2021 endunamoo apc professional programme

Case Study 3 – 2021 – Marking Grid

2021

ENDUNAMOO

APC PROFESSIONAL PROGRAMME

MARKING GRID (RSA)

2 © Endunamoo Professional Course | APC Professional Programme 2021 | Marking Grid

TASK A:

A1: PRIMARY INDICATORS OF COMPETENCE AREA C ACHIEVED

A1.1. Discusses that the conclusion Susan reached after applying the concentration

test is not appropriate and / or suggests the concentration test is re-performed

ACC 2

A1.2. Discusses the lack of guidance in IFRS 3 on the definition of “substantial” and

requirement for management to apply judgement in this regard

ACC 2

A1.3. Discusses the inappropriate inclusion of transaction costs of R0.5m in the fair

value of consideration transferred

ACC 2, 5

A1.4. Discusses the inappropriate inclusion of consideration for future services of R1m

in the fair value of consideration transferred

ACC 2, 5

A1.5. Discusses the inappropriate inclusion of the proportionate share of the NCI’s net

assets acquired as opposed to the fair value of the NCI

ACC 2

A1.6. Discusses that liabilities assumed have been incorrectly subtracted in

determining the fair value of the gross assets acquired or that they should be added

ACC 2

A1.7. Discusses that deferred tax liabilities have been incorrectly subtracted in

determining the fair value of the gross assets acquired or that they should be ignored

ACC 2

A1.8. Identifies that NuShip’s cash balance (or deferred tax asset or goodwill from

deferred tax liability, if any) has not been excluded when determining the fair value of

the gross assets acquired

ACC 2

A1.9. Discusses the inappropriate use of the ships’ depreciated carrying amounts as

opposed to fair values

ACC 2

A1.10. Discusses the inappropriate grouping of the 2 ships, patent and skilled workers

as a group of similar identifiable assets

ACC 2

A1.11. Discusses the inappropriate separate consideration of an intangible asset

relating to skilled workers when determining identifiable assets

ACC 2, 5

A1.12. Discusses the inappropriate value of Rnil for the brand in the determination of

identifiable assets due to management’s intention not to use the brand

ACC 2, 5

A1.13. Discusses the inappropriate use of the LSE PE ratio due to the fact that NYSE is

the principal market and / or highlights that the fair value cannot be based on the most

advantageous market where a principal market exists

ACC 2, 5

A1.14. Discusses the possible inappropriateness of using a PE ratio as opposed to an

EV/EBITDA ratio for the relative valuation or another valuation technique

FM 2, 5

A1.15. Discusses that using historic PE ratios is inappropriate FM 2

A1.16. Discusses the inappropriate determination of sustainable earnings using profit

after tax for FY2020 (or suggests the use of weighted average earnings)

PERV/FM 3

A1.17. Identifies a valid adjustment that might need to be made in establishing

sustainable earnings

FM 2

A1.18. Discusses that it is not appropriate to base the valuation on parameters that

would result in a higher valuation (e.g. it is not appropriate to use the equity analyst’s

PE ratio as it is not based on an exit price) and / or highlights the importance of an

objective valuation

PERV 3

A1.19. Provides suggestions on the type of discounts missing while showing a good

understanding of Carnival (from research) and Ulendo (from PRI and IOD)

PERV/FM 3, 5

A1.20. Demonstrates an exercise of caution considering the complexities of the

valuation and the size of the proposed transaction (e.g. suggests the use of a

valuation expert)

PERV 3, 5


A2. INDICATORS OF EFFECTIVE COMMUNICATION

A2.1. Use of an appropriate communication method (email with attached review

comments)

COMM 1, 8

A2.2. Use of the appropriate tone and is not overly critical to Susan’s concentration

assessment

COMM 8

A2.3. Expresses content clearly, with no ambiguity, spelling, or grammatical errors COMM 8

A3. HIGHER LEVEL INDICATORS

A3.1. Discusses that management’s judgement in defining “substantial” is likely to be

a significant area of judgement and that disclosure is required

ACC 2

A3.2. Discusses that audit firms provided guidance on appropriate thresholds when

defining “substantial” (i.e. 90%) and / or makes reference to other areas in IFRS that

provide guidance (e.g. IFRS 9 substantial modification of 90%)

ACC 2

A3.3. Questions or discusses whether the 2 ships are a group of similar assets

considering the possibility of difference risk characteristics (e.g. market risk, age, size

etc.)

ACC 2, 4

A3.4. Suggests an approach to determine the fair value of the NuShip non-controlling

interest (e.g., with reference to the fair value of the consideration paid for the 60% of

NuShip acquired)

PERV 3

A3.5. Suggests performing a reasonability test on the relative valuation using

EV/EBITDA ratio

PERV/FM 3

A3.6. Demonstrates deep research by noting the difficulty in determining a forward PE

ratio for Carnival because it is making losses

PERV/FM 3, 4

A3.7. Demonstrates deep research by noting the difficulty in determining Ulendo’s

sustainable earnings by noting possibility that Ulendo will never return to previous

profitability levels

PERV/FM 3, 4

A3.8. Identifies the expected range of ZAR:USD exchange rates demonstrating a good

understanding of current affairs

PERV 3

A3.9. Discusses the inappropriate translating of profits / sustainable earnings to GBP

or USD using a spot rate and / or suggest an average rate over the respective period is

used.

PERV 3

A3.10. Contextualises the review by stating the method of the concentration test

selected by Susan

PERV/ACC


LC BC C HC

Missed BC profile

A C profile but missing 1

Elevated or 1 Pervasive

OR

One indicator short of a C

profile but not missing

Elevated or Pervasive

9 indicators including 2 of

the Elevated (A1.3, A1.4,

A1.10, A1.11, A1.12, A1.13

or A1.14) and 3 Pervasive

OR

10 indicators including 2 of

the Elevated and 2

Pervasive

C profile plus 3 HLAs

Task A: Competencies assessed Achieved

1. Good approach and responds to all components of the task (A2.1.)

2. Demonstrates good technical skills with good coverage (ACC coverage)

3. Demonstrates critical thinking on the day (PERV coverage)

4. Demonstrates business acumen with good coverage (A3.3, A3.6, A3.7)

5. Adapts to changes introduced on the day of assessment (Any 2 Elevated)

6. Uses pre-research with good application to the case (ACC or PERV coverage)

7. Identifies ethical dilemmas and demonstrates ethical leadership (N/A)

8. Communicates effectively, appropriately and logically (A2.1. – A2.3.)

9. Task response evidences effective ‘time management skills’ (Length)


TASK B

B1: PRIMARY INDICATORS OF COMPETENCE Area C Achieved

B1.1: Discusses the inappropriateness of including cash as a source of finance OR

Discusses the inappropriateness of the lost interest income as the cost of the cash

FM 2

B1.2: Discusses the inappropriateness of the selected risk-free rate (including weighting

used)

FM 2

B1.3: Discusses the missing adjustments for business risks and other risks on listed beta

OR WACC with an example of these risk factors

FM 2

B1.4: Identifies the use of incorrect capital asset pricing model formula FM 2

B1.5: Identifies that the tax effects were not incorporated in the cost of debt FM 2

B1.6: Discusses the inappropriate use of the average market rates (questioning the

selection of the market rates for the green bond)

FM 2

B1.7: Addresses the lack of professionalism in the communication from Alude OR

Addresses the lack of Alude’s professional attitude with regards to communication (or

lack thereof) of the delays in responding to the task

PERV 4

B1.8: Demonstrates professional attitude with regards to supporting Alude in her

development (e.g. training, sharing of research etc.)

PERV 4

B1.9: Identifies the inappropriateness of an adjustment for errors PERV/FM 4

B1.10: Identifies that the market value of equity used is incorrect – needs to be total

equity rather than consideration transferred

PERV/FM 3

B1.11: Identifies the specific forms of funding might result in varying discount rates OR

Discusses that the target capital structure should be used

PERV 2

B1.12: Questions whether the long-term government bond was used when source of

other inputs is justified (or questions the use of sector specific market risk premium

rather than the general risk premium)

PERV/FM 3

B1.13: Questions the need to include Norwegian Cruise Line in determining the

appropriate beta

PERV 3

B1.14: Criticises the use of the simple average in determining the appropriate beta or

suggests a market weighted average in determining the appropriate beta

PERV/FM 3

B1.15: Questions the possibility of differing capital structures and thus the need to

unlever and re-lever the beta

PERV/FM 3

B1.16: Suggests the use of expert due to the complex nature of the calculation or given

the difficult environment

PERV 3

B2: INDICATORS OF EFFECTIVE COMMUNICATION

B2.1: Use of an appropriate communication method (email with an attachment) uses

numbering and headings for review comments

COMM 1, 8

B2.2: Use of the appropriate tone and is not disrespectfully critical to Alude COMM 8

B2.3: Expresses content clearly, with no ambiguity, spelling, or grammatical errors COMM 8

B3: HIGHER LEVEL INDICATORS

B3.1: Questions whether cash is indeed available as a source of finance given the state

of affairs

PERV 4

B3.2: Identifies that the use of the risk free rates in other countries will add country risk,

making it inappropriate as a proxy for risk free rate

FM 2; 3

B3.3: Questions the appropriateness of 12 months tenor for the beta given the market

volatility or suggests a longer tenor for the average beta

PERV/FM 4

B3.4: Demonstrates insightful research (e.g., market cap of Carnival being 3 x that of

Norwegian, diversity of operations, etc.)

PERV 4

B3.5: Identifies the unexpected cost / yield of the green bond or lack of a greenium PERV 4


LC BC C HC

Missed BC profile

(8 / 16) i.e. B1.1 – 1.16

but limited to no coverage

(0 or 1/5 of B1.12 – 1.16

OR

at least (2/5) of B1.12 – 1.16

But

(6 / 16) i.e. B1.1 – 1.16

(8 / 16) i.e. B1.1 – 1.16

and

at least (2/5) of B1.12 – 1.16


Task B: Competencies assessed Achieved

1. Good approach and responds to all components of the task (At least 1 in B1.1 to B1.11 and At

least 1 in B1.12 to B1.16)

2. Demonstrates good technical skills with good coverage (Coverage in technical (6 of B1.1 to

B1.11)

3. Demonstrates critical thinking on the day (At least (2/5) of B1.12 – 1.16)

4. Demonstrates business acumen with good coverage (At least 2 HLA indicators)

5. Adapts to changes introduced on the day of assessment (At least (2/5) of B1.12 – 1.16)

6. Uses pre-research with good application to the case (B3.4; B3.5)


8. Communicates effectively, appropriately, and logically (B2.1 – B2.3)



TASK C

C1: PRIMARY INDICATORS OF COMPETENCE Area C Achieved

C1.1. Appropriately calculates an impairment loss by considering the carrying amount of

the Ulendo 2 CGU and a recoverable amount

ACC 2, 5

C1.2. Allocates impairments to assets within the scope of IAS 36 (ship and ROUA) based

on the respective carrying amounts

ACC 2, 5

C1.3. Considers trade receivables after the loss rate of 3% and / or inventory after the

write-off of 35%

ACC 2, 5

C1.4. Discusses the inappropriate consideration of the expected refurbishments to the

diesel engines in the determination of fuel costs

ACC 2, 5

C1.5. Discusses the inappropriate consideration of the expected restructuring in the

determination of staff or payroll costs

ACC 2, 5

C1.6. Discusses the inappropriate use of the internal transfer price for the cost of food

and beverages

2, 5

C1.7. Discusses the incorrect inclusion of depreciation in the net cash flows and / or

inclusion of finance income in the net cash flows

ACC 2, 5

C1.8. Discusses the incorrect inclusion of the existing lease payments considering the

fact that the lease liability is included in the CGU (i.e. double counting)

ACC 2, 5

C1.9. Reduces the value in use by the amount of the recognised lease liability and

provides and appropriate reason.

ACC 2, 5

C1.10. Discusses the incorrect inclusion of financing activities (e.g. capital repayments

on borrowings) in the net cash flows

ACC 2, 5

C1.11. Discusses the inappropriateness of using the residual value to estimate the

disposal proceeds in Year 5

ACC 2, 5

C1.12. Discusses the incorrect inclusion of tax cash flows in the net cash flows ACC 2, 5

C1.13. Selects with an appropriate reason the real discount rate of 21,45% for the

purposes of determining the value in use

ACC 2, 5

C2. INDICATORS OF COMMUNICATION SKILLS

C2.1. Use of an appropriate communication method (email with an impairment

workings attached) and uses notes and numbering to enhance the layout and structure

of the working

COMM 1, 8

C2.2. Use of the appropriate tone and style considering CFO as audience COMM 8

C2.3. Expresses content clearly, with no ambiguity, spelling, or grammatical errors COMM 8

C2.4. Uses clear and appropriate workings (value in use, impairment allocation and

carrying values)

COMM 8

C3. HIGHER LEVEL INDICATORS

C3.1. Discusses that the lease payments of the new lease (not signed) need to be

included in the determination of net cash flows

ACC 2, 5

C3.2. Proposes an alternative method of determining the expected disposal proceeds of

Ulendo 2 in year 5

ACC 2, 5

C3.3. Discusses the need to consider working capital changes in the determination of net

cash flows

ACC 2, 5

C3.4. Demonstrates evidence of research by noting that in practice preparers consider

changes in working capital to have a negligible impact to the value in use (BDO

publication)

ACC 2, 5


LC BC C HC

Missed BC profile

Coverage in ACC (7 / 13)

OR

Limited coverage in ACC (5 -

6 Indicators) and

C1.2.

Coverage in ACC (7/ 13)

including

C1.2.


Task C: Competencies assessed Achieved

1. Good approach and responds to all components of the task (C1.2. and C2.4)

2. Demonstrates good technical skills with good coverage (ACC coverage)

3. Demonstrates critical thinking on the day (N/A)

4. Demonstrates business acumen with good coverage (N/A)

5. Adapts to changes introduced on the day of assessment (ACC coverage)

6. Uses pre-research with good application to the case (ACC coverage)


8. Communicates effectively, appropriately and logically (C2.1 – C2.4)



TASK D

D1: PRIMARY INDICATORS OF COMPETENCE Area C Achieved

D1.1: Provides an overall view on the FOC strategy PERV 4

D1.2: Discusses valid benefits of Panama FOC PERV 4

D1.3: Discusses valid ethical concerns of Panama FOC PERV 4

D1.4: Discusses valid mitigants of the ethical concerns of Panama FOC PERV 4

D1.5: Cites concerns on the misalignment of the strategy to the values that have made

Ulendo successful

PERV 4

D1.6: Demonstrates good research by stating just how much cruise operators have

benefited from adopting a FOC

PERV 4

D1.7: Discusses that operating cost or tax savings should not be seen as the primary driver

of Ulendo’s strategy, but rather supplement a strategy that creates new market

opportunities and drives growth

PERV 4

D2: INDICATORS OF EFFECTIVE COMMUNICATION

D2.1. Use of an appropriate communication method (email with table attachment

containing benefits, concerns and mitigants) and uses headings

COMM 1, 8

D2.2. Use of the appropriate tone and is not dumping research without application COMM 8

D2.3. Expresses content clearly, with no ambiguity, spelling, or grammatical errors COMM 8

D3: HIGHER LEVEL INDICATORS

D3.1: Discusses the impact of benefits (reduced down time or allow maintenance time

when it is optimal for the business (high and low seasons) and not generic regulations)

PERV 4

D3.2: Integrates benefits, concerns or mitigants with information from other tasks (e.g.,

acquisition of NuShip demonstrates commitment to protecting the environment)

PERV 4

D3.3: Demonstrates knowledge of current affairs by suggests disclosing the pay gap in line

with the draft Companies Amendment Bill

PERV 4

D3.4: Performs an analysis of Ulendo’s cost ratios and / or effective tax rate against a

competitor that has adopted a FOC

PERV 4

D3.5: Provides a balanced overall view on the FOC strategy (i.e. considers both the pro’s

and con’s)

PERV 4


LC BC C HC

Missed BC profile

D1.1

AND

2 benefits, 2 ethical

concerns, 2 valid

mitigants

AND

D1.5 (Addresses the

core values)

D1.1

AND

3 benefits, 3 ethical concerns, 3

valid mitigants

AND

D1.5 (Addresses the core values)

C profile plus 3

HLAs

Task D: Competencies assessed Achieved

1. Good approach and responds to all components of the task (D1.1 - D1.4)

2. Demonstrates good technical skills with good coverage (N/A)


4. Demonstrates business acumen with good coverage (Coverage benefits)

5. Adapts to changes introduced on the day of assessment (Coverage mitigations)

6. Uses pre-research with good application to the case (N/A)

7. Identifies ethical dilemmas and demonstrates ethical leadership (BC and above and D1.5)

8. Communicates effectively, appropriately, and logically (D2.1 – D2.3)

9. Task response evidences effective ‘time management skills’


Task E

E1 PRIMARY INDICATORS OF COMPETENCE Area C Achieved

E1.1 Provides appropriate input on the validity of each risk identified by internal audit AUD 2,5

E1.2 Discusses additional risks to address the completeness of the risk assessment: e.g.

tax, legal, utilisation or other valid risk or Provides appropriate input on the accuracy of

the risks (for all 3 risks)

AUD

2,3, 5

E1.3 Describes relevant controls, with the control activity and control objective for risk 1

(e.g. interface or any two of: segregation of duties, isolation of responsibilities, review

and/or reconciliation)

AUD

2,5


(e.g. approval of new accounts, use of trust account that is restricted, periodic reviews,

CAATs, use of customer statements to query any discrepancies and auto-locks)

AUD

2,5


(e.g. authorisations, periodic reviews, refunds, exception reports etc.) AUD

2,5

E1.6 Discusses general IT controls over the Zapro system (logical access, program

changes, computer operations and security etc.). May contribute to E1.3, E1.4 and E1.5 if

not achieved.

AUD

2,5

E2. INDICATORS OF EFFECTIVE COMMUNICATION

E2.1 Use of an appropriate communication method (Email) and addresses both

components of the task (validity and completeness of risks + controls to address the risks)

COMM 1,8

E2.2 Use of the appropriate tone and not overly critical of the internal auditors COMM 8

E2.3 Expresses content clearly, with no ambiguity, spelling, and grammatical errors COMM 8

E3. INDICATORS OF HIGHER LEVEL OF APPLICATION

E3.1 Discusses the money laundering risk and/or recommends valid controls to address

the risk (NB - Only contributes towards E1.2, otherwise HLA)

AUD 2,3,5

E3.2 Discusses that the interest earned by Ulendo on these accounts will need to be

included in their taxable income per the gross income definition

TAX 3,4

E3.3 Discusses that the CPF accounts process may result in Ulendo being considered a

financial institution and having to comply with such requirements

PERV 3,4

E3.4 Identifies that the current CPF balance exceeds bank account balance PERV 3

E3.5 Concludes on whether the funds would be taxed or not based on tax principles

(entitled to or received on own behalf / for own benefit) TAX

2

E3.6 Demonstrates research on similar issues as to who the interest on managed funds

belongs to (e.g. Old Mutual, Nedbank etc) PERV

4


LC BC C HC

Missed BC profile

Coverage on four of the five

indicators

Coverage on E1.1 to E1.5

(addresses all indicators)

OR

Misses 1 of (E1.3, E1.4 or

E1.5) but deals with E1.6


Task E: Competencies assessed Achieved

1. Good approach and respond to all components of the task (E2.1)

2. Demonstrates good technical skills with good coverage (BC or above)

3. Demonstrates critical thinking on the day (At least two of E1.2, E1.3, E3.1, E3.2, E3.3)

4. Demonstrates business acumen with good coverage (At least two of E1.2, E1.3, E3.1, E3.2, E3.3)

5. Adapts to changes introduced on the day of assessment (BC or above)



8. Communicates effectively, appropriately, and logically (E2.1 – E2.3)

9. Task response evidence effective ‘time management skills’ (Length)


TASK F

F1: PRIMARY INDICATORS OF COMPETENCE Area C Achieved

F1.1: Discusses the entity’s obligations as per the Tax Administration Act (onus to

declare income and/or onus to prove deductions)

TAX 1; 2

F1.2: Identifies that the transaction is treated as a barter transaction or identifies that

there is an acquisition of bitcoins in exchange of the supply of tickets or that

consideration is in a form of payment other than money

TAX 1; 2

F1.3: Discusses and concludes on the nature of proceeds of bitcoin as gross income or

capital in nature (profit-making scheme)

TAX 1; 2

F1.4: Identifies that the value of the tickets (R750 000) is gross income or proceeds from

the sale / conversion of the bitcoins is gross income

TAX 1; 2

F1.5: Discusses that there is no cost / expenditure actually incurred in the acquisition of

bitcoins (Lambat case) or discusses section 11(a) deduction on purchase of bitcoins

TAX 1; 2

F1.6: Correctly calculates the number of bitcoins acquired (1,3923) PERV 1; 2

F1.7: Correctly / Consequentially calculates the gross income from the conversion of

bitcoins to ZAR (R1 150 736)

PERV 1; 2

F1.8: Correctly / Consequentially calculates the transaction costs incurred PERV 1; 2

F1.9: Discusses the deductibility of the transaction costs TAX 1; 2

F1.10: Discusses / Calculates that an output tax will be levied on full ticket price TAX 1; 2

F1.11: Discusses that bitcoin is a supply of financial services and is exempt from VAT TAX 1; 2

F1.12: Discusses that an input tax will not be claimable on transaction costs since this is

not in the furtherance of an enterprise

TAX 1; 2

F1.13: Calculates output tax on ticket price and/or input tax on transaction costs at 15% TAX 1; 2

F1.14: Discusses counterparty risk in CoinBase or identifies that CoinBase is a reputable

cryptocurrency exchange

SGRM 1; 4; 6

F1.15: Discusses price volatility risk related to bitcoins SGRM 1; 4; 6

F1.16: Discusses forex risk related to bitcoins SGRM 1; 4; 6

F1.17: Discusses the liquidity benefits associated with bitcoin payment option (due to

lower transaction costs and/or 30 days period)

SGRM 1; 4; 6

F1.18: Discusses the lower transaction fees for bitcoin payment option vs credit card

option (or compares 1,5% and 3,5%)

SGRM 1; 4; 6

F1.19: Identifies that there are other cryptocurrency currencies other than bitcoin SGRM 1; 4; 6

F1.20: Identifies the risk of money laundering related to bitcoins SGRM 1; 4; 6

F1.21: Suggests the use of a tax / legal expert to assist the tax implications or questions

whether the scope of services from CoinBase will include this

PERV 1; 4; 6

F1.22: Discusses other valid consideration with regards to introduction of bitcoin (e.g.,

costs of technology required to adopt this payment onboard, etc.)

SGRM 1; 4; 6

F2: INDICATORS OF EFFECTIVE COMMUNICATION

F2.1: Use of an appropriate communication method (email, responds to ethical concerns

and accounting policy review comments and factors) and uses headings or numbering

COMM 1, 8

F2.2: Use of the appropriate tone COMM 8

F2.3: Expresses content clearly, with no ambiguity, spelling, or grammatical errors COMM 8

F3: HIGHER LEVEL INDICATORS

F3.1: Identifies negative environmental impact of cryptocurrencies SGRM 1; 4

F3.2: Identifies the uncertainty in the legal framework governing cryptocurrencies SGRM 1; 4

F3.3: Discusses that the inclusion of other crypto currencies might assist Ulendo capture

a wider market

SGRM 1; 4


F3.4: Identifies the possibility to defer the inclusion of full gross income prior to

departure date (S24C)

TAX 2

F3.5: Discusses that the bitcoin is not an exchange item (not currency) and therefore

there will not be exchange gains and losses

TAX 2

F3.6: Provides context regarding guidance provided on the tax implications of bitcoins

(crypto assets are of intangible nature)

PERV 1

F3.7: Discusses that VAT on transaction costs will be allowed as a deduction for income

tax purposes

TAX 2

F3.8: Discusses that unsold bitcoins will be added back as closing stock and deducted in

following year of assessment as opening stock

TAX 2

F3.9: Discusses that there might be VAT leakages since part of the operations will not

be an enterprise

TAX 2; 4

LC BC C HC

Missed BC profile

Provides 8 / 9 valid

indicators

AND

Discusses income tax

implications, value added

tax implications and

other considerations

Provides 10 valid indicators

AND

Discusses income tax

implications, value added

tax implications and other

considerations


Task F: Competencies assessed Achieved

1. Good approach and responds to all components of the task (F1.1 – F1.9, F1.10 – F1.13 & F1.14 – F1.22)

2. Demonstrates good technical skills with good coverage (Coverage on F1.10 – F1.13)


4. Demonstrates business acumen with good coverage (F1.14 – F1.22)

5. Adapts to changes introduced on the day of assessment (N/A)

6. Uses pre-research with good application to the case (BC or above)


8. Communicates effectively, appropriately and logically (F2.1 – F2.3)



TASK G

G1: PRIMARY INDICATORS OF COMPETENCE Area C Achieved

G1.1 Rolls forward, with reasoning the prior year misstatement on the current year

schedule

AUD 2

G1.2 Distinguishes misstatement in amounts from misstatements in disclosures: #2 &

#6 or demonstrates understanding that disclosures misstatements are misstatements

AUD 2

G1.3 Correctly classifies misstatements as factual or judgemental AUD 2

G1.4 Calculates the aggregate effect of misstatements (including tax) AUD 2

G1.5 Correctly records misstatement #1 – debit revenue & credit contract liability ACC 2

G1.6 Correctly records misstatement #3 – debit loss/expense & credit allowance account ACC 2

G1.7 Correctly records misstatement #4 – debit loss/expense & credit accounts

receivable

ACC 2

G1.8 Correctly records misstatement #5 – debit interest expense & credit other

expenses

ACC 2

G1.9 Explains that the revenue will be taxed because it amounts to gross income TAX 2

G1.10 Correctly applies 40% in determining s11(j) allowance (R240 000) TAX 2

G1.11 Discusses the application of section 11(i) on the bad debt loss TAX 2

G1.12 Concludes that the interest expense misstatement will not have tax effects TAX 2

G2. INDICATORS OF EFFECTIVE COMMUNICATION

G2.1 Use of an appropriate communication method (email with attached summary of

audit misstatements and current tax calculation, with reasons)

COMM 1, 8

G2.2 Use of a good layout and structure for audit misstatements schedule COMM 8

G2.3 Expresses content clearly, with no ambiguity, spelling, and grammatical errors COMM 8

G3: HIGHER LEVEL INDICATORS

G3.1 Determines the effect of the misstatements on the financial statement’s captions AUD 2

G3.2 Questions appropriateness of rolling forward projected misstatement or suggests

that management should have been asked to investigate the factual misstatement

AUD 2

G3.3 Correctly included the effects of the misstatements on the assets, liabilities, equity

and cash flows

AUD 2

G3.4 Questions the rationale for determining current tax effect – should determine tax

effects (current + deferred tax) which in most instances is simply 28% of misstatement

ACC 2

G3.5 Discusses the application of section 24C on the future expenditure TAX 2

G3.6 Determines a reasonable cost/revenue ratio for the purposes of section 24C PERV 3

G3.7 Questions the completeness of the audit findings and/or need to confirm with audit PERV 3


LC BC C HC

Missed BC profile

Coverage on Audit/Accounting (5/8)

and limited coverage on tax (1/4)

OR

Limited coverage on review

Audit/Accounting (4/8) and coverage

on tax (2/4)

Coverage on the following:

1. Audit/Accounting

(5/8 indicators)

2. Taxation

(2/4 indicators)

OR

1. Audit/Accounting

(7/8 indicators)

2. Taxation

(1/4 indicators)


Task G: Competencies assessed Achieved

1. Good approach and respond to all components of the task (G2.1)

2. Demonstrates good technical skills with good coverage (BC or above)



5. Adapts to changes introduced on the day of assessment (BC or above)



8. Communicates effectively, appropriately, and logically (G2.1 – G2.2)



TASK H

H1: PRIMARY INDICATORS OF COMPETENCE Area C Achieved

H1.1 Begins the memo with intro and/or purpose of the memo and ends with a

conclusion or recommendations

PERV 1

H1.2 Recommends that material misstatements be corrected to avoid modified opinion

or all agreed misstatements be processed to avoid cumulative effect in future

PERV 3

H1.3 Recommends drafting responses and reasons for any uncorrected misstatements PERV 3

H1.4 Recommends the need to proactively understand cause of the misstatements PERV 3

H1.5 Discusses that misstatements are above the clearly trivial threshold of R75 000 AUD 2, 6

H1.6 Discusses that misstatements are evaluated using final materiality / that

materiality might be revised based on the actual loss position or need for a better

benchmark to determine materiality (e.g. assets)

AUD 2, 6

H1.7 Discusses acceptable and consistent approach to evaluate prior year uncorrected

misstatements or to reinstate current year profits against the retained earnings

AUD 2, 6

H1.8 Demonstrates understanding of quantitative materiality (i.e. materiality in size)

based on the R1.5m planning materiality or the revised materiality

AUD 2, 6

H1.9 Demonstrates understanding of qualitative materiality because of related parties

or impact interest cover ratio (key covenant for lenders) or use of professional

judgement or non-compliances with laws and regulations

AUD 2, 6

H1.10 Demonstrates understanding of pervasiveness with respect to selected accounts

(confined to specific elements / not a substantial portion of the AFS / in relation to

disclosures, not fundamental to the user’s understanding of the financial statements)

AUD 2, 6

H1.11 Identifies the correct audit opinion conclusions AUD 2, 6

H1.12 Discusses the impact on the audit report (basis for the modified opinion and /

other applicable impact on the audit report (e.g. Report on Other Legal and Regulatory

Maters)

AUD 2, 6

H1.13 Discusses that the immaterial misstatements are material in aggregate (both to

profits and accounts receivables) and/or that one should be corrected

AUD 2, 6

H1.14 Discusses that auditor will evaluate if misstatements are due to fraud or error; if

other misstatements may exist; need to extend testing or breakdown in internal

controls

AUD 2, 6

H2. INDICATORS OF EFFECTIVE COMMUNICATION

H2.1 Use of an appropriate communication method (memo) and uses headings or

numbering to enhance the layout and structure of the memo

COMM 1, 8

H2.2 Use of the appropriate tone, style considering executive management as audience COMM 8

H2.3 Expresses content clearly, with no ambiguity, spelling, and grammatical errors COMM 8

H3. HIGHER LEVEL INDICATORS

H3.1 Discusses revision of materiality may result in additional audit work and/or

findings or questions the completeness of the audit findings

AUD 2, 6

H3.2 Discusses correction of prior year errors in terms of IAS 8; or need to consult with

technical specialists or effect of decline in materiality causing an error to be material

AUD 2, 6

H3.3 Discusses that misstatements cannot be offset because they are only offsetting

against the earnings but not within the same account balance

AUD 2, 6

H3.4 Challenges the decision to cut the clutter if it detracts from the transparency or

discusses the fair presentation principle or non-compliance with s 28/29 of Co. Act

AUD/

PERV

2, 6


H3.5 Discusses reportable irregularities arising from section 29 and the impact on the

audit report (Report on Other Legal and Regulatory Matters and / heading to separate

ISA report from regulatory reporting)

AUD 2, 6

H3.6 Discusses the qualitative materiality of disclosure of impairment events because

for the CGU or its persistence across other Ulendo CGUs to still undergo impairment

test

AUD/

PERV

2, 6

LC BC C HC

Missed BC profile

Coverage in auditing (6/10)

and limited coverage in

pervasive (1/4)

OR

Limited coverage in

auditing (5/10) and

coverage in pervasive (2/4)

OR

Limited coverage in

auditing (4/10) and

coverage in pervasive (3/4)

Coverage on the following 8

indicators:

1. Pervasive (2/4

indicators)

2. Auditing (6/10

indicator)

OR

Coverage on the following 8

indicators:

1. Pervasive (3/4

indicators)

2. Auditing (5/10

indicator)


Task H: Competencies assessed Achieved

1. Good approach and respond to all components of the task (H1.1 and H3.1)

2. Demonstrates good technical skills with good coverage (Coverage in AUD)

3. Demonstrates critical thinking on the day (Coverage in PERV)


5. Adapts to changes introduced on the day of assessment (N/A)

6. Uses pre-research with good application to the case (Coverage in AUD)


8. Communicates effectively, appropriately, and logically (H3.1, H3.2 & H3.3)


2021 endunamoo apc professional programme

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