lead in developing apprenticeship standards. This means that the AAT will deliver the end point assessments (EPAs) for apprenticeships. AAT CEO Mark Farrar explained:

apprenticeships for both the Professional Accounting Technician and the Assistant Accountant. They are already attracting a lot of interest from employers, and delivery has started on behalf a variety of employers, including KPMG on its 360 • programme.

ACCA December results see option pass rates plummet

Class pay gap Professional people from working class backgrounds are paid £6,800 less than colleagues from more affluent backgrounds, says research from the Social Mobility Commission. The researchers unearthed a previously unrecognized ‘class pay gap’ of 17%. This gap in accountancy is slightly higher than the average, standing at £7,867. This is lower than the £10,218 gap for doctors but higher than the £5,261 difference in lawyers’ pay, depending on their background. Report co-author Dr Sam Friedman from LSE said: “While social mobility represents the norm, not the exception, in contemporary Britain there is no doubt that strong barriers to opportunity still persist.”

PwC reassures staff PwC’s US senior partner, Tim Ryan, joined many leading business names in reassuring staff over Donald Trump’s attempted travel ban of seven Muslim majority countries. He said: “I want to reinforce that PwC stands for inclusion, understanding, acceptance and equal opportunity for all, full stop.” Fraud is a £1bn business The value of alleged fraud reaching UK courts broke the £1bn barrier in 2016, according to the KPMG Fraud Barometer. The resurgence in ‘super cases’, cases where the value of the fraud is £50m or more, is the main reason for 12

“Given the acceleration of emerging technologies impacting the role of accountants, such as cloud computing and predictive software, the skillsets accountants needs are changing.” He felt that Trailblazer apprenticeships can help provide employers access to the evolving talent they need to develop and grow. AAT has been integral to the development of the new-style

Mark Farrar

The ACCA optional pass rates slumped in December 2016, and even the P4 and P5 pass rates dropped this time around, to 33% and 30% respectively. Student feedback after the P5 test was that it was ‘suspiciously easy’. PQ reported that some sitters even left the exam hall with a smile on their face. Those smiles won’t be there after the results were published on 16 January. All the December optional paper pass rates were down on both the September and June sittings. In fact, this was the worst set of pass rates for the whole of 2016. The essential level pass rate held steady, and in total contrast to the optional papers they were the best set of pass rates for the year. At the skills level, the lowest pass

rates were for December were F5 and F8, at 40%. PQs told us that F5 MCQs were ‘the worst ever’. The general feedback from F8 was that the exam was pretty fair. The good news came from F6, with a 52% pass rate, and F7’s 50%. The ACCA said that over 5,000 students worldwide completed their final exams in December, bringing the annual total of new affiliates to 19,514. That is almost 17% up on the 16,700 who passed their final exams in 2015. ACCA December 2016 pass rates: F1 82%; F2 63%; F3 71%; F4 82%; F5 40%; F6 52%; F7 50%; F8 40%; F9 45%; P1 49%; P2 51%; P3 49%; P4 33%; P5 30%; P6 34%; P7 31%

Got the basics?

Too many ACCA December P5 sitters lacked the basic knowledge to pass the paper, claims the examiner. The latest Examiner’s Report highlighted candidates’ inability to adjust a budget by an applicable percentage and failure to recognise the difference between profitability and liquidity. The examiner repeated the fact that candidates who come to the exam expecting to repeat memorised material will only score between 20% and 30%.

this. The actual number of cases brought to court fell in 2016 from 310 in 2015 to 220, but the value of the average case doubled, to £5.2m. KPMG said that fraud against businesses was up seven-fold last year, with internal fraud committed by employees and management the most common type. Going beyond the numbers CFOs of the future will need to use the rightside of their brains more, says a new EY global survey. The DNA of the CFOs will increasingly be characterised by attributes such as empathy, innovation and imagination. This in turn will help them inspire and generate loyalty, according to the study. Communication styles will also need to change to become highly

adaptive. Digital channels and formats such as tweets and blogs will be important elements of the CFO’s communication toolkit. Where’s the expertise? Just a handful (5%) of FTSE 100 company boards disclose having a director with specialist technology or cyber security experience, according to analysis by Deloitte of annual reports. This is despite cyber risk being identified as a principle risk by the vast majority of them. Deloitte’s Phill Everson said half of firms mentioned cyber contingency, crisis management or disaster recovery plans in their annual report. Of these, however, only 58% disclosed that these plans had been simulated in test scenarios over the year. PQ Magazine March 2017


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PQ Awards 2017

PQ awards: the shortlist

The PQ awards received a record number of entries this time around. Our top independent judges not only chose the winners – they also decided the shortlist, too!

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he PQ magazine 2017 awards night will take place on Tuesday 21 February at the wonderful Café de Paris. So who made it onto the shortlist? A big shout-out to our independent judges. This year they were AAT’s head of product, Rachel Kellett; ACCA Director – Education Network, Alison McHugh; CIMA’s Director of Learning, Peter Stewart; ICAEW Director of Qualifications, Shaun Robertson; and Professor Prem Sikka. STUDENT BODY OF THE YEAR Accounting Student Network Facebook Group Birmingham Chartered Accountant Student Society (BCASS) CIPFA Student Network Northern Chartered Accountant Students’ Society (NCASS) North West CIPFA Student Network ACCOUNTANCY COLLEGE OF THE YEAR Public Sector BMETC Sutton Coldfield Campus Farnborough College of Technology London South Bank University South Devon College University of Derby Private Sector Accountancy Learning Ltd First Intuition, Chelmsford HTFT Partnership Kaplan, Islington Campus, London LSBF, Singapore ONLINE COLLEGE OF THE YEAR AVADO BPP Online Classroom First Intuition Distance Learning HTFT Partnership Osborne Training

ACCOUNTANCY BODY OF THE YEAR The usual suspects!

LECTURER OF THE YEAR Public Sector Stephen Field, Stockport College Anna Howard, LSBU School of Business Nagin Lad, Derby University Kerry Patton, Manchester Met University Darren Sparkes, Derby University Private Sector Rebecca Evans, Kaplan Martin Jones, LSBF Paul Kirkwood, AVADO David Malthouse, First Intuition, Chelmsford Nitin Rabheru, BPP professional education STUDY RESOURCE OF THE YEAR AAT – Key Calculations ACCA-X Accountancy Student Network Open Tuition Premier Training INNOVATION IN ACCOUNTANCY ACCA & BPP for the ACCA tutor excellence programme AVADO Essendon App HTFT’s CIMA resit courses Kaplan & PwC BEST USE OF SOCIAL MEDIA BCASS, Mitchell Webb CIPFA Accelerated Route for Executives Cohort Kaplan Motivation Campaign LSBF Facebook Live ACCA mentoring Planning Your Study Competition, Kaplan TRAINING MANAGER/WORKPLACE MENTOR OF THE YEAR Claudia Grant, The Training Place of Excellence Mohamed Ebrahim Osman, Nexia SJ Tanzania Roger Eddowes, Essendon Accounts & Tax Carla Jackson, Sevacare Jayne Walker, Gower College Swansea

ACCOUNTANCY TEAM OF THE YEAR Belfast Met Higher Level Apprenticeship in Accountancy teaching team Butlin’s JoJo Maman Bébé Finance Department Sevacare’s Finance Team St Mary’s Accounting Services ACCOUNTANCY PERSONALITY Reza Ali, ACCA Rachael Johnstone, South Devon College Mike Molan, LSBU Paul Sizer, Gower College Swansea Vicky Taylor, HTFT Partnership EDITOR’S SPECIAL AWARD To be announced on the night APPRENTICE OF THE YEAR Catherine Devine, BDO/Belfast Met Hollie Leggett, Thames Valley Police Charlie Mead, Chelmsford Bookkeeping Solutions Luke Millar, Colman Print Emma Nudd, Tax Assist, Norwich

NQ OF THE YEAR Archana Bharathan, CSC Technologies, Singapore Jessica Bernardez, Cancer Research UK Tom Burns, JoJo Maman Bébé Harry Pampiglione, PwC Dani Williams, McAlister & Co DISTANCE LEARNING STUDENT OF THE YEAR Susan Azzabi Julie Dove Natasha Everard Kate Kilianova Vanessa Lavoipierre PQ OF THE YEAR Zhang Aijia, Deloitte Malaysia Tim Mpofu, Ealing London Borough Council Justina Pavlevchec, Butlin’s Michael Scott, EQ Accoutants LLP Joe Wheeler, Anderson Group Services

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PQ Magazine March 2017


CIMA exams PQ

CIMA updates exam Ts & Cs

Tanya Barman explains changes to CIMA’s exam rules and regs

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he start of the year brought changes for CIMA students, as on 1 January 2017 our updated Exam Scheduling Terms and Conditions came into force. These apply to all exams booked and scheduled on or after 1 January 2017. What is this change about? High standards, ethics and honesty are a top priority at CIMA. This applies to all areas, including our exams. Our terms and conditions have therefore been updated to be as clear as possible and fair to everyone. We wanted to make sure that there are no grey areas when it comes to taking our exams. These are the parts that have been updated: • Calculator guidance. • Rules around exam confidentially. • Access to your exam results – i.e. what types of behaviours may jeopardise students receiving their exam results. • Challenges to exam results. Why we have made the update New technologies and social media platforms are great tools for learning, especially for study groups. However, education providers all around

the globe have noticed that this also creates the potential for a small minority of students to find new ways to attempt to cheat and game the exam system. While CIMA does encourage selfdirected study groups to provide peer support outside the classroom there are clear rules about what information students can and should not share. CIMA is committed to upholding the highest ethical and professional standards to maintain public confidence in management accounting.

Accountants, like so many other professions, act according to a professional code. Once students have successfully passed their exams and gained their CGMA designation they are also committed to CIMA’s Code of Ethics. It is based on five fundamental principles: objectivity; professional competence and due care; confidentiality; professional behaviour; and integrity. And this means being straightforward and honest in all professional and business relationships. The code is also globally recognized and offers a framework for ethical decision making. However, even before becoming a member CIMA students are already obliged to understand the importance of acting ethically and with integrity. This, of course, includes acting honestly when taking exams and according to the rules that apply. To raise student awareness around ethical and unethical behaviour, and their obligations to uphold the code, we are launching a number of online resources over the coming months on CIMAconnect, Facebook and Instagram. These include guidance on using social media as part of students’ learning and exam preparation. There will also be articles and blogs as well as real-life student case studies from around the world highlighting the likely consequences of engaging in unethical practices. PQ • Tanya Barman is Head of Ethics at CIMA

What a start to 2017 for HTFT Partnership We have just achieved

Private Sector

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College of

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Email: info@htftpartnership.co.uk Tel: 0121 745 8842 PQ Magazine March 2017

15


PQ LSBF profile

Looking at the bigger picture PQ magazine caught up recently with LSBF Professional School’s commercial director, Vitaly Klopot to see how the training provider is taking itself truly global

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arly last summer the news came through that KPMG in India was joining forces with LSBF’s e-learning partner InterActive to deliver ACCA online tuition. Since then LSBF has been named the official ACCA provider for PwC CCE Academy. Closer to home, the lecturing team has launched #FacebookLive, a series of last-minute revision advice for the ACCA exams. We also understand there are some plans for new smart ebooks over the coming months. Finally, LSBF Singapore has been shortlisted for College of the Year at the upcoming PQ awards. With so much positive stuff happening at LSBF we decided it was time to have a chat with LSBF’s Vitaly Klopot. He was still excited about working with KPMG in India when we spoke. Klopot explained that it is also working with the ACCA and its ACCA-X programme for this project. There is undoubtedly a lot of work to do in India to sell the ACCA qualification, but

he believes that with KPMG they can make it work. So 2017 is going to be a big year. LSBF has also just become the official provider of ACCA tuition materials for PwC in Central and Eastern Europe (CEE). The new partnership will see LSBF as the sole provider of training materials for thousands of PwC staff across 29 countries. The materials will be delivered in hard-copy and electronic format to PwC sites across the region. “PwC has an outstanding reputation in professional services and we are proud to become the official ACCA provider for their prestigious academy,” said Klopot. Meanwhile the London lecturing team, led by

Rob Sowerby, decided to offer ACCA PQs a series of ‘The Night Before Exams’ live revision advice sessions online. Sowerby’s P1 session was watched by nearly 12,000 people last December. Totally free and open to all PQs, the team plans to run more ‘day-before’ events for the March exams, and wants to increase the number of sessions on offer. PQ magazine will tweet out and upload the sessions on to our website as soon as we have them. Klopot stressed that there is still more to come, and he believes that ACCA students can only benefit from the company working with the likes of KPMG and PwC. PQ

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PQ AAT exams

LET’S GET TECHNICAL

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little-known fact about me is that I used to be a farmer. In fact I have a degree in it, but a career tilling the soil and feeding calves didn’t work out, and the next thing you know you are wearing a suit, on an ACA training contract, and find yourself on a stock count on New Year’s Eve. Anyway, my first job was as a bookkeeper for farmers – I knew a bit about farming and not too much about bookkeeping, initially. One of the earlier tests of my career was from a farmer in Northumberland. He had bought some fertiliser, and as all readers of PQ magazine know, fertiliser isn’t cheap. Therefore, there was a lot of VAT on it, and the farmer wanted to claim it back. However, the problem was that the invoice was dated 3 March 2002, but I was preparing the February 2002 VAT return. So as an accountant I stood up for my fundamental principle of integrity and told him he would need to wait for the next VAT return before he could claim it back. Sounds simple: just use stick by the date on the invoice, right? Well, as with most things to do with VAT it isn’t so simple, as the date on the invoice isn’t always the tax point. The tax point is the date that dictates when we can claim back, or have to pay over, the VAT. If the fertiliser was delivered on 3 February 2002 this would be the tax point; as the delivery is before the invoice date. This is known as the basic tax point. As ever, it isn’t as straightforward as that, as if the invoice is dated within 14 days of the basic tax point this would override the basic tax point, and the invoice date would be used. So if the fertiliser was delivered on 25 February 2002, the farmer still couldn’t have his VAT, as the tax point would still be 3 March 2002 as it is within 14 days of delivery. The farmer could have got around the invoice being dated after his VAT quarter by actually paying for the fertiliser upfront. If cash is paid before delivery or the invoice date, the date of the payment will always be the tax point. However, many of the tight farmers I know wouldn’t do this, as they would rather claim the VAT back, and then pay the invoice later – much later! So we have a tax point that could be the delivery date, could be the invoice date, or could be the date that the goods were paid for. But wait – it gets more complicated!

18

Nick Craggs talks you through the complex business of reclaiming VAT What happens if the farmer pays a deposit on his nice shiny tractor upfront? Well, in this case there would be two tax points. There will be the date of the payment of the deposit, then the next tax point will be dependent on delivery date, invoice date, or the payment of the balance. Let us look at an example Farmer Giles is going to buy a new tractor for £72,000. He has agreed to pay a deposit of £12,000 on 4 June. This is a tax point as he paid cash, so the VAT will be £12,000 / 120% x 20% (or you can just use the VAT fraction of 1/6th), which is £2,000. He takes delivery of the tractor on 25 June. He then receives the invoice for the balance, which is £60,000, on 3 July. He begrudgingly pays the invoice in November, because that is what farmers do. His VAT return quarter ends in June, and obviously he wants to claim back £12,000 of VAT from HMRC as soon as possible. Within his

VAT return quarter he has made a payment of £12,000 and taken delivery of his new tractor, which is the basic tax point. However, Giles’s problem is that his machinery dealer has issued an invoice within 14 days of the basic tax point, so the basic tax point is overridden and the actual tax point is 3 July, outside of his VAT return, so he can only claim £2,000 of VAT this quarter. The rest of the VAT will have to wait until the next VAT return before he can claim it back. Why don’t you have a go at this example and see how much VAT Farmer Alan can claim back on his June VAT return. Alan pays deposit on his plough of £6,000 on 20 June. The plough is delivered on 23 June and he pays the balance of £12,000 on 29 June, and then he receives the invoice on 3 July. See me work out the answer at http://www.firstintuition.co.uk/category/aat/ PQ • Nick Craggs is a tutor at First Intuition

PQ Magazine March 2017


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PQ ACCA exam tips

Questionspotting The March exams are approaching fast – so here are some tasty tips! BPP.

F5 • Planning and operational variances. • Mix and yield variances. • Evaluation of the company performance (either as a whole, or on a divisional basis). F6 Section A • Administration of income. • Corporation tax. • Due dates for income tax, payments on account. • Due dates for corporation tax, installments for large companies. • Filing dates – income & corporation tax. • Penalties & interest for late payments & returns. • VAT rules on registration, impairment loss (bad debt) relief, and gains. • Trading loss reliefs for both companies and sole traders. Sections B&C • The two longest questions will focus on income & corporation tax, and will include (likely): – Employment benefits. – Property income. – Relief for pension contributions. – Adjustments to profit. – Capital allowance computations. • 10-mark questions on VAT, IHT or CGT. F7 Section A • Expect a few questions on consolidation and interpretation of financial statements. • Inflation. • Specialist entities. Section B • Two 20-mark questions, one covering interpretations and the other preparation of financial statements. • Context of a single company – interpretation and preparation, a significant change in year. • Context of a group – interpretation & preparation, a significant change in year. • Accounts prep. • Statement of changes in equity. • Statement of cash flows extract. • Earnings per share calculations. • Consolidation – one subsidiary and often an associate, with adjustments. Could be fair values, deferred/contingent consideration, PUP on inventories/PPE, intergroup trading and balances, or goods/cash in transit. • Single entity – trial balance or 20

restatement, with adjustments for depreciation, revaluation and current/deferred tax. Plus a mixture of leases, substance over form issues, financial instruments, share issues, government grants, inventory valuation, revenue recognition or construction contracts. F8 • Audit planning. • Audit risk – identify and explain audit risks and the auditor’s response to each. • Internal audit. • Internal controls – deficiencies and recommendations, or description of tests of controls. • Audit procedures – substantive procedures and tests of control. F9 Section A • Ratio analysis. • The concept of shareholder wealth. • Financial intermediation. • Fiscal and monetary policy. • The efficient market hypothesis. Section B • Working capital management – operating cycle, impact of a change in credit period or accepting a factor’s offer.

• Business or security valuations – methods of valuation. • Financial risk management – currency risk, or aspects of interest rate risk. Section C • Working capital management. Section D • Investment appraisal – NPV with inflation and tax. Section E • Business finance – evaluation of financing options (interest coverage and gearing ratios). • Cost of capital calculation.

First Intuition.

P1 • 50-mark scenario question, to include: ethics, governance and risk management. • AAA model on ethical issues. • Integrated reporting. • Optional questions to include: evaluation of risks and their mitigation, board structures, the role of the professional and corporate ethics. P2 • Q1: Group question on disposals or step acquisitions. PQ Magazine March 2017


ACCA exam tips PQ • Ethics. • Revenue recognition. • Provisions. • Deferred tax. • Share based payments. • Pensions. P3 • Three strategic lenses. • Industry lifecycle. • Pricing strategy. • Value chain. • Critical success factors. • SWOT. • Organigram. • Globalisation. • Strategic clock. • Porter’s generic strategy. • Change kaleidoscope. • Harmon’s process strategy mix. • 6 I’s. • Business case. • Leadership. P4 • International investment appraisal techniques focusing on risk management tools such as value at risk. • Option valuation. • Capital structure. • Traditional debt finance and Islamic finance – Sukuk Bonds. • Financing strategy business valuation. P5 • Critique an existing performance management system and the performance hierarchy. • Quality as a critical success factor. • Benchmarking. • Effective use of information systems. • Reward systems linked to performance measures. • Performance model (balanced scorecard, building block model or performance pyramid). • Economic value added. P6 • Cessation of trade (unincorporated) – basis periods and loss relief. • Remittance basis. • Pensions. • Consortia. • Patent box. • Transfer pricing and thin capitalisation. • VAT – option to tax and partial exemption. • EIS, SEIS and VCTs. P7 • Business or audit risks in a scenario. • Identifying ethical and other professional issues in a scenario. • Matters to be considered and audit evidence for a couple of core accounting issues. • Forensic auditing. • Insolvency issues (UK stream). • Discussion on current issues.

LSBF.

F5 Sections A&B • The whole syllabus! Section C • Divisional performance & transfer PQ Magazine March 2017

HEALTH WARNING

These tips should only be used in conjunction with proper study. We cannot guarantee that these topics will appear in the actual exam as we have not seen the exam papers. Examiners are not predictable so it is vital that all core syllabus areas are revised fully. pricing. • CVP analysis. • Decision tree analysis. • Budgeting theory. F7 Sections A&B • The entire syllabus, including the more obscure standards – recent questions covered government grants, borrowing costs, investment properties, etc. Section C • Ratios and interpretations. • Published accounts with standards, including cash flow aspects. • Consolidations. F8 • For MCQs focus on ethics, especially threats to objectivity & corporate governance principles. • For the three long questions: – Substantive procedures (purchases or inventory). – Internal control objectives, deficiencies and procedures, tests (purchase or inventory). – Audit risk and response practical scenario. – Audit reports scenario, with KAM and MURGC. – Internal audit pros and cons of outsourcing, comparison with external audit. – Different levels of assurance. – ISA 220, 240, 250, 260, 560, 610, 720. F9 Section B • Valuation. • Foreign exchange risk. • Working capital management. Section C • Investment appraisal. • Business finance. P2 • Q1: Balance sheet or CFS. • Q2 & 3: Usual mix of revenue and PPE and intangibles and impairment and discounted and financial instruments,

and the rest. • Q4: current issues on provisions or groups. P3 • External analysis. • Evaluation of strategic choice using SFA. • Relevant costs in decision-making. • Improving business processes/Harmon. • Scenario planning. • Management of risk. P4 • Valuation with mergers and acquisitions. • Or corporate reporting. • Hedging foreign exchange risk. • International investment appraisal. P5 • Selection of KPIs. • Technology and performance management. • Budgeting impact. • Building block model. • Divisional issues and selection of KPI. P6 • IHT with the death estate including BPR and APR and lifetime gifts, gifts with reservation and relief for a fall in value. • Domicile including deemed domicile and election to be treated as UK domiciled and deed of variation. • Group question, sale of shares versus sale of the trade and assets. • Overseas aspects of corporation tax – branch versus subsidiary and controlled foreign companies. • Relief for trading losses made by a sole trader/partnership at the beginning or end of the trading cycle. • Choice of accounting date made by an unincorporated business. • Cash basis of accounting. • Residency rules, remittance basis and overseas aspects of income tax. • Investment in a VCT, the theory versus investing in a registered pension scheme. • Overseas aspects of VAT. • Share incentive plan versus EMI share option scheme. • Ethics – conflict of interest or duties of a senior accounting officer. P7 • Audit risk, for a group. • Extra information needed to assess those risks. • Accounting matters and audit evidence. • Ethics and prof issues including: – Money laundering. – Advertising. – Quality control. • Audit reports including KAM and MURGC. • Social/environmental or public sector disclosures – evidence. • UK stream – insolvency. • ISA 250, 260, 510, 560, 720. PQ

For BPP’s predictions on what will appear in the options papers go to www.pqmagazine.co.uk 21


PQ ACCA exams

Audit reports: keep up! Paul Merison explains how you can get your head around the recent changes to the audit report that are now examined in F8 and P7

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uring recent years, audit reports have been changing in the real world, and gradually this has resulted in audit standards being changed. From the September 2016 exam sitting these changes ceased to be just a current discussion issue and have hit F8 and P7 in full (note, for P7 UK Stream it remains just a current issue topic until the September 2017 sitting). Audit reports have a number of issues for students, and always have had: • Understanding the content of an audit report, given many students will never actually try to read a real one. • For those who DO read a real one, the problem that some of the content is beyond where an ACCA exam question is likely to go. • The fact that there are so many possible outcomes for an audit report. And the problem is that it has now got a bit harder. Let’s go straight to an example, aimed at showing all the possibilities: EXAMPLE You are the auditor of a listed company, and the audit process is nearing completion. You are discussing the company’s going concern position with the Audit Committee. Describe the potential audit report outcomes that could arise. My approach for any audit report outcome question is as follows: 1: Have you got all the audit evidence you need? Well, if we are having a full discussion with the audit committee I guess the answer is yes. If not, the Opinion would be either a Disclaimer, or an “Except for” Qualified Opinion, possibly the former given the lack of evidence relates to going concern, so feels pervasive. 2: How has company accounted for the situation, and is it correct? Two issues here. First, the company either uses the ‘going concern’ basis of preparing the financial statements (FS), or it doesn’t. Second, if using the going concern basis, is there any ‘material uncertainty relating to going concern’ (a MURGC), because if there is the company needs a disclosure note explaining this uncertainty in its FS. If the company uses the going concern basis, but the auditor thinks the company is not a going concern, the Opinion will be adverse.

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If the company uses the going concern basis but there is a MURGC that they fail to disclose in the FS, the Opinion will be either Adverse, or an “Except for” Qualified Opinion, as the missing disclosure represents a breach of IAS 1. Take a deep breath before reading the next paragraph… If the company uses the going concern basis, there is a MURGC and they have correctly disclosed it in a FS Note … then the Opinion is unmodified (the FS are not misstated), but the auditor adds their own MURGC paragraph directly under the Basis For Opinion, to draw attention to the FS Note and ensure shareholders are aware of it, and understand that the auditor agrees with its content. 3: Do we need to consider mentioning the issue: a. in the KAM? b. in an Emphasis of Matter paragraph? c. in an Other Matter paragraph? The company is listed, so the audit report needs a Key Audit Matters (KAM) section, which in simple terms will explain anything discussed at length with the client’s audit committee that is not already mentioned in a modified audit opinion, or as a MURGC (as there is no point repeating ourselves). So if there is a MURGC in the FS notes, the auditor will already have referred to this either by modifying the

Opinion, or by adding a MURGC paragraph below the Basis For Opinion, as described above in point 2. If there is no MURGC, but going concern remained an issue that caused a detailed discussion with the audit committee, then it will be discussed within the KAM. An Emphasis of Matter paragraph highlights an important FS disclosure note to the shareholders … as long as the note is not a going concern uncertainty (as this is dealt with by the MURGC paragraph). So Emphasis of Matter is not going to be relevant to going concern issues in an exam question, unlike in the past when it certainly was. An Other Matter paragraph is used where the unaudited Annual Report content is inconsistent with the audited FS. So, if the FS are considered correct, but the Annual Report says contradictory things about the going concern status of the company, an Other Matter paragraph would refer to the inconsistency, with the Opinion section remaining unmodified. Conclusion Audit reports have changed recently, and the changes are already being examined. Invest some time learning, understanding and practising them. PQ • Paul Merison is a top tutor at LSBF PQ Magazine March 2017


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PQ ICAEW HE conference visit

Technology is king

Wow Company’s Paul Bulpitt says it’s time for accountancy firms to get with the program and get IT savvy

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here are far too many accountancy firms you would not want to send your children to, claims co-founder of the Wow Company, Paul Bulpitt. The key speaker at the recent ICAEW Higher Education conference, Bulpitt claimed that the lack of technology at some accountancy firms was almost shameful. He likedened them to being workhouses! So while most of us now live our lives online and on our smartphones, when you enter the offices of certain accountancy firms they can feel a bit disconnected and old-fashioned. Bulpitt felt that clients and even new graduates have expectations of connectivity. He understood that there are risks with going online, but the move on to the cloud and beyond is inevitable, and firms who don’t take on the technological challenges will end up becoming almost valueless. Bulpitt then moved on to some stats to prove his point. He said that 86% of UK businesses are now using the cloud and 50% of SMEs are predicting they will move their whole IT infrastructure onto it. A recent survey of accountants and bookkeepers found just 14% of them on the cloud. This highlights for Bulpitt the gap between accountants and possible future business clients. He stressed that digital cannot be just a department, either. Most businesses are now tech businesses, and like them accountancy firms can’t put digital to the side. Accountants won’t be able to hide

behind the transactional either. The rise of AI will see to that. The days when the top dog in the office was the person who was the quickest to type numbers into the calculator have long gone. However, while technology needs to underpin everything you do, it is still about people when it comes to competitive advantage, stressed Bulpitt. The new roles will be more predictive (less looking back), more analytical and all about data management, he ventures. Cyber security roles will also be on the rise. He also sees a jump in high integrity accounting jobs, spotting the accounting issues and working on anti-fraud measures. Setting yourself up as an accountant has never been easier, and many people

Paul Bulpitt

are still doing this. But Bulpitt believes that it’s tough being a one-man (or woman) band and he predicts there is going to be massive consolidation in the coming years. There is no getting away from technology, however, and he believes that technology expands capability, it does not limit it. He pointed out that since Uber launched there are 26% more cabs in London. The introduction of cash machines didn’t end people working in banks either, but the jobs they did changed. Bulpitt felt that there has never been a more exciting time to be an accountant. He predicts a massive demand for accountants, but what they are asked to do could be different. PQ

Conference briefs ACADEMIC COMMUNITY LAUNCHED The ICAEW’s has launched a new online academic community to share insight into the profession. The announcement was made at the ICAEW’s Higher Education conference by the Hilary Lindsay, the institute’s first-ever academic President. The new group is open to both ICAEW members and non-members. The ICAEW has 3,000 members working in academia, some 50% of which are female. NOT TAKING REJECTION WELL? In the last three months the accountancy firm RSM has seen a significant rise in the 24

number of graduates struggling with rejection, says Farrah Wooley. Even at the first application stage the firm is now receiving endless calls from disgruntled graduates wanting to know why they hadn’t got to the next stage. Wooley said that potential recruits have to be careful when using their smartphones and with basic spellings (getting the name of the firm right helps here!). She also suggested that perhaps candidates need to be a bit more formal with their applications, too. • RSM takes on around 350 students a year, of which 280 are graduates.

TRANSFER WINDOW INTRODUCED PwC has introduced a transfer window in an attempt to keep more of its newly qualified accountants. Many graduates still do their three years training contract and then try to leave. With the transfer window NQs are encourage to stay with the firm and see if they can find an opportunity elsewhere. Senior associates are given an incredibly 18 months’ window. Oh, and we also discovered recently that you want to join a PwC you will still need to get at 2.1 degree. Even if you achieve a master degree, if you didn’t manage a 2.1 before that you don’t get in! PQ Magazine March 2017


ICAEW Business Strategy paper PQ

Lee Rowlandson addresses the ethics topic (question 2.3) that appeared in the December 2016 exam

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here aren’t many certainties in life, especially when you are preparing for exams. With a vast array of topics for examiners to choose from it is always comforting to find one that is guaranteed to be tested every sitting. And for students preparing for the ICAEW Business Strategy paper that topic would be ethics. The paper assesses a candidate’s ability to identify, explain and advise on ethical concerns stemming from commercial (or perhaps uncommercial) decisions that have been made within an organisation. In the December 2016 exam, question 2 focused on an organisation called ZDC. Students were asked to explain the ethical issues for both the chief executive and marketing director arising from a conversation about the recent takeover of a company called Trann. The examiner also asked candidates to set out the actions that each director should take as a result of this conversation. Identifying the ethical issues Note that the question asked for an explanation of ethical issues (plural). Therefore students needed to diligently digest all of the information provided to identify a range of problems. The BS examiners often comment that weaker answers focus narrowly on a small number of issues and fail to appreciate the multiple layers of predicaments that are often presented. In this scenario there were two main issues, each of which gave rise to numerous concerns. Firstly, the chief executive’s niece worked as a manager at takeover target Trann. He had not disclosed this information at the time of the acquisition and may have even voted in favour of helping his niece’s career rather than the best interest of ZDC. She had since been promoted twice. Secondly, the CEO may have been guilty of putting pressure on the marketing director initially to vote in favour of the acquisition. He may have exerted more pressure to ensure that the

PQ Magazine March 2017

Tackle ethical issues

in a strategic way

chief executive acted in the best interest of the company could be depicted by using terms such as ‘lack of objectivity’ or ‘self-interest’. Furthermore, the threats that he makes with regards to the marketing director’s dismissal could be discussed in terms of their legality. It is also important to establish the facts to present a balanced evaluation. Did the chief executive actually put pressure on the marketing director’s vote? Or, to be sceptical, is this director now looking for an excuse to disassociate himself with this questionable decision?

takeover was a success, and again to not disclose his family connections. How many issues did you count? There are as many as seven. Explaining the ethical issues When explaining the problems it is crucial to be able to explain why something is an ethical issue and then what the impact of this issue might be. Students often miss the first stage of this explanation, skipping straight to the implications. In this question the implications may be that ZDC may have made an unsuitable acquisition. However, this is the commercial consequences of these ethical issues rather than the ethical issues themselves. To describe the ethicality of the predicaments it helps to use ‘ethical language’, such as the popular transparency, effect and fairness framework. For example, the CEO not disclosing the employment status of his niece would be a lack of transparency. However, do not limit yourself to these three terms. The question of whether the

• Lee Rowlandson is a tutor and ICAEW Business Stream subject matter expert at Kaplan Financial

Advising on the ethical issues Always remember to provide advice in questions like this. After all, the requirement does specifically ask for the actions that they should each now take. Most questions will contain similar wording to this, as the examiners want to assess a student’s ability to offer practical advice. So they will be looking for more than just “call the ICAEW helpline”. Again, the markers will look favourably on an answer that offers a range of recommendations – especially as this requirement asked for actions that they should both take. Ideally, the advice should also aim to address different problems. Should the CEO disclose his niece’s position? What should the marketing director do if he feels he has been pressurised? Tragically, the main risk with this section of the question is that students often forget to offer any advice at all. Remember that the number-one thing the reader will be looking for is always guidance. With that in mind, it is important to remember what can be learned from this question: • Identify a range of ethical issues from the scenario. • Explain them by using ethical language. • Advise with a selection of practical solutions. PQ

25


PQ absorbtion & marginal costing

Costing: we’ve got the knowledge

Our expert Mary Ofili of The Training Place explains the differences between absorbtion and marginal costing Absorption costing This is a costing system where the total manufacturing costs (fixed and variable costs) are charged against the product and are treated as a product cost. It sets out each unit of inventory at the total cost to produce it, which will include the fixed production overheads. This can be represented as below: Absorbtion cost

Solution Opening inventory Production Sales Closing inventory

Month 1 0 6,000 (5,500) 500

Month 2 500 6,000 (4,200) 2,300

Month 3 2,300 5,000 (5,500) 1,800

Cost per unit: Month 1 Variable production cost = £126,000/ 6,000 = £21 Month 1 Fixed production cost = £186,000/ 6,000 = £31 Direct materials

Direct labour

Direct expenses

Production overheads (fixed and variable)

Marginal costing This is a costing system where each unit of product is valued at the total variable costs of producing each unit. The unit cost will include the cost of direct materials, direct labour, direct expenses and variable production overheads. The fixed costs are charged in full in the statement of profit or loss. This can be represented as below: Marginal cost

Direct materials

Direct labour

Direct expenses

Variable production overheads

Exercise The following budgeted figures relate to a factory that produces a single product. Overheads are absorbed on a budget production basis and inventory is valued on a FIFO basis. Opening inventory (units) Selling price (£) Production (units) Sales (units) Direct materials per unit (£) Direct labour per unit (£) Variable production costs (£) Fixed production costs (£)

Month 1 0 160 6,000 5,500 22 20 126,000 186,000

Month 2 150 6,000 4,200 22 20 129,000 186,000

Month 3 150 5,000 5,500 22 20 112,500 186,000

You are required to prepare the cost statements under absorption and marginal costing systems for months 2 and 3.

Absorption costing system Month 1 Month 2 Month 3 (£) (£) (£) Direct materials 22.00 22.00 22.00 Direct labour 20.00 20.00 20.00 Variable production 21.00 21.50 22.50 Fixed production 31.00 31.00 37.20 Totals 94.00 94.50 101.70

Marginal costing system Month 1 Month 2 Month 3 (£) (£) (£) 22.00 22.00 22.00 20.00 20.00 20.00 21.00 21.50 22.50 63.00

63.50

64.50

Note Absorption costing picks up all production overheads, fixed and variable, but marginal costing picks up only variable costs, and we account for the fixed production overheads as a period cost under marginal costing system. The closing stock will be valued at the same unit cost of production for the month it was produced. It then becomes opening stock at the same production cost in the next month. The number of units produced and the closing stock are valued at the same production cost in the month of production. Absorption Costing Statement: Sales Opening inventory Production costs Closing inventory Less: Cost of sales Gross Profit

47,000 567,000 (217,350)

Marginal Costing Statement: Sales Opening inventory Production costs Closing inventory Less: Cost of sales Contribution Less: Fixed overheads Profit for the period

31,500 381,000 (146,050)

Month 2 (£) 630,000

(396,650) 233,350 Month 2 (£) 630,000

(266,450) 363,550 (186,000) 177,550

Month 3 (£) 825,000 217,350 508,500 (183,060) (542,790) 282,210 Month 3 (£) 825,000 146,050 322,500 (116,100) (352,450) 472,550 (186,000) 286,550

PQ Annual Bumper Quiz – the answers Here’s the answers to our annual bumper Quiz. How did you do? 1. Adam Peaty 2. 67 days 3. Middlesex, Yorkshire & Somerset 4. The Chicago Cubs defeated the Los Angeles Dodgers and won the World Series, breaking the curse. 5. Sheffield United, Manchester United, Newcastle United, West Ham United and Leeds United. 6. Chris Froome 7. Saracens 8. Minnesota 26

9. Rule The World 10. Anthony Joshua 11. RRS Boaty McBoatface 12. Brexit 13. 12 sides 14. Paul Beatty 15. Mike Pence 16. Meghan Markle 17. Ben Affleck 18. Prince 19. Diane Abbott 20. 500 and 1,000 rupee notes 21. Bono 22. Kim Kardashian West 23. Paul Hollywood

24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38.

Ukraine Abba Melvin Odoom Danny Dyer Matt Smith Chris Evans Idris Elba Grampian Mountains Trevi Fountain Nigeria York Mackenzie River Tokyo The United States Senlac Hill, near Battle

39. France 40. Indonesia 41. Big bang theory 42. Czechoslovakia 43. Mercury/Venus 44. One stomach, but it has four distinct compartments (Rumen, Reticululum, Omasum, Abomasum) 45. Nitrogen Dioxide 46. Peregrine falcon 47. Hawk T Mk 1A aircraft 48. Small antelope 49. China has five time zones, but it uses one standard time 50. 300,000 (b) PQ Magazine March 2017


ACCA exams PQ

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he exclamation ‘call for a CAB’ is a rather odd one to make in relation to passing an exam and especially the ACCA F9 paper, which has always been a challenging test. Let me explain my thought process. The ACCA F9 paper has gone through the metamorphosis process several times over its history. The latest paper-based exam format consists of: • Section A: 15 x multiple choice questions (MCQs) – 30% of the marks. • Section B: three case studies, with five MCQs per case study (30%). • Section C: two long questions (40%). With the exam now consisting of 60% MCQs, the conventional line of thinking is that the paper should be ‘easier’ to pass. Candidates believe that because MCQs have far less data to digest they can be attempted quickly (sometimes too quickly). Added to that, in the worst case scenario a student can always have a guess – after all, there’s a one in four chance of getting the right answer. So it is not a surprise that many candidates attempt ACCA F9 in the order the paper is printed – A, B, C. They believe that they can realistically secure the majority of marks that they need to pass from the first two sections. The long questions have been perceived to be more challenging. Best to leave them until the end of the exam. However, I don’t believe this is the best order of attack. From looking at the two papers published by the ACCA to date (Specimen Exam and September 2016 paper) and from discussions with candidates who attempted the September and December 2016 exams, the A, B, C order may not be the recipe for success. The MCQs are not as easy as they first appear. They have to be read carefully to ensure all their subtleties are understood, otherwise the wrong choice can be made and that is two marks gone. Some of the theory/non-numeric questions are particularly challenging. The case study MCQs that make up Section B are a new exam style question for ACCA F9 paper.

Want to pass F9? Then call a CAB! Sunil Bhandari explains why being out of order can help get you a pass mark

From the feedback I received from the December 2016 candidates, the regular comment was that “I had to guess more answers than I expected to”. It’s not all doom and gloom – there is a ray of sunshine. Section C is easy. Yes, I said easy! The two long questions in each of the Specimen and September 2016 exam papers were more than fair. They tested the predictable syllabus areas. Candidates had time to finish the required computations and complete the written/theory elements. The December

2016 paper has not been published, but the student feedback confirmed that the two long questions were ‘very doable’. You have to prepare thoroughly (tuition, revision and mocks) prior to going into the ACCA F9 exam. You would expect me to say this as a F9 tutor. But when you are in the exam room don’t forget to ‘call for a CAB’. Attempt the paper in the order C, A, B and you will be on the road to success. PQ • Sunil Bhandari is a freelance ACCA F9 and P4 tutor

Making Tax Digital PQ

MTD moves into new phase

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usinesses that cannot go digital will not be required to do so, says HMRC, which has released more details about how it plans to proceed with digitising the tax system through its flagship Making Tax Digital. Following extensive consultation, HMRC said businesses will now be able to continue to use spreadsheets to record receipts and expenditure. These will be linked to software which will automatically generate updates and send them to the taxman. PQ Magazine March 2017

Under MTD, free software will also be available to most of the smallest businesses. Customers will have at least 12 months to become familiar with the changes before any late submission penalties will be applied. HMRC has promised it will consult again in spring 2018 on the new penalty model. Self-employed businesses and landlords with a turnover under £10,000 a year will to have to

keep their records digitally or make quarterly updates, but can do so if they wish. There are plans to extend the option to account for income and expenditure on a simple ‘cash in, cash out’ basis. This should help an extra 2.5m selfemployed businesses and unincorporated landlords. Charities (especially the smaller ones) will also breath a huge sigh of relief as they will not have to keep their records digitally or make quarterly updates. HMRC said that it is still prepared to look at initial exemption thresholds and deferring the changes for some small businesses alongside their cost, with final decisions to be made before legislation is introduced later this year. So watch this space. PQ 27


PQ apprenticeships

Change is imminent T his Spring, the way the government funds apprenticeships in England is changing. Some large employers will be required to contribute to a new apprenticeship levy, and there will be changes to the funding for apprenticeship training for all employers. The government is introducing the apprenticeship levy on 6 April 2017. The levy requires all employers operating in the UK, with a wage bill over £3 million each year, to invest 0.5% of the wage bill in apprenticeships. These changes to apprenticeship funding, along with the introduction of new apprenticeship standards, means that employers have a greater role to play in deciding what training is delivered to staff, and who delivers it.

James Taylor explains changes to apprenticeship funding due to come into force in April

Employer ownership The new standards are going to provide employers with far more flexibility over how they develop their future talent. The focus now has shifted to preparing apprentices for an end-point assessment to ensure they meet the standard (skills, knowledge and behaviours); how they get to this point is down to employers. As I mentiond, the training is not prescribed, so employers can choose to include in-house or external programmes. Translated, this means that employers can use in-house training, external training providers delivering professional qualifications or selected modules, or a combination or both to deliver the results/skills they need. This means that apprenticeships are no longer just about passing exams, but relate directly to performance in the workplace, which is a really positive step.

New standards The new apprenticeship standards will replace the old SASE frameworks. We are moving away from apprenticeship frameworks and their prescribed qualifications, for example NVQs, to standards that cover specific job roles and sets out the core skills, knowledge and behaviours an apprentice will need to be fully competent in their job role and meet the needs of employers. Under the new standards, apprentices will build up a portfolio of skills and behaviours that they have demonstrated in the work place and reflect back on these via a professional discussion at the end of the apprenticeship.

These new standards provide the perfect mechanism to deliver the quality training that employer’s need: the training is not prescribed, so employers can choose to include in-house or external programmes. There are currently two standards approved for delivery: • Apprenticeship standard: assistant accountant (Level 3). • Apprenticeship standard: professional accounting taxation technician (Level 4). One other is being developed: • Apprenticeship standard: professional accountant (Level 7).

Opportunities I see the new world of apprenticeships as a real opportunity for employers. An opportunity for employers to take control of what training is delivered to their staff. If I was an employer, and I am working with a number of them, I would be mapping the skills I want, against the appropriate apprenticeship standard; the end-point assessment; external qualifications; and in-house programmes to design an apprenticeship that delivers for me the skills that I want. PQ • James Taylor, Commercial Director, HTFT Partnership

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PQ Magazine March 2017


exam advice PQ

B

eing effective in the workplace requires much more than just passing your exams. As your professional body we are here to support you throughout your whole ACA journey, and this includes the workplace, too. There is a wealth of resources available to you, to help develop your technical competence and professional skills. Here’s a taster of what we have to offer. ACA student webinars: We offer an entire library of professional skills development webinars on demand for free, they are designed to support you throughout your ACA training. Start watching at icaew.com/listenagain Faculties and SIGs: Join a faculty or special interest group and stay ahead. As an ACA student you can register free of charge for provisional membership of one special interest group and receive a monthly complimentary e-newsletter from one faculty of your choice. Faculties and special interest groups are designed to support you in areas of work and industry sectors that are of particular interest to you. Learn more and register at icaew.com/facultiesandsigs Staying up-to-date: Join the community of ACA students around the world by following us on social media. Our growing online communities will help keep you

A question of support The ICAEW offers advice on how it is helping its students to help themselves abreast of industry specific news, key dates and deadlines and other valuable resources available to you while you study for the ACA. Like us on Facebook by searching Students@ICAEW, follow us on Twitter @icaew_talk, join our ICAEW Students LinkedIn group and share, debate and engage at icaew.com/studentcommunity

Students’ Excel: Sign up for a free Excel online training course, the content has been customised to teach functions and formulae that are crucial in the accounting and financial sector. Join at icaew.com/students-excel (available until 31 December 2017) Exam resources: Access past exams, examiner feedback, sample papers, useful articles and exam webinars for each ACA module, freely available to you as and when you need it. Get started at icaew.com/examresources

Vital: Vital is our magazine for ACA students. Posted to you each quarter, it’s jam-packed with interesting articles and useful resources. Download the latest issue at icaew.com/vital ACA planner: Stay on top of key dates and deadlines throughout 2017 by downloading the ACA planner, complete with colour coding for different calendar entries, at icaew.com/acaplanner

Student support: Our student support team is on hand to help and advise you throughout your training. From queries about your training agreement, exams or updating your personal details, don’t hesitate to get in touch.

ICAEW app: Track your exam progress, access quick reference tax tables and find events and webinars by topic and location via the ICAEW app. Find out more at icaew.com/studentapp

If you’re browsing our website, look out for the live help boxes. You will be able to speak directly to an adviser. You can also call us on +44 (0)1908 248 250 or email us at studentsupport@icaew.com PQ

New Exam – Global Mobility and Human Capital Taxes You may know this as Global Employer Services, People Advisory Services, Global Mobility Services, Employer Solutions, International Taxes or even Human Resources Tax Services.

People

experience

rewarding profit management

Global Mobility Services

Employer Solutions

PQ Magazine March 2017

pension

Advisory Services

rewarding profit management

Global Mobility Services

Employer Solutions

Global

sought after

Growing

International Taxes labour area of expertise internationally Employer Services development employees mobile

Global

sought after labour

area of expertise

Human employees development

Relevant Increased exam choice

Human Valuable

Growing

European Union assets skilled

Capital Capital

Employer Services

Find out more about the benefits of the Human Capital Taxes exam and CTA visit: www.tax.org.uk/humancapitaltaxes

International Taxes internationally mobile

People

experience

In response to growing demand, the CIOT are offering a new CTA examination in Human Capital Taxes from May 2017.

pension

Advisory Services

tailored specifically management

loss

system

welfare

useful

analysis

Relevant

Valuable Increased

loss

welfare

European exam Union assets skilled choice

life

tailored job specifically rate

Taxes training

management education structure

system

useful

analysis

life job

rate

Taxes

Human Resources Human Resources Tax Services “jump ahead” Tax knowledge Services “jump ahead”

education

training structure

knowledge 29


PQ public sector fraud

How to stay secure

Rachael Tiffen explains how an organisation can minimise the risk of being a victim of fraud

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ransparency International’s recently released Corruption Perception Index 2016 shows that systematic corruption is rife across the globe, with much of the problem linked to the public sector. The UK public sector is no exception. The CIPFA’s Fraud and Corruption Tracker report found more than £325m worth of fraud had been detected or prevented in the public sector in 2015–16 alone. Fraud, bribery and corruption involving taxpayer money are all becoming more common – for example, embezzling petty cash or money for trips, and wages and overtime being falsely claimed. As organisations go through transformation, restructuring and reform, fraud risks may increase in the short term as a result of changing systems and processes. Public bodies must have the skills in place to identify fraudulent activity and to ensure that they have sound oversight and regular monitoring processes. Recognising a fraud is only part of the challenge; the greater challenge is addressing the issue, especially in cases where fraud has

become an embedded culture. All sectors have had to cut their budgets during almost 10 years of austerity. Limited resources, coupled with a lack of skills to tackle fraud properly, has created significant challenges for public bodies. It is crucial therefore that robust anti-fraud and corruption policies and procedures are developed and maintained. It is preferable to be in a good position to prevent fraud happening in the first place than to deal with its consequences.

Human resources: An organisation must know who they are employing. Employing someone who does not have the necessary qualifications and experience can lead to both reputational and financial damage. It is essential that original documents and proper references on headed paper are provided by potential employees and that potential employers scrutinise what they are given; qualifications, references and employment history should all be checked thoroughly. The finances: It is essential that those charged with governance carry out their financial

responsibilities effectively. They must ensure they receive the information necessary to allow them to do so and that they ask challenging questions and receive satisfactory answers. Internal controls: Public bodies must have in place sound internal controls, in accordance with accredited standards. There are various forms internal controls can take, including defining roles and responsibilities; clear lines of authority within the organisational structure; appropriate safeguards to limit access to assets, systems and records; authorisation and approval procedures; and agreed accounting procedures. Policies and procedures: Public bodies should also have a fraud policy statement setting out their stance on fraud and corruption and governing how individuals should act in the event that there is a suspicion of fraud. Staff should know who to report fraud to and management should have a clear fraud response plan on how to deal with the allegation and how any investigation will be managed. Stay updated: Finally, to counter fraud, it is essential to know what to look out for. It pays to keep up-to-date with trends and behaviours and be able to assess the risks that external threats may present. PQ • Rachel Tiffen, Head of Counter Fraud, CIPFA

“I am an award winning certified bookkeeper ”

Student of the year – LUCA Awards 2011

“I am grateful for ICB’s help and support in starting my own practice. Having started 3 years ago, I have come a long way and enjoy the freedom and fulfilment of being self-employed. I manage a large portfolio of clients and plan to continue expanding.” Moolchand Dubey MICB CB.Dip PM.Dip To find out if you could become a bookkeeper call

0845 060 2345

www.bookkeepers.org.uk/PQ 30

The Institute of Certified Bookkeepers

PQ Magazine March 2017


ACCA report PQ

Ensuring your longevity Pauline Schu explains how to ensure longevity in a finance and accountancy career

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n January’s PQ magazine, ACCA revealed how accountants will need to embrace a set of seven professional quotients – a mix of technical skills and abilities formed with interpersonal behaviours and qualities. Professional accountants – the future: Generation Next is the much anticipated follow up to our earlier skills report, sharing views from younger finance professionals and their career aspirations and work preferences, what attracts them and retains them in organisations, and how they like to learn. Involving close to 19,000 ACCA students and members from 150 countries, the research shows this generation – which we refer to as ‘Generation Next’ – is well equipped to deal with the changes happening in the profession. Navigating future employment will entail thinking about your career plans as well as accepting some realities of the new world of work. Our research shows that successful professionals manage their careers, carefully plotting out the experiences they need to acquire. As the employeremployee relationship continues to evolve and with job tenure decreasing, Generation Next will need to take responsibility for their careers and seek development opportunities that will

• Pauline Schu, ACCA Professional Insights Manager

benefit them most. Future proofing your skills is now crucial in an age of collaboration between smart people and smart tools to ensure on-going relevancy as careers become more fluid. Creating a personal brand has never been more important with the need to continually examine how you are building your own brand. In a jobs market where an increasingly fluid range of skills are

called upon to meet business needs, demonstrating how you add value is essential. Additionally, developing personal networks can have a significant bearing on career success. Historically, it has taken time for professionals within finance and accountancy to build up the requisite skills as many employers may not be able to accommodate their aspirations. Future generations should work ‘within the system’ and see the employer perspective as they chart out their own career journey in the organisation. Considering roles without a salary increase or promotion and being open to lateral moves will help with building additional technical competencies and soft skills. Exploring whether you could gain entrepreneurial experience within the organisation will become part of how successful a future career can be. Be open to embracing ‘intrapreneurialism’ with the benefits from the resources, capabilities and security of the current organisation, and none of the personal risks that entrepreneurship entails. Gaining global experience will be hugely beneficial as doing so will bring a more diverse view gained working in global teams. The skills obtained through seeking international experience will provide a competitive edge. Success in the future will require embracing change and owning your career to ensure your skills are not only future proofed, but that you also remain in the group of the most in-demand professionals. PQ

CTA Awareness paper PQ

Proformas hold the key to exam pass Kamran Ali explains how to pass Inheritance Tax, Trusts and Estates module of the CTA exams

Focus on proformas! If inheritance tax (IHT) has never been studied before (i.e. in prior qualifications), then it is very common to feel a little overawed by the sheer number of proformas within the syllabus. The key here is to spend time in learning and practising the ‘seven key proformas’ and at the same time ensuring you can distinguish between each one. So, what are these seven key proformas? Well….. 1) Lifetime tax on lifetime gifts. 2) Death tax on lifetime gifts. 3) Death estate. 4) Income tax on interest in possession trusts. 5) Income tax on discretionary trusts. 6) Exit charges on relevant property trusts. 7) Principal charges on relevant property trusts. PQ Magazine March 2017

Is it all about proformas? The IHT module has a great mix of both calculation and written questions in the exam. Ensuring you practise the written questions is vital in passing the module, as you will not get 12 questions purely focused on numbers. Using your legislation wisely is a useful tool to help you with some of these written questions. For example, it is common to get questions asking students to identify whether a particular gift qualifies for business property relief. Avoid using up valuable memory space on learning such things when you can just spend some time before the exam highlighting your legislation carefully to help with the conditions for this relief. And here’s a tip to help: when highlighting the legislation, use two different colour highlighters to indicate what qualifies for 100% or 50% business property relief! This will help you remember the information in the exam hall.

Inheritance tax reliefs are a must There are a significant number of reliefs which get tested regularly within the calculation questions. It is imperative to know not just how to calculate the particular relief but also which proforma it belongs in. The key IHT reliefs examinable are taper, business property, agricultural property, fall in value, quick succession and post mortem reliefs. What about trusts and estates? This module will never examine 12 questions purely focusing on IHT, so it is essential that you learn the trusts and estates part of the syllabus. This often includes how to calculate income tax on trusts or inheritance tax charges on trusts. Commonly, there are also one to two questions focusing on capital gains tax, so watch out for this topic, which often gets overlooked by many students. PQ • Kamran Ali is a tutor at BPP 31


PQ careers

social media ROUND-UP We couldn’t resist a quick tweet this month on the taxman’s red flag to David Beckham’s knighthood. HMRC vets all those put forward for honours, and it allegedly raised concerns over his investment in Ingenious Media, a so-called avoidance scheme. Perhaps the biggest lesson for all of us normal people is that anything we put online can be hacked. I remember meeting the real ‘Catch Me if You Can’ man, Frank Abagnale Jr., a few years back. He told me we had all been hacked – everyone! Perhaps our only saving grace is that we have nothing interesting to say. The call for an increase in the ACCA CBE pass mark to 60% also rumbled on with some Facebook groups. I brought this up at a recent meeting with education boss Alan Hatfield and the team at ACCA HQ, and he told me there are definitely no plans to raise the pass mark. He was very confident that the 50% pass mark works for both paper and computer exams. So don’t worry, you are safe. Hatfield also promised to keep providing you with a percentage mark, something CIMA haven’t managed to do under its new CBE system. On LinkedIn there has been a lot of talk about CIMA’s new ‘visual identity’. It appears that CIMA has been showing off some ideas for a change, and there were a lot of underwhelmed members, apparently. One CIMA member was under the impression the CIMA team were only asking younger members about the new visuals, forgetting the target audience is really employers and potential clients (for MiPs). CIMA are also not alone here as the ICAEW is, we understand, planning to unveil new branding some time in April. We have been told that it won’t be a dramatic change. Economia (she’s the lady in the logo) will still be there, but she will be thinner than she is now. 32

Life at IML Holdings ACCA studier Pantelis C. Fouli, 42, is Group Financial Controller at the firm based in Larnaca, Cyprus. He has been there for nearly four years. He was the winner of the $5,000 Bill Phillips Transformation Challenge 2014, a health and fitness programme What time does your alarm clock go off on a working day? 5am. What’s the first thing you do when you get to your desk? Unfortunately, the opposite of what modern thinkers on personal development preach – I check email! What’s on your desk? My two monitors, work phone, mobile, keyboard and a coaster given to me by my personal development coach that has B+ on it (be positive). It reminds me that’s what I need to be, day in day out. What’s the best thing about where you work? The 100% backing by my boss, CEO of the company, and my great team. Without them I am nothing.

Where’s your favourite place to go for lunch? An Italian restaurant called LaBoca – the food is cooked fresh, right in front of you. What (or who) can you see when you sit at your desk? My colleagues when they walk past – I always leave my door open. Which websites are your favourites? LinkedIn – it’s the only social media I use. Which websites do you use for work? I am constantly on the net reading up on latest events in the financial markets that could influence us or one of our business partners. How many hours a week do you spend in meetings? Two at the most, broken down into small

daily sessions with my team. What time do you leave the office? 6pm. How do you relax? Playing board games with my two girls, or having a nice cup of coffee on our veranda with my beautiful wife. How often do you take work home? Four days a week. What is your favourite TV show? My wife and I love Suits. Summer or winter? Winter. Pub or club? Pub. Who is your hero? My wife. If you had a time machine, where would you go? Back to 1990 before my nan died, I would have liked to have been with her. If you hadn’t chosen accountancy, what might you be now? An economics teacher.

10 percentage point increase in the number in state school appointments. EY’s Maggie Stilwell said: “We made a bold move to achieve a bold result and improve social mobility.” She felt the firm challenged itself by transforming its well-established student recruitment process to ensure it was able to find talent wherever it was. Last year EY received 37,000 student applications for 1,600 graduate, student and intern vacancies.

KPMG in equality top 10 KPMG has been named as the top LGBT accountancy employer by Stonewall, the lesbian, gay, bi and trans equality charity. The Big 4 firm came in at number 10 in Stonewall’s Workplace Equality Index, with PwC at number 19. The top employer in this year’s index is Lloyds Banking Group. EY, Accenture and the Home Office remain ‘star performers’ for their unwavering efforts to create inclusive workplaces.

In brief All CVs banned! It is being called a radical experiment, yet EY is claiming its ban on CVs is helping to boost state-school recruits. New stats show that 18% of EY’s graduate and school leaver intake in 2016 would previously been ineligible to apply for a position with the firm. In its 2016 recruitment drive EY also scrapped the requirement for 2.1 degrees or three B grades at A level for school leavers. Those conducting interviews were stopped from asking about relevant experience, as it was felt that this benefitted middle-class children with ‘pushy parents’. EY said its 2016 intake has seen a

The PQ Book Club: books you should read Narco Nomics: How To Run A Drug Cartel by Tom Wainwright (Ebury Publishing, £8.99) It’s great when you come across a book that you just can’t put down – and this is one of those. Described by The Times as “an economics book for the Breaking Bad generation”, author Tom Wainwright lifts the lid on the world of international drugs trading. But this is no ‘ivory tower’ academic treatise – Wainwright puts himself in the thick of the action, visiting the drug ‘hotspots’ of Colombia, Mexico and Bolivia, and interviewing those involved in the drugs

supply chain, from gang bosses to drugs ‘mules’. For the narcotics trade, as Wainwright discovers, is run in exactly the same way as legitimate big business, applying the same principles and methodologies. He explodes many myths in the process. For example, far from the Hollywood image of gang members being violent and expendable, they are actually looked on as the organisation’s most valuable resource. The author explains that recruiting the right people is a difficult process – these people have to be trustworthy, loyal and resourceful. Having said that,

the gangs show no mercy to those to try to thwart their ambitions – in Mexico alone, thousands were murdered as rival gangs fought over territory and markets. Fascinating facts leap off every page. Tellingly, Wainwright describes some of the gang bosses he meets as reminding him of some of the wold’s top corporate bosses. PQ rating 5/5 Start this book and you’ll soon become addicted! It powerfully states the case for a worldwide reform of drug laws. PQ Magazine March 2017


www.howett-thorpe.co.uk

real jobs real people Studying taking over your life? Don’t let it put your career on hold too! So many studiers put their career on hold whilst life and exams take over – don’t let your career lag behind! Gaining experience of what you’re studying whilst being challenged is just as important as the exams themselves. It’s difficult to know with all the online surveys where you should be in the market – It’s just a survey! At Howett Thorpe we have specialist Consultants in each stage of Accounting ensuring that wherever you are in your career there is a Consultant to support you in your next move and provide invaluable market information. Get in touch for confidential chat about your career today.

TOP JOBS Assistant Accountant, Guildford – Finance Sector - £30,000 - £35,000 Financial Analyst, Whitely – Technology/Aerospace Sector - £31,000 Senior Financial Analyst, Basingstoke – Marketing/Technology - £38,000 - £44,000 SOX Compliance (IT General Controls), Newbury – Integrated Solutions Sector - £40,000 Part-Qualified Financial Accountant, Fleet – Technology - £27,000 - £35,000 FP&A Analyst, Guildford – Defence sector - £38,000 - £45,000 Management Accountant, Camberley – FMCG - £35,000 - £38,000 PQ Auditor, Reading – Practice - £30,000 - £35,000 Part-Qualified Accountant, Leatherhead – Practice - £27,000 – 35,000

For further information or careers advice please contact Cheryl Ramsden Cheryl.ramsden@howett-thorpe.co.uk 01252 718777 Weybridge Office T: 01932 901 900 E: weybridge@howett-thorpe.co.uk

Reigate Office T: 01737 304 050 E: reigate@howett-thorpe.co.uk

Slough Office T: 01753 313 033 E: slough@howett-thorpe.co.uk

Farnham Office T: 01252 718 777 E: farnham@howett-thorpe.co.uk


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

LOVED UP

KEEP ON PRACTISING

Practice makes perfect, so the saying goes. But just because you are ‘perfect’ it doesn’t mean you should stop practising. New research into ‘overlearning’ has found that the point at which you are good at something is precisely the time when you should keep doing it, if you want to keep that ability. The study found those who stopped learning just as they had mastered a skill seemed to leave their brains in a ‘plastic’ state and were vulnerable to interference from the next task. The ‘overlearners’ seemed to have a more stable brain.

PRIZE-WINNERS

We may have just missed Valentine’s Day, but we thought we would bring you a story of two award-winning ICAEW PQs (now NQs!). Tom Mah managed to get 91% in a Corporate Reporting exam, putting him in first place worldwide. His girlfriend, Laura Southgate, was also in the same class. Not to be outdone, she recently went on to win a prize for the case study exam, which they both sat at the same time, too!

NEW QUID ON THE BLOCK ARSENAL FOOTBALLER ADMITS TO TAX FRAUD Arsenal footballer Alexis Sanchez has admitted a £865,000 tax fraud in Spain. Despite the size of the fraud he is likely to face a fine rather than be asked to spend some time behind bars. Sanchez appeared in court via a video link before Christmas where he admitted the two charges relating to the time when he was at Barcelona. The Chilean avoided paying the tax on his image rights by setting up a shell company in Malta called Numidia.

KEEP YOUR HANDS HIDDEN As we move ever closer to biometric security you may have to think about what pictures you have on your Facebook page. The National Institute of Informatics in Tokyo has said that the quality of smartphone cameras mean fraudsters will be able to blow up your pictures to reveal your fingerprints. Isao Echizen’s team have been able to reconstruct fingerprints from well-lit photographs shot from three meters away. So no more peace signs!

SELF ASSESSMENT FUN

HMRC tries to make the 31 January self assessment date as fun as possible – no, it does! Did you know, for example, that men are better than women at getting it in on time? Or that the worst age group for getting their returns in by the due date is the 18-20 year olds, with 949 overdue returns for every 10,000 submitted. Accountants aren’t the best at completing their tax returns on time (they come second). That honour goes to those working in agriculture, fishing and forestry.

’ WEV E

What has 12-sides and will appear in March? The new improved £1 coin, of course. The news hasn’t been greeted with worldwide approval though, despite claims that this will be ‘the most secure’ coin ever. The ICAEW said that the financial hit that smaller business would take preparing for the coin would “divert their attention away from… dealing with the economic consequences of Brexit”.

STOP THE CV BUZZWORDS

Ever wondered why you never got an interview after sending in your fantastic CV? According to the experts, many CVs contain too many ‘buzzwords’ and not enough content. So instead of saying you are ‘enthusiastic and passionate’ you need to show some of your real-life experiences, like your volunteering. And don’t say you are a ‘perfectionist’ – some recruiters think you could be picky and concentrate too much on the little things. Other phases to avoid are ‘hard-working’ and ‘multi-tasking’

GOT THE L OT

Animal Kingdom Do you need a colouring adventure to help reduce the stress of exams? We have three copies of Millie Marotta’s Animal Kingdom to give away this month, so get your colouring pencils ready (she prefers them to pens as they are more versatile). A colouring book might not be your idea of an adult pastime – but you can’t knock it if you haven’t tried it. To enter this great giveaway draw just send you name and address to graham@pqaccountant.com. Head up your email ‘Animal Kingdom’.

Partners in Crime We thought we would giveaway something different this month. So we have the Agatha Christie’s Tommy & Tuppence collection up for grabs. These are the books that inspired the hit BBC show Partners in Crime, starring David Walliams. The collection includes her final novel and a series collection of short stories. If you bought this in the shop it would set you back around £40. If you want to enter this super giveaway then just email graham@pqaccountant.com with ‘Partners’ as your header.

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 10 March. The main draw will take place on Monday 13 March 2017.

TO ENTER THESE GIVEAWAYS EMAIL GRAHAM@PQACCOUNTANT.COM 34

PQ Magazine March 2017


MAKING LIFE SIMPLE Sorted, thanks to pqjobs.co.uk

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