Top accountancy firms aresystematically excluding brightworking-class applicants from theirworkforce, says the latest report fromthe Social Mobility & Child PovertyCommission.

These elite firms still prefer privileged,‘polished’ candidates, claims the commission,and backs this up by saying some 70% of joboffers in 2014 went to graduates who had beeneducated at a selective or fee-paying school.

Commission chairman Alan Milburn, a formerLabour Cabinet minister, claimed young working-class people are being locked out of top jobs. Hewent on to stress: “Elite firms seem to requireapplicants to pass a poshness test to gain entry.Inevitably, that ends up excluding youngsterswho have the right sort of grades and abilitiesbut whose parents do not have the right sort ofbank balances.”

Milburn’s views were backed up by MarkBoleat, the policy chairman of the City of LondonCorporation. He said that firms were “hiring intheir own image” and so “wasting the talent of ageneration”. He also agreed that top companieswere hiring too many privately educatedOxbridge graduates with the right accents.

However, he praised PwC’s recent decision to

disregard candidates’ A-level grades. PwCadmitted that using just A-level resultsdisadvantaged able candidates from poorerbackgrounds because grades invariably reflectedschooling and background as well asintelligence.

The social mobility report explained thatdespite attempts to improve inclusion in recentyears, the elite firms yearly intakes are still

dominated by people from privileged socialbackgrounds. The research even suggests thatto break into top jobs state school candidateswill need higher qualifications than their privatelyeducated peers. This is because they don’t passmost firm’s ‘polish’ test. When looking for ‘talent’the firms admit defining these according to anumber of factors, including strongcommunication skills, experiences of travelling,confidence and ‘polish’ – which participants inthe research agreed can be mapped to middle-class status and socialisation.

Interestingly, former Tesco CEO Sir TerryLeahy has suggested that many seniorprofessionals know they would not have beenhired by their own organisations because theydid not go to one of the “right universities”.Some did not go to university at all.

ACCA CEO Helen Brand said that it was clearthat despite an improvement in the past fewyears more needed to be done in terms ofaccess to the professions and recruitmentprocesses. She stressed: “ACCA believes thatsocial background should be viewed with thesame scrutiny as gender diversity and we thinkthis recent research only stands as a furtherreason to appoint a minister with directresponsibility for social mobility.”

DO YOU PASS ‘POSH’TEST FOR ELITE JOB?

PQmagazineAugust 2015 www.pqmagazine.co.uk / www.pqjobs.co.uk

All the feedback from the ACCAJune exam sitting in one place as

our experts tell it as it is

CIMA unveils a big jump in pass ratesThe latest sitting of CIMA’s case study examssaw a massive jump in pass rates. Themanagerial rate almost doubled from 33% inMarch to 62% this time around. The May passrate for the strategic case study rose to a veryhealthy 70% and for the operational exam itwas 67%.

CIMA’s director of examinations, SteveFlatman, told PQ magazine that the number ofPQs sitting the first case study inFebruary/March had been relatively small. Hefelt there was now a greater deal of familiarityof what is expected. CIMA also released the

March case study as study material. Finally, heemphasised that there was more tuition aroundfor the May exam, and tutors had a betterunderstanding of the standard now expected toachieve a pass. He is hoping these pass ratescan be maintained.

The OT pass rates are also now ‘out there’(see page 16).

The first-attempt pass rates show P1 and P2are still the toughest tests. P2 had a pass rateof 44% and P1 was 43%. Another tough paperappears to be F3, with 45% of students passingthe exam at their first attempt.

Flatman stressed that pass rates where nowwhere they were expected to be. He was alsohappy with candidates’ rates of progression.

He said that the P papers are what makeCIMA unique and added that students have tostudy these subjects hard to get a pass.

He also pointed out that the pass rates of thenew exam system were not directly comparablewith what went before.

Flatman emphasised that employability is thekey driving force behind the new exams, and hebelieves the new forms of assessment willcontribute to this.

PQ Aug 15 p01_pq feb 12 p01 10/07/2015 11:16 Page 1

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002_PQ 0815.qxp_PQ 1209 000 29/06/2015 13:31 Page 7

comment PQ

News08ACCA exams No more MCQs

for F papers, says association10FRC training plea Training

‘must be more focused’12The workplace A lack of

diversity could harm UK plcFeatures, etc06Mind your Ps&Qs A problem

with PERS; accountancy bodies’staff levels; and CIMA’s own goal?

14ACCA exam feedback Sowhat was good and what wasbad in the latest set of exams?

16CIMA pass rates Five monthsinto the new exam regime, howare students coping?

18The ACCA brand We spokeexclusively to the association’sDavid Grint about its rebranding

19CIMA exams We spoke to onePQ about his study experience

20International standards Howthe new IFRS 9 changes things

21CIMA case study How best totackle the tricky ManagementIntegrated case study

22Let’s get technical Accruedand deferred income explained

24CIMA E1 paper How to passOrganisational Management

25An accountancy blog MikePennington on why performingan audit for the first time is likegoing on a first date

26Career guidance Emotional

intelligence: why it’s important 27Variance accounting We’ve

questions on standard costingand variance – so test yourself

28ICAEW spotlight A contestthat’s uncovering new talentenjoys a bumper year

29CIMA E3 paper EnterpriseStrategy and how to pass it

30Careers Life at Lambeth Living;and our Book Club reviews

34Fun time Great giveaways andthe usual stuff and nonsense

The columnistsRobert Bruce An old-timer whocan teach us all a lesson 8Prem Sikka Why HSBC is holdingthe government to ransom 10Carl Lygo Level playing field? Menwin on pay, women on play 12

Subscribe to PQ magazineIt’s FREE – see page 33 or go to

www.pqmagazine.co.uk

ABC July 2013–June 2014

32,361

Publisher’s statement: We have adigital issue of the magazine which

is sent to 9,709 requested readers

Heaven and hell I think it is always important that we praise the professionalbodies when they get things right. We are, after all, quick to

damn them when they don’t! So I thought it was wise to put the goodnews about the sharp rise in the CIMA case study pass rates on ourcover. Someone quickly tweeted that the final level case study pass rateof 70% certainly puts the last papers ACCA students have to sit in theshade. Those optional paper pass rates never make pretty reading.Who would sit a paper (P5) that had a 30%, 29% and 30% pass rateat its last three sittings? We will have to see how the CIMA case studypass rates now hold up in August – let’s hope it wasn’t a one-off.

We also had a big debate in the office about our front cover story thismonth, ‘Do you pass the posh test?’ Ourlead stories over the past two issues doseem to be castigating the Big 4 overtheir lack of diversity. A career with oneof the Big 4 accountancy firms has tobe the goal of many of you – they arefantastic places to work. They have alsoput a lot of resources behind ensuringtheir workforce better reflects the world they live in. But, as our storiesshow, they have an awfully long way to go. And just having policies inplace doesn’t necessary engender change.

And it’s not just the Big 4 who need to look at their recruitmentpolicies. Green Park’s report (see page 12) claims a lack of ethnicdiversity in Britain’s top corporates could also put UK companies at aserious disadvantage.

While on page 12 take a look at Rachel Garvey’s story on why menchoose accountancy. It may help explain why certain women are put offa career with numbers – they are surrounded by men who continuallyover-estimate their mathematical ability!

Graham Hambly, PQ magazine editor – graham@pqaccountant.com

CONTENTS August 2015

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It is not really clearwhy CIMA cannotfollow the sameapproach. By allmeans fiddle about asmuch as you likebehind the scenesbut please givecandidates a passmark and a clearmarking guideattached to pastpapers to allow

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PQ Magazine Fourth floor, Central House, 142 Central Street, London EC1V 8AR | Phone: 020 7216 6444 | Email: graham@pqaccountant.comWebsite: www.pqmagazine.co.uk | Editor/publisher: Graham Hambly graham@pqaccountant.com | Advertising manager: Polly Thrasivoulou polly@pqaccountant.com

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Check your PERsI was in the seemingly fortunateposition that having passed allexams for ACCA, completed theethics module, logged at leastthree years’ relevant experienceand, finally, had the last of the 13PERs signed off that Ienthusiastically applied formembership. To my surprise myapplication was rejected, and Iwas told that seven of the‘Achieved’ PERs must be re-submitted as “they do not meet

the criteria”. All that Ihave managed to learnfrom a series of callsand emails is that they

just not ‘enforced’ on submission.My problem now is that these

were submitted two or three yearsago and I no longer work for thatemployer, so I have to effectivelystart all over again with all sevenof these requirements.

Hopefully, by highlighting myexperience other students cancheck their submissions to findout if this situation applies tothem. If it does they can sort itout now, so they don’t end upfeeling that someone (ACCA) haslengthened the race just whenthey thought they had made it tothe finish line!Name and address supplied

The writer of the star letter each month wins a fantastic ‘I ❤ PQ’ mug!

email graham@pqaccountant.com

Number’s upHaving a lazy half-hour I had a lookat the member and studentnumbers for each accountancybody, compared with their staffnumbers (PQ, July ’15). Whatfascinating results! The ratios areas following (members/students tostaff): AAT – 864:1; CIMA – 502:1;ICAEW – 243:1; ICAS – 171:1; andCIPFA – 66:1.

Are there particular conditionswithin each body that wouldexplain this disparity? Is AATespecially efficient, or does it give aseriously worse level of service toits members and students? Beingof a cynical disposition I couldassume that CIPFA has a civilservice mentality, and creates ‘jobsfor the boys’, but is there a moresensible explanation for such alarge number of staff to managethe needs of so few members andstudents?Muriel Sprott, by email

Affair of the HeartsI read Peter Stewart’s articlecomparing the relative merits ofHearts and Man. Utd with interest(PQ, July ’15).

Examining bodies have alwaysset different exams at differentsittings. Some have been perceivedas hard while some have appearedeasier. The bodies have alwayspublicised a pass mark and havestuck to that whether the exam was

them to see what would have beenneeded to pass previous exams.The ACCA and ICAEW can do this,why can’t CIMA? My employeesfollowing the CIMA route are notclear what is required of them,while the ACCA and ICAEW peopleknow exactly what is expected.

On a more serious note, I havereservations about the technicalcontent of the CIMA case studies.A review of the examiners’ modelanswers would suggest thatcandidates don’t have to knowmuch about accounting to pass. Itseems that provided they have“learned” the pre-seen, and can“apply it to the question”, they willpass. As an employer ofaccountants I would expect moretechnical knowledge from a newlyqualified accountant than CIMAappears to require. There are somevery able young people studying forthe CIMA qualification who mayfeel let down by what is happening.

To go back to Mr Stewart’sarticle, I fear that CIMA are in gravedanger of becoming ‘Hearts’,leaving the ICAEW and ACCA to be‘Man. Utd’. In a head-to-head overtwo legs who do you think wouldwin? Come on CIMA, time to upyour game or relegation threatens(sincere apologies to Hearts fanseverywhere).Name and address withheldThe editor says: We wouldwelcome a response for CIMA onthe issues raised here

Doctor who?Well done, Graham, on your awardof an honorary doctorate. It is well-deserved recognition for the greatindependent and progressive linethat you have taken in a largelyconservative profession.

It is a pity that you wrote in yourcommentary (PQ, July ’15) that“you won’t have to call me doctor”.Think how it would improve theletters page: “Dear Doctor….”

Thanks for keeping PQ comingmy way. It is the most enjoyableway to keep in touch. Cheers andcongratulations againDavid Hunt, by emailThe editor says: Thanks, David,and thanks to eveyone else whosent their best wishes.

hard or easy. Theymay have moderatedthe exam resultsbehind the scenes butcandidates havealways known that theyhad to achieve a pre-determined mark topass. Everyone knewwhere they stood, and ifthey decide to study withthe ACCA or the ICAEWthey still do, thankfully.

In the 2014/15 football season,

Heart of Midlothian Football Club

was the best league team in Britain.

My colleague, Noel Tagoe, seems

convinced that Manchester United FC

were better. What’s the evidence?

1. Hearts became league champions in

March, earlier than any other team in any

other major league. Man Utd came

fourth in their league – only confirming

that position with three games to go.

2. Hearts earned an average of 2.53

league points per game played; Man Utd

only earned 1.84 points per game.

3. Man Utd’s average goal difference per

game of 0.66 was dwarfed by Hearts’

1.94I could go on. Noel might say that I do

go on. His main counter-argument is that

Hearts played minor teams like Alloa,

Cowdenbeath (10-0 you may remember),

Hibernian and Rangers while his lot had

to play European ‘giants’ like Arsenal,

Chelsea and Liverpool.

Does Noel have a point? Should we

take the difficulty of the ‘test’ into

account before deciding who’s best?

After all, he says that’s what happens in

CIMA’s exams. We want candidates to

demonstrate competence against some

clearly defined learning outcomes and we

initially indicated that ‘70%’ was the

standard where we believed that

competence would be demonstrated.

However, each test is a combination of

different questions. How would you feel if

you failed a test with Arsenal, Chelsea

and Liverpool questions while someone

else passed with Alloa, Cowdenbeath and

Hibernian questions? The difference in

standard between our tests is not as

great as that but wherever there are

differences, CIMA considers those when

calculating the pass mark. This ensures

that student performances are assessed

fairly and equally, no matter which

version of the test you sit.

If everyone took the same ‘ideal’ test,

we’d have a single pass mark of 70%. As

it is, we can’t state that 70% is ‘the’ pass

mark as, in some tests, it may be 68% or

66%. When you open the test, you won’t

know which number applies and, I hope,

you’ll aim to get as many answers correct

as you possibly can – not just 70%!

By all means, you can continue to use

70% as a rough guide during exam

preparation if you feel it would be helpful.

But whether the ‘true’ pass mark is 66%,

68% or 70% (other numbers are

available), what do students do with that

figure? We know they don’t just book

their exam once they hit the magic

number on a mock test. The key to being

30

PQ Magazine July 2015

PQ CIMA exam marking

A level playing fieldPeter Stewart explains how the new marking

regime CIMA gives all PQs an equal chance

exam-ready is to learn the content of the

learning outcomes thoroughly, practise

questions, focus on the ones you get

wrong (or get right by chance) and

develop a comprehensive understanding

of the topic area you are covering.

I’d like to reassure you that the degree

of difficulty is assessed by the same

exam faculty who delivered the old-style,

paper-based assessments. Just as before,

they establish the minimum level of

competency required to pass the exam.

They know the capabilities of good,

passing students and they use this

experience in coming to their judgement.

Next season, Hearts will face a

different test, including matches against

European ‘giants’ Celtic, Aberdeen and

Dundee United (you need a long

memory!). It is unlikely that they will

repeat the statistics I quoted at the start

of this article, but they may well be best

with an average of 1.9 league points per

game.I don’t know what scores and statistics

it will take to prove that Heart of

Midlothian is better than Manchester

United. The evidence, for me, was written

by the late, very great, Tottenham legend

Dave Mackay, when he signed an

autograph for me. “Hearts is best. Always

Hearts.”

• Peter Stewart is Director of Learning

at CIMA

PQ

Peter Stewart

Dave Mackay

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8 PQ Magazine August 2015

PQ news

‘Apprenticeships’ protectedThe government is to protect

apprenticeships by giving them thesame legal treatment as degrees.The plan, part of theEnterprise Bill, will givegovernment the powerto take action when theterm 'apprenticeship' isabused to promote low-quality courses. This willstrengthen their reputation, helpworking people and ensureapprenticeships are recognised asa path equal to higher education.

Woman president for CIMACIMA has elected Myriam

Madden (pictured) its 82ndpresident for the forthcoming year.

An experienced director offinance, Madden is only thesecond woman to be electedto the high office ofpresident. She has worked

for, among others, HBOS,Hewlett Packard, the Scottish

Arts Council and the NHS.

Price Bailey shares for staffPrice Bailey accountants has

made history by offering its 300employees a stake in the firm.Each employee with more than oneyear’s service, irrespective ofgrade, will receive 25,000 sharesin the firm at a value of around£250.

ACCA shifting deadlinesACCA PQs will be getting their

June exams a week earlier thistime around – on 1 August. PQswill have to act quickly if they wantto take advantage of the newSeptember sitting, as the deadline

for entries is 10 August. TheSeptember exams then start onMonday 7 September and will runover five days (not eight).

First Intuition is growingFirst Intuition is set to add two

new centres to its portfolio. First upis a Brighton centre, which willinitially be run out of the city’sJubilee Library. PQ magazine alsounderstands that First Intuitioncould also be opening inBirmingham, too. We will keep youposted on this.

In brief

The death of Bill Mackey (PQ, July 15,p38) reminds us of the main point ofbeing an accountant. He was aGeordie, humorous, forthright andblunt. He spent most of his careerdealing with why firms kept goingbust because they refused to own upto what was wrong. His finest hourwas taking control of Laker Airwayswhen it finally went under. It involvedhim taking over the Heathrow controltower and securing the airline’s fleetof aircraft around the world. Hebecame a TV star overnight. This waswhat accountants should be like:wisdom built on experience and anability to state the issues clearly.

But what he was really famous forwas his checklist of the signs that acompany was likely to go bust. Inconversation he expressed a smilingexasperation that people preferred tomislead themselves about theobvious. A company would bementioned. “But it’s BdoubleA”, hewould respond. You would ask himwhat that meant. “Bust as arseholes”,he would growl. And his lengthychecklist was much quoted. “Fountainin the reception area,” was one. “Newoffices opened by Prime Minister”was another. “Audit partner grew upwith the company” and “annual reportshows chairman getting out of ahelicopter”. What they all had incommon was style getting ahead ofsubstance. And that is why Mackey’sexample is still so important.Accountants have an ability to see thereality of what the figures tell them.Their duty is to then communicatethat as clearly as possible – and to tryand do it with humour as well.

ROBERTBRUCE

Bill Mackeycan teach allaccountantsa lesson

■ Robert Bruce is an award-winning writer onaccountancy for The Times

No more publishedMCQs for F papersThat’s it folks – ACCA studentssitting the F papers will no longerbe able to see section A of theexam they have just sat!

The ACCA director ofqualifications, CatherineEdwards, told PQ: “Wewill not be producingMCQ sections in future.”

She explained thatstudents sitting the Fpapers now have threeexams worth of multiplechoice questions to practice from asgood examples – that’s the pilot,December 2014 and June 2015.

And Edwards is urging PQs use

the examiner’s report for eachsitting, as they clearly set out whatstudents do well and less well in.

She revealed thesereports will alsoinclude some MCQitems that sitters havestruggled with, notjust for this session,but will indicatechanges to futuresessions, too.

Finally, sheexplained that the ACCA’s approvedproviders for content have also hadtheir revision banks assessed by theexam team to ensure that their

Women thebetter half

Now Careers, a Cardiff-based recruitment consultant, islaunching the first-ever scholarship programme to fund onelucky Welsh AAT student’s progress through the ACCAqualification at the University of South Wales, Newport CityCampus.

Director of the accounting & finance division at Now Careers,Ceri Leath, said: “As one of the leading recruiters in SouthWales we wanted to give something back to this thrivingindustry.” The closing date for entries is Friday 31 July 2015.On Monday 10 August, the top 10 candidates will beshortlisted, with the top three candidates then being invited totake part in a group lunch and interview at the Celtic ManorResort on 24 August.

Visit nowcareers.co.uk/scholarship to find out more. Thescholarship is only available to AAT students studying in Wales.

The accountancy profession continues toattract large numbers of female part qualifiedaccountants and for the first time theprofession achieved a 50/50 gender split,according to the Financial Reporting Council’s(FRC) latest facts and trends survey.

This is mainly because the ACCA femalestudent base rose two percentage points in justone year, and now stands at 53%.

CIPFA has a healthy 48% female intake,although cynics could point out that in 2010that figures was 50%.

Meanwhile, CIMA just can’t seem to getabove its 44% female intake number. Thispercentage has been the same now for thepast five years.

Finally, still at the bottom is the ICAEW withits female intake of 40%. Another body withcause for concern will be the Scottish Institute.In 2010. ICAS’s intake of female students was45%. Following a steadily decline ICAS is nowonly just above the ICAEW with 41%.

Female membership of the accountancybodies in 2014 stood at 36%.

Edwards:use theexaminers’reports

additional questions are at theappropriate level.

Edwards admitted that when theJune 2015 exams for F5, F7, F8and F9 were initially publishedACCA received quite a few queriesabout why the MCQs had beenomitted. The reason for this is thatthe policy, in line with what it doesfor it other exams with MCQs, is notto publish the MCQ sections. Theexception is after the first session ofa new exam structure. This is why itpublished the December 2014papers in full, and why F6 waspublished in full this June.

She admits the ACCA did notcommunicate this policy clearly andin response to demand fromstudents decided to publish thesein full for the June exams.• So what do you think? Emailgraham@pqaccountant.com

Welsh scholarship for AAT student

PQ aug 15 p8 ccm.qxp_pq sept 12 p08 10/07/2015 12:11 Page 10

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009_PQ 0815.qxp_PQ 1209 000 30/06/2015 10:34 Page 7

10 PQ Magazine August 2015

PQ news

All over the western world taxpayershave bailed out banks, resulting inausterity programmes and economicturmoil. Governments have helpedbanks to replenish their balancesheets by keeping interest rates low.Banks give derisory returns to saversand charge exorbitant amounts toborrowers. Low interest rates havedecimated the value of pensionschemes and many will bear the scarsof bank bailouts for decades to come.

Are banks grateful? HSBC isthreatening to relocate its head officeunless the UK government offers evenlower corporate taxes and laxregulation. It objects to possible ring-fencing of retail banking from the morerisky investment side of its operations.It objects to the modest banking levyimposed by the government toreplenish its coffers. Hong Kong andJamaica have been mentioned aspossible destinations. Any countrywelcoming HSBC will need to have thecapacity to rescue banks and provideeffective regulation, as without thatHSBC will not be able to secure adeposit-taking licence in otherjurisdictions. With the recent history ofheavy fines in the US for facilitatingmoney laundering, HSBC is unlikely toget an easy regulatory ride. Tax wise,it will gain little as profit shifting toavoid taxes is becoming difficult.Countries want to tax profits based oneconomic activity within their borders.HSBC will still trade in the UK. Ratherthan holding the government toransom, it should live up to its claimsof being a socially responsible bank.

PREMSIKKA

HSBC isholding usto ransom

■ Prem Sikka is professor of accountancy at theUniversity of Essex

Is cheating now endemic?

Certificatelaunched

Baker Tilly tobecome RSM

Scrap quarterly updatesScrapping quarterly updateswould help the City to adoptlonger-term thinking, says Legal &General Investment Management.CEO Mark Zinkula said there are“other ways to stay in touch” withshareholders. He believesreporting to the stock market twicea year, through interim and full-year results, would be moreeffective.

Going beyond the tick-boxThe UK has learned little since the

financial crisis and relies tooheavily on checklists when itcomes to corporate governance,says a new study from theInstitute of Directors. Ken Olisa,who chaired the advisory panelthat helped produce the report,said: “Identifying symptoms ofgovernance failures, and thendrawing up checklists to eradicatethem, leaves us fighting the lastbattle.”

UK linked to ‘blacklist’ Nearly a quarter of the world’s

major tax havens on a ‘blacklist’published by the EuropeanCommission are either BritishOverseas Territories or CrownDependencies. The 30-strong listincludes seven UK-linked havens

– Anguilla, Bermuda, British VirginIslands, the Cayman Islands,Guernsey, Montserrat and theTurks & Caicos Islands.

Amazon’s loans service to SMEsAmazon has announced boldplans to offer loans to UK SMEsthat trade via its marketplacedivision for third-party sellers. TheAmazon lending product willinitially be an invitation-onlyservice, but the organisation hasnot ruled out extending the servicein the future.

Business digest • Business digest • Business digest

Financial staff‘need training’

More focused training ofaccountants is needed if there isto be an improvement in thequality of reporting by smallerquoted companies, says theFinancial TrainingCouncil – and it iscalling on the helpof the professionalaccountancybodies to do this.

The training is part of a seriesof measures the FRC wants tosee, which it believes willimprove the quality of reportingby smaller quoted companies.

Other issues identifiedincluded the provision ofpractical guidance to auditcommittees and boards onevaluating the adequacy of acompany’s financial reporting

function and process. The FRC also plans to provide

annual guidance to boards ofsmaller quoted companies on thecurrent issues, areas of focus for

investors and commonerrors.

Its research discoveredmany smaller quotedcompanies believe thatinvestors pay little

attention to their annual report,and so do not prioritise itspreparation. In fact, investorshave told the FRC that suchreports are important to them,partly because there are feweranalysts’ reports.

The worry is some companieslack sufficient skilled resourcesand are not always up-to-datewith reporting requirements.

Bottoms up!the sun wasshining onKingston uponThamesrecently for thespecial WalkerDendle PQevening. Manytrainees camealong to sharein the relaxed atmosphere, chat with PQ magazine and get one-to-oneexpert advice from Walker Dendle’s PQ team

Will the accountancy profession ofthe future be filled with exam anddrug cheats? The profession mayhave to introduce lie detector teststo their recruitment processes ifrecent stories are to be believed!

One in 10 school and universitystudents recently admitted theycheated in their summer exams,

and 20% said the problem was‘getting out of hand’. The StudentRoom study found male studentsare more likely to cheat than femaleones – but only marginally.

In a separate story, the

Medicines and Healthcare ProductsRegulatory Agency reported arecord haul of illegal medicinefuelled by students buying anti-narcolepsy drugs online to helpthem stay alert during exam times.

The Institute of Internal Auditors (IIA)has agreed to develop its CertifiedInternal Auditor (CIA) ChallengeExam to make it available to ACCAmembers from November 2015. Thedeal will allow ACCA members tobecome CIA certified through acustomised exam, which will includekey syllabus and learning outcomesof the CIA qualification.

ACCA has also launched aresource for IIA and ACCA membersworking in internal audit with asection on the ACCA website. Thisincludes useful guides and articlesincluding internal audit for managersand also for the audit committee.

Registration for the CIA examopens on 1 August.

Baker Tilley is to adopt RSM as itsbrand name. Managing PartnerLaurence Large said: “Although ourname is changing we will continueto maintain the core essence andlegacy of the Baker Tilly brand.Adopting RSM as our name willsimply accelerate our path to arecognised unified global brand andstrategy.” The change will beeffective from 26 October 2015. Allmember firms will remainindependent legal entities within theRSM network but will carry the RSMbrand name and logo.

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12 PQ Magazine August 2015

PQ news

Congratulations to England’s Women’sfootball team who have had their bestever World Cup Finals finish. Canadahas put on an impressive World Cup,with large attendances watching everygame. England’s run to the semi-finalcoincides with Football Associationplans to professionalise the sport withthe creation of the Women’s SuperLeague (FAWSL).

But I was surprised to learn that theFA maintains a salary cap for thewomen's game, ensuring no femalefootballer can earn more than about£25,000 playing football. The stars ofthe World Cup are limited in theamount their professional regulatorsays they can earn in comparison tomale stars such as Wayne Rooney. Sowhy isn’t the FA imposing a salary capon male footballers? A good question– surely discriminating against onesex is potentially unlawful? Thejustification is to support the long-term competitive balance of thewomen’s game (infrastructure spendversus spend on players wages). Inthe male game, Premier League teamsreceive on average 51% of theirincome from the collective sale of theTV rights. In the female game thiscompetitive rights tendering ismissing. My good friend Gill Coultardcaptained England in the 1990s andwas the first woman to reach 100caps for England. She did this for nopay and in fact held down a factoryjob, using her holidays to take time offto play. While things have moved on,Marta Vieira, the Brazil international,is said to be the highest-paid femalefootballer earning $500,000 a year.Cristiano Ronaldo’s earns $22m. Inthe battle of the sexes the men win onthe wages front but the women aremore successful on the pitch.

CARLLYGO

Men win onpay, womenon play

■ Professor Carl Lygo ischief executive of BPP

The diversity deficit‘will harm business’

ACCA tribute to first female president

A lack of ethnic diversity in Britain’stop firms could put UK companiesat a serious disadvantage in bothdomestic and global markets, saysa new report commissioned byrecruitment firm Green Park.

The research looked at both thegender and ethno-cultural ‘diversitydeficit’ that is apparent at the top ofBritish business. Strikingly,professional and support servicesappears to be relatively non-diverseon every measure, says the report.This reinforces our front cover story

on July’s PQ: ‘Is it a question ofblack and white? Here, ProfessorBinna Kandola explained theaccountancy profession has a longway to go if it is going to ensureethnic minorities have the sameopportunities as their whitecolleagues.

Interestingly, the Green Parkreport authors Trevor Philips andProfessor Richard Webber saidthat, broadly speaking, sectors thatare successful at promoting womento senior positions are not doing the

same for minorities – and viceversa. Philips suggested theconsensus is that the business eliteis simply too narrow in its outlook,too prone to the ‘herd mentality’and just not switched on enough tothe modern world.

Walk tall:SwanseaUniversityrecently ran ahighly successfulpilot course incomputerisedaccounting for itsgraduates. Herethey are standingproud with theircertificates

By Rachel GarveyWashington State University’s Shane Bench believes he has discoveredwhy more men than women choose to pursue maths-related careers suchas accountancy. His research found that men think they are much betterat maths than they really are! Women, on the other hand, tend toaccurately estimate their arithmetic prowess. Bench ventured gender gapsin certain fields are “not necessarily the result of women’s underestimatingtheir abilities, but rather may be due to men’s overestimating their abilities’.

Why men choose accountancy

The fact that almost half of all mealsare now eaten alone would notnormally have any interest to CIMAPQs. That was until the Augustoperational case study pre-seen wasreleased. The latest case is just 15pages long, as opposed to the 23pages for Scent (MICS). Its keyindustry is the grocery business,where you are an assistantmanagement accountant working forMerchants.

The new case studies aresomething that CIMA thinks reallydifferentiates it from the crowd. Asone CIMA spokesman venturedrecently: “Our case studies aren’tjust innovative in accountancy butacross any professional qualificationyou care to look at.”

Phillips: critical of ‘herd mentality’

PwC ditches A-levelsPwC has revealed thatapplicants will no longer needtop A-level grades to get a jobat the firm. Instead, it willrecruit some 1,500 graduates

using aptitude tests to help it attract a morediverse selection of people. PwC used to insiston recruits having a minimum of 240–340Ucas points before they could be consideredfor graduate entry. The firm has admitted thatits current policy prevented it hiring top talentfrom disadvantaged groups.

You can’t beat a good book Young people undoubtedlylove their smartphones, onlinevideo and mobile gaming. Butwhen it comes to reading theyspurn ebooks in favour ofprint, says Deloitte’s MediaConsumer 2015 survey. Infact, nearly two-thirds of 16-24year old have never purchased an ebook. Thesame survey found 35% of respondents stillown a record player – a number so high thatDeloitte admits it isn’t sure it’s actually correct!

Respectable auditors The supposed resignation of president SeppBlatter has put KPMG in the spotlight. KPMGhas commented: “As FIFA’s statutory auditorwe are bound by professional confidentialityand have to refrain from any commentregarding our client.” However, FA chairmanGreg Dyke told the Daily Mail: "Someoneshould go to the auditors [KPMG] and say,‘Hang on, where actually did that come fromand go to. Where is it in the accounts? Did youknow about this?’ Respectable auditors will notlike being involved in this sort of stuff.”

The ACCA has paid tribute to Vera DiPalma, the first woman president ofACCA, who has died aged 83.Di Palma made history in1971 when she became thefirst female Council memberand again in 1980 when shebecame the first female president. Inan interview in 2009 Di Palma said:“When I qualified in 1956 theprofession was heavily male

dominated and there were hardlyany women.” She was a co-founderof the Certified Accountants

Women’s Society in 1965.ACCA CEO Helen Brand said:

“ACCA has always led the way indiversity and much of that is down topioneering and inspirational peoplelike Vera. She opened the door formany young women to succeed infinance and accountancy.”

Case study isthe best way

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14 PQ Magazine August 2015

PQ June exam feedback

Becker Professional Education .F5 was reasonable in terms of topics tested, butthe mark allocations were a little mean. Studentswere required to do a lot of work in section B forthe marks available.

F6-UK was consistent with the publishedspecimen paper. Students are likely to havefound the new format, with 15 MCQs (30%),easier than the old format. A well-preparedstudent should have been comfortable with thisexam. However, those who had targeted theirrevision on old favourites (e.g. property,partnerships, pensions and commencement/cessation rules) are likely to have struggled.

F7 provided a good test of much of thesyllabus in the MCQ section. Section B appearedto be structured around Q1, Q2 and Q3 of theprevious exam structure with no in-depthexamination of individual standards.

F8 was fairly straightforward. Section A MCQswere balanced across the syllabus but perhapstoo much on receivables in section B.

F9 was fair and well balanced overall, butthere were several instances where the clarity ofthe questions could have been improved.

P1 was again a very unbalanced paper. As inDecember 2014, it was heavily weighted towardssyllabus capability A (Governance &Responsibility). Candidates with a goodunderstanding of capabilities A and E couldhave easily passed. Candidates who had notread the examiner’s article on CSR might havethrown away 10 marks.

P2-INT was a good test of students’ ability,with a better balance of topics across the examthan the D14 paper. Well-prepared studentsshould have coped quite well with Q4 as theissues examined featured in two P2 articles(available on ACCA’s website). Q2 and Q3 weredemanding, but a well-prepared student shouldhave found sufficient ‘easy’ marks.

P3 was a fair paper. It contained many oldfavourites (e.g. external analysis and projectmanagement). The decision-making question insection B shows that the examiner still requirescandidates to keep their managementaccounting skills up-to-date.

P4 was extremely time pressured in the casestudy, due to the repetitive number-crunchingrequired (which tested little beyond paper F9knowledge). Q2 mostly tested existing knowledgeof ratios. Most of the calculations in Q3 wereroutine financial forecasting, although the debtcovenant had little logic. Q4 did test P4knowledge, but the scenario could have beenbetter structured. Overall, poor syllabus coveragedid not allow well-prepared candidates todifferentiate themselves.

P5 included mostly core topics that shouldhave been very familiar to well-preparedcandidates. However, the wording of a fewrequirements could have caused someconfusion.

P7-INT, at last, had cutting-edge questions

based around professional scepticism andquality control. The paper was let down bycoverage of IFRSs that are on their way out(IASs 11 and 18 are being replaced by IFRS 15)and very little on assurance topics.

Kaplan Financial .F5 had a more challenging section B for thesecond sitting under the new syllabus. Thetransfer pricing question would have provedunpopular, but there was no difficult concept tostruggle with and the topics were some of themost predictable. Questions were set at anappropriate and consistent intellectual level andwere mostly consistent with previous exams incontent, even if the format has changed.

F6 was a straightforward paper focusedmainly on core syllabus areas with very fewfringe topics tested. Well-prepared studentswould have found this paper easy to approachand would not have been under time pressure.It was easier than the December 2014 paper inour opinion.

While many students said that section A wasthe real killer in the F7 exam, section B was anarea where students could pick up marks. Anice group and TB question should make up forthe cash flow curveball in Q3.

F8 was a fair paper, slightly more focused oncontrols than previous exams.

Overall, F9 was fair, with nothing toounexpected. It was time-pressured but notexcessively so. There was a good mix of coresyllabus areas along with some more unusualbits to sort out the prizewinners.

The P1 exam was well constructed, drawingon new and amended syllabus areas andrelevant technical articles. As always, the examwould have been challenging from a timemanagement perspective, but comprehensiveand thorough question practice is recommendedto circumvent this challenge. The application ofcore definitions and key syllabus areas tounfamiliar scenarios may have presentedproblems for the ill-prepared candidate. The useof a variety of verbs in the requirements againdemonstrates the intention to continue to test inthis manner, as has been noted repeatedly inthe examiner’s reports.

Q1 in P2 was more difficult than usual, andalso extremely time-pressured. However, as longas they managed their time effectively, well-prepared students should have scored goodmarks in section B of the exam.

The P3 exam focused on core syllabus areas.The key challenge for students will have beenmanaging their time and not trying to do toomuch for very few marks.

P4 was a tough and time-pressured exam asshould be expected by now (it was felt that Q3could cause students particular problems withtiming). The exam contained good balanceacross the syllabus with a fair mix of narrativeand computational requirements.

P5 was a fair if challenging paper. Areasexamined were reflected in the syllabus. Theexaminer covered metrics in three of the fourquestions, emphasising the importance of thistopic in this paper. Some candidates may havestruggled to absorb or use the scenarioinformation but those who had practised enoughquestions should have felt comfortable with this.

There was nothing unexpected in terms offormat and style of questions in P6. A fairlytough and unpredictable exam with some moreobscure areas tested, especially in the optionalquestions. There was very strong emphasis onoverseas aspects of personal tax, but not asmuch IHT as in some sittings. Overall, this was aharder exam than the last sitting.

P7 was a fair paper with good coverage of thesyllabus. While the procedures questionscovered some trickier financial reporting areas,all requirements were quite common and shouldhave been well practised.

First Intuition .There was an overall balance between writtenwork and calculations around the core syllabusareas in F5. Students may have found it a littletime pressured to have to deal with ABC,transfer pricing, learning curves and optimalpricing in section B, but no doubt these are fairgame in this exam.

There was some concern that there couldhave been more clarity required in the wordingof one of the OT questions in F6. The mainconcern is that going forward the OTs will not bepublished, so we will not be able to pick up onthese points.

F7 was a fair paper in line with expectationsand students can have no real complaints aboutthe balance of the exam.

For F8 we felt that part B did not contain asmuch on section E (Review & Reporting) asmight have been expected. Other than one ortwo slightly unusual requests in Q6 thequestions should have been familiar to students.

In F9 core syllabus areas covered in section Bwould have held no fear for well-preparedstudents. Q4, on the use of the proceeds from arights issue, was perhaps the most unusual andlikely to cause problems in the timeframe.

The P1 exam, as usual, required candidatesto keep abreast of current affairs and deal withissues in a practical and commercial manner.Consequently, PQs who simply learnt their noteswill have found the exam a tough challenge.

We felt that the P2 exam, while not easy, wasin line with recent exams – candidates mustremember not to panic if they don’t know all thetechnical material.

In P3, the volume of information given in thescenario in Q1 would have caused many PQs topanic and so got them off to a bad start. Theactual content of the questions was fair, butgood exam technique and disciplined timemanagement would have been key.

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PQ Magazine August 2015 15

June exam feedback PQ

P4 was yet another technically challengingexam, but none of the content was unfair. Lotsof core marks were available for demonstratingknowledge.

P5 was a classic exam from the examiner,where students were given a range of differenttypes of business situation and syllabus areas tocover. Candidates have to think on their feethere, as what is being requested is often easierthan might first appear. Sadly, the exam’sreputation often leaves students nervous abouttackling the requirements in a structured wayand there would have been scope for some tohave fallen into this trap again.

P6 – see pqmagazine.co.uk for this.The P7 exam was fair, but we still question

why students sitting the UK variant do not getgiven the mark allocation within each questionwhereas the international variant students do.

LSBF .Section A in F5 was fairly balanced being 50%computational MCQs and 50% narrative. Itcovered a big portion of the syllabus, giving aclear message to future candidates to studyevery line of the syllabus. Section B also saw a50/50 split. Overall, this exam was very do-able,and indicative of better pass rate this sitting.

The F6 exam was consistent with the stylepresented in the specimen paper and so had amixture of core and (a few) non-core topics. The

most disappointing part of this paper was thelack of questions testing sole trader rules;students spend many hours learning this topicand it was not tested. The most challenging partof this paper would be time management.

The F7 paper was one of the hardest inrecent years with the MCQs testing very obscureareas, though 50% of the questions did notrequire calculations to be done, thus saving timefor thinking (making educated guesses?). Thequestions would have put part-time students at adisadvantage because of the need to havecovered all the standards in considerable detail.

F8, as always, had a lot of marks for the ‘bigthree’ question types: audit risk, internal controlsand substantive procedures. In fact, all of the sixlong questions were predictable and on coreareas that have come up numerous timesbefore. Students who had practised past paperswould have had a high recognition rate, so thosewho had decent technique on ethical threats,audit risk and response, controls, substantiveprocedures, should have had no problems at all.

F9 certainly has wide syllabus coverage andtruly challenging MCQs. A thorough knowledgeof F9 was needed but you also had to be verycareful with some distractors being plain difficultto understand.

P1 had a better balance than some previousoutings, with enough scope of syllabus topics tosatisfy students favouring different areas of

knowledge. The distinguishing characteristic ofthis paper was the accessibility of the casestudy. It was easy to fathom the nature of thecorporate conflict involved and the questionsposed were straightforward enough to hopefullyelicit strong student responses.

The P2 exam was ‘a game of two halves’.Section A was challenging but section B had twoapproachable questions. Q1 required a b/s. Thequestion was carefully thought through and hadinteresting twists. However, it would not beunreasonable for a well-prepared student to ask:“Where are the usual suspects?” Q2, on FVM,had a lot of information to process within thetime. But that was balanced by Q3, anapproachable analytical question on a mix ofstandards. Q4 was technical but because itcovered two hot current issues (IR and sploci)prepared PQs would have had the knowledge.

P3 was a disappointing paper that may signala change in the way it is examined. Althoughthere was no real change to what was beingexamined, the whole paper seemed to require ahigher level of analysis than recent exams. Iwould compare it to swimming in a pool and inthe sea; both use the same techniques but thesecond is far harder to accomplish. There wasno hint at the teacher’s conference earlier thisyear of such a radical departure in style.

P4 was a fair paper testing the predictableareas of the syllabus and questions were similarto those tested recently. Q3 and Q4 werestraightforward, on management buy-out/in(similar to December 2011, Q4) and interest ratehedging (similar to December 2011, Q2). Q2was challenging, as many candidates may notbe able to explain dark pool trading and thefinancial analysis required. Q1 followed thenormal international investment appraisal, butwould have been, as usual, time consuming.

Overall, P5 was very much in keeping with thestyle of exam this examiner favours. As always,this is a paper where students are expected tojustify their ideas and to use the scenarios toassess the suitability of different approaches.

The P6 paper was challenging and tricky andwill have been unpopular with many candidates.The examiner seems obsessed with overseasaspects for individuals, which was tested in Q1and Q5. Students who don’t like companies andcorporation tax will have loved this exam as thistopic was tested to a very limited extent in Q2.But very few of the traditional core areas such asloss relief and groups were examined, and therewas nothing on overseas aspects for companies.

P7 was a lovely paper, with all the questionsbeing standard format and predictable. Thepaper was generous in the option questions,with sitters able to choose to answer on subjectsthat both featured in recent examiner articles ifthey wished, or to go with whichever article theypreferred and choose the final option question. Itwas, as always, a good test of whether studentshad practised past exam papers. PQ

XPERTS THINK

You sat the June exams and have yourown view. But what did our experts

think of the examiners’ efforts?

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16 PQ Magazine August 2015

PQ CIMA pass rates

The 2015 CIMA professional qualificationsyllabus and assessments were designed to fulfila promise to employers that ‘passing studentsare business ready’. Combining thethoroughness of the objective tests with the realworld simulations of the case study exams,passing students at every level demonstrate thatthey have the requisite business, technical,leadership and people skills to provide theinsight organisations need to successfullyexecute their strategies.

Perhaps the most obvious change to the CIMAprofessional exams is increased accessibility,both in terms of the number of exam centresand the frequency with which exams can betaken. In the first five months of this year, CIMAstudents booked exams in over 1,400 examcentres in more than 700 towns and cities in108 countries.

CIMA students now have a greater choice asto when they sit exams and, if necessary, whento take the exam again should they fail. The ‘ondemand’ availability of objective tests allows

students to progress far faster thanthey could have done before. Ratherthan waiting three or six months tore-sit an exam, CIMA students cannow make another attempt as soonas they feel ready. As a result, thepercentage of students passing theexam between January and May isalready 10% above the overall exampass rate, a figure that is set tocontinue to rise with time.

At over 60%, overall case studypass rates for May showedconsiderable improvement over theFebruary sitting, a result of studentshaving more time to prepare for theexam and a greater understandingof the new case study format.

CIMA’s exams are tough.However, it’s a challenge well-prepared studentsare meeting. To pass, students need todemonstrate both a good understanding of thesubject and how to apply this understanding at

work. Successful P3 student MatthewWroe told us: “These exams are makingme a better accountant. I can’t get awaywith focusing on only 40% of thesyllabus to earn 70% of the availablemarks.”

The provision of all exams bycomputer has generated new data aboutstudent performance in exams. CIMA

can now identify areas of high performance andenables us to analyse what passing students dodifferently to unsuccessful ones. This allows theCIMA Learning & Development team to betteradvise students on exam preparation and tofocus on the production of targeted studymaterials. In this way, we can provide studentswith the support they need to pass withoutreducing the rigour of the exams in any way.Students will be able to access detailedinformation on CIMAconnect.

Our figures tell the story that we are producingcompetent and confident management

accounting professionals throughthe CIMA professionalqualification. CIMA students should find ourpass rates encouraging and beconfident that they can aspire toan exceptional performance intheir exams and their careerbeyond. • Steve Flatman, director ofexams, CIMA

PQ

How are PQs faring in the CIMA exams? Steve Flatman plots their progess five months into the new regime

TESTING TIMES

This case firmly established the principle ofseparate corporate personality. The case itselfwas a claim by the liquidator of Salomon & Coagainst Aron Salomon, the founder andmajority shareholder of the company, seeking tohold him personally liable for the debts owedby the company to its creditors following itsinsolvency. The company had been formed byMr Salomon with the clear intention of takingadvantage of the limited liability afforded bythe Companies Act 1862, which required aprivate limited company to have sevenmembers (the Companies Act 2006 requiresonly one). In order to do this, Mr Salomonoffered one share in the company each to six ofhis relatives, and took 20,000 shares for

himself. It was apparent, therefore, that he hadno intention in affording control of thecompany to anyone other than himself.

For these reasons, the High Court and Courtof Appeal granted the liquidator’s claim,holding respectively that the other shareholderswere Mr Salomon’s “dummies” and underprinciples of agency law. However, the House ofLords allowed Mr Salomon’s appeal. LordMacnaghten made the important observationthat the judgments of the lower courtspresupposed that the company was not validbecause its members (other than Mr Salomon)took no role in the running of the business, butthat this was a misconception because theCompanies Act contained no such requirement.

Indeed, Mr Salomon had done no more thanthe Act required him to do, and was thereforeentitled to take full advantage of its protection.

With this decision the House of Lords,therefore, brought into being the limitedcompany, with separate personality, as we knowit today, and thereby created the modernbusiness world.

Albert Einstein is purported to have said thathe “should have become a watchmaker” had heknown the consequences of his atomic theory.Perhaps their Lordships would have had similarthoughts?• Cath Hall is an AIA Achieve e-tutor. Morearticles can be found on the AIA website:www.aiaworldwide.com/a-quick-look-at

A QUICK LOOK AT... Saloman v Saloman & Co [1897] AC 22

Objective tests .Between 2 January and May 31, 2015 E1 P1 F1 E2 P2 F2 E3 P3 F3

Percentage of students who have passed 84% 54% 80% 91% 57% 60% 71% 57% 54%the exam after one or more attempts

Percentage of students who have passed 78% 45% 75% 86% 44% 49% 59% 48% 45%the exam on first attempt

Exam pass rate 76% 43% 73% 85% 43% 48% 58% 47% 45%(total exams passed/total exams taken)

Case study exams .Exam pass rate (total exams passed/total exams taken)

February ’15 May ’15

Operational case study 44% 67%

Management case study 33% 62%

CIMA gateway exam 15% 20%

Strategic case study 46% 70%

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PQ spoke to ACCA’s director ofstrategy and brands, David Grint

David Grint, who joined the ACCA lastsummer, is responsible for theassociation’s strategy and the brand.

So it falls to him to bring the ACCA brand to life.He confided in PQ that he hopes you have

noticed the changes that have alreadyhappened. The ACCA logo now comes with astrapline ‘Think Ahead’, which reflects theACCA’s brand positioning – it wants to be theworld’s most forward-thinking professionalaccountancy body. The strap is an explicit callfor action.

Red and squares are the ACCA’s thing, butGrint has also introduced the graduated redsquare – it may seem counter intuitive but thiscertainly helps the logo stand out.

The palette of acceptable colours has alsobeen increased, and the letters ‘ACCA’ in a boxdon’t always have to be red – sky blue, orangeand grey are now available, too.

18

PQ ACCA brand

PQ Magazine August 2015

BRINGING THEBRAND TO LIFE

The ACCA is also putting more time intochoosing the images it uses in its publicity. Grintwants them to be more inspirational.

He stressed that a brand is a ‘mindset’, notsomething you can wheel out occasionally. ForGrint it wraps around everything you do and‘lasts forever’, unlike a strategy, which normallyhas a specific life cycle.

He rightly points out that, since its inception,the ACCA has always been forward thinking.Those founders understood the importance ofproviding an open profession. It should alsomean in the future that it would continue tobreak convention. But it won’t just break it forthe sake of it, it will do it because it is the rightthing to do!

Grint is also in charge of ensuring the ACCA’sstrategic vision is achieved. He has to ensure theACCA is the best at developing the professionalaccountants the world needs. That is a big ask.By definition, ‘what the world needs’ will alsochange and he knows he has to make the ACCA‘future proof’.

Grint was given a slot at ACCA’s Learning

Providers Conference earlier this year. He tolddelegates that for students the idea of ‘thinkingahead’ means supporting students so they canrealise their dreams and hopes. And, as yourcareer evolves, the ACCA wants to ensure itremains constantly relevant, whatever youchoose to do. Being that forward-thinkingaccountancy body will then equip you for acareer of growth, mobility and success.

Not bad for four letters in a coloured box! PQ

PQ Aug 15 p18 ccm_Layout 1 07/07/2015 09:46 Page 14

19PQ Magazine August 2015

CIMA exams PQ

Irecently meet up with CIMA PQ DavidHeath at the trendy London Grind onLondon Bridge. He has been working at

Guy’s and St Thomas’ NHS Foundation Trust forthree years now, and before that he worked for asmall IT company.

It is now seven years since he studied for abusiness degree at Plymouth University, but hefelt that finance was his strongest subject. Sowhen the opportunity arose to study CIMA in hislatest job he jumped at it.

His current role covers capital estates,facilities and project management. There is a bigfinance link here, as he has to review businesscases, and getting an accountancy qualificationwas the next obvious step. Heath says he choseCIMA because it was a very roundedqualification. “It gives me business skills andshows me how to apply them,” he said. Heathalso thought the qualification would open moredoors. That it isn’t all number-crunching helped,

as did the fact that he is more interested in themanagement side.

So, in February 2014 he decided to startstudying. He quickly realised he had missed theMay sitting and with only two sittings a year hewould have to wait until the next exam windowin November. He thought he had an exemptionfor E1 (which hedidn’t!) so sat P1 andF1, studying withBPP. He says hereally enjoyed bothsubjects, and passedwith good grades.

The trust thenoffered a new optionto trainees – distancelearning with HTFT.After a quick chatwith James and Vickyhe decided to givethem a go. “It was adifferent approach,but it’s been great,”said Heath. Hestudies at work, withhis online lecturesstarting at 6.30pm; acolleague is studying a higher level so he stayson as well. Heath likes to leave his books atwork, helping to demarcate his home and

work/study. He also said he doesn’t feel isolated,although the type of interaction with tutors isdifferent.

Since being with HTFT he has passed F2, P2and E2. That meant he had just themanagement case study to pass before movingto the strategic level when we spoke, but he was

concerned about the 33% passrate. But we have since foundout that he was one of the 62%who passed in May.

Heath felt there was a bigjump between studying for OTsand the case study. It has beenhere that the years ofexperience the HTFT tutorshave really told. “They drilledinto me what I needed to do toget a pass,” Heath said.

Despite the differing views onthe merits of OTs, he felt he hasworked harder in the past sixmonths to get his passes thanhe did under the previouspaper-based system.

He sees the changes as areally positive step that willmake him a better accountant.

The case study, in particular, places the studentin a business context, and he actually looksforward to looking at different industries. PQ

STUDY FOR THE REAL WORLDCIMA introduced big changes tothe way it examines its students atthe beginning of the year. EditorGraham Hambly spoke to one PQwho has studied under both theold and new systems Heath: changes

at CIMA arepositive ones

The Institute of Certified Bookkeepers

“I was a serving helicopter pilot

with the Army, but changed my

career and I am now an award

winning Certifi ed Bookkeeper”

Natalie Phillips MICB. CB. Dip

HRH Prince Michael of Kent GCVO

I am an award-winning Certifi ed Bookkeeper”

“

To fi nd out if you could become a bookkeeper call

0845 060 2345www.bookkeepers.org.uk/PQ

PQ aug 15 p19 q11.qxp_Layout 1 10/07/2015 10:59 Page 23

Yes, there is now a brand new all-singing,all-dancing IFRS on financialinstruments (IFRS 9). The standard was

issued last year and becomes examinable as oftoday. The IFRS is a monster, so it is certainlynot possible to cover the whole standard in onearticle. I am going to focus on financial assetimpairment (also known as ‘bad debts’) as thiscomponent of the IFRS is the newest. In fact, itmight be worth looking at the issue dates of thecomponents of the standard to put financialasset (FA) impairment in context

Content Issue dateFinancial assets (FA) 2009Financial liabilities (FL) 2010Hedging 2013FA impairment 2014

There is a good reason the FA impairment projecttook so long to complete. The story explains thecraziness of the detail involved in FA impairment.Before there was IFRS 9 guidance on FAimpairment there was IAS 39 guidance andbefore that in the 1990s there was nothing. Whilethere was no guidance there was a culture ofwriting off sickly receivablesusing specific bad debtallowances and writing off asmall proportion of healthyreceivables using a generalbad debt allowance. It wasfelt that this was prudent;but shareholders got fed upwith corporate abuse of thegeneral bad debts. This was easy to manipulateand investors felt that the general bad debts wasbeing used to ‘profit smooth’ – make bigallowances in good years to release credits in thebad years. So general bad debts was forbidden in1998 with the issue of IAS 39.

Incurred losses v expected lossesNow IAS 39 has a horrible reputation, however,the recognition of FA impairment was widelyaccepted because of its simplicity. The conceptbecame known as the ‘incurred loss model’because you were allowed to recognise lossesyou had incurred but not allowed to make uppossible losses that you might incur in thefuture. This worked well for 10 years, but whenthe financial crisis hit in 2009 the previouslyadmired incurred loss model was blamed atleast in part for the crash. The IASB did notagree, but the crash stirred up such powerfulemotions that the IASB accepted they had to dosomething. Look at the picture below of theLehman Bros employee holding his possessionson the day he was kicked out of his collapsingemployer. He looks like American Psycho to me– but I find it impossible not to feel somethingfor the fella. And think of all the countless lessglamorous others that have been pushed out

and held back by the recession.So the IASB accepted that they had to

rediscover some the prudence of the oldgeneral provision for bad debts withoutletting in the wildly abusive profitsmoothing that haunted us prior to IAS39. The result adopted in IFRS 9 is aferocious wall of complexity summed upby the term the ‘expected loss model’

and I shall try to give you a feel for some of thecomplexity now.

ApplicationFinancial asset impairment only applies to FAcarried at amortised cost (essentially). This

means in particular lending to customers; eitherbecause you are a trader and give yourcustomers trade credit or you are a bank andlend to your customers.

Amortised cost is mathematical and if yourcustomer ends up in trouble then themathematical carrying value of your receivablemight be way above the recoverable value andso an impairment may be required.

Expected credit losses (ECLs)The machinery to shave off some of thereceivable is called an ‘expected credit loss’(ECL) and represents the expected shortfall ofexpected cash flows against contractual cashflows. And like any ‘expectation’ this ECLrequires guesswork.

I have the IFRS open here in front of me andit says “an entity shall measure expected creditlosses in a way that reflects a probabilityweighted amount and the time value of moneyand forecasts of future economic conditions”.That sounds like a general allowance to me.

For simple trade receivables a ‘simplifiedlifetime ECL’ is required, meaning the entity isrequired to look into a crystal ball and predicttrouble for current receivables until they are allreceived.

However, banks are required to follow a‘general approach’. This only allows the abovedescribed lifetime ECLs “if the credit risk on thatfinancial instrument has increased significantly”.Otherwise, a 12-month ECL is required. This 12-month ECL is likely to be tiny on healthyreceivables and it is hoped by the IASB that this

will mean that banks have limitedscope to manipulate their ECL toget the profit they want. I am notso sure. • Martin Jones lectures at LSBF

PQ

20 PQ Magazine August 2015

PQ international standards

Don’t let bad debts get you downMartin Jones explains the whysand wherefores of the new IFRS 9

pq aug 15 p20 ccm_Layout 1 07/07/2015 09:56 Page 23

THE WRITE WAY

21

CIMA case study PQ

PQ Magazine August 2015

The August Management Integrated Case Study will be examinedby the way of a three-hour computer based exam. It comprises aseries of tasks that aim to integrate and apply the technical

knowledge tested in the objective test examinations.The answers you give will be long-form and typed into the exam system;

they will consist of all forms of modern communication, including emails, reports and briefing notes.

Writing skills .For those who have completed the F2, E2 and P2 papers under the 2015OT style of paper this will be the first time you will get to display to CIMAyour ability to write long form answers. You will need to be able to combinethe competencies from the CIMA framework with an ability to structure ananswer with a ‘logical flow’.

Focus .The most important skill on the day is not mentioned in the competencyframework but basically is have you answered the tasks set with sufficientapplication to the company concerned.

Business acumen .You need to be completely familiar with all the learning outcomes that

are assumed knowledge for this case. But you then need to apply them tothis perfume manufacturer (Scent). The pre-seen gives lots of scope forbringing in technical skills. From the F2 syllabus one of the most difficultaspects is the following learning outcome.

LO C1 (b) Evaluate the financial performance and financial position ofan entity based upon the information contained in the financial statements.

There are potential pitfalls in this pre-seen and you will need to useprofessional scepticism in our evaluation.

See below for the sort of triggers and tasks you need to be prepared for:

AYK 1 – Trigger

Today is 1 August 2015 and you receive the following email from BethMiller:

From: Beth Miller, bm@scent.co.uk

To: Financial Manager

Sent: 1st August 2015

Subject: FW: Operating performance

We had a visit yesterday from an analyst who specialises in the luxury

goods industry. She has explained that in her opinion the market is

losing confidence in Scent’s ability to deliver profit and shareholder

gains generally. In her opinion LK is a better bet for a long-term

investment.

Can we plan a meeting as I really need to discuss this with you.

AYK 1 – Task

Today is 2nd August and the following message was on your voicemailwhen you arrived at the office this morning:

Beth Miller here.

Thank you for the meeting, it was great to discuss things with you. Can

I now ask that based on your thoughts could you draft a report that

compares the financial performance and position of Scent and LK. Can

you include a discussion of the limitations of such an analysis please

Also tricky is the following learning outcome:LO C1 (c) Advise on action that could be realistically taken by an entity’s

management to improve financial performance and strengthen financialposition taking into account ethical considerations and internal andexternal constraints.

AYK 2 – Trigger 2

Today is 10th August and Charles Chevalier, Scent’s operations directorinvites you into his office

I need your help with something.

Beth Miller showed me your report on the financial performance and

position of Scent. I was very impressed but now would like you to draft

a new report that advises on actions that we could take to improve

Scent’s financial performance and position. When asking Beth about

sourcing new finance she has expressed concerns about protecting

the gearing ratio, which I understand but was thinking we could sell

one of our properties to a bank to give us a short term cash flow. If we

hold the rights to repurchase in a years time I believe my new project

will generate enough cash to pay the repurchase price immediately. It

seems like a win-win to me.

AYK 2 – Task

Write the report requested by Charles Chevalier:

I suggest you prepare fully for both these learning outcomes so youshow both technical skills and business skills and a logical flow of writing.If you want to see my suggested solution drop me an e-mail atClare.Finch@htftpartnership.co.uk • Clare Finch is a partner at HTFT Partnership, leads the HTFT MICSteam and is the author of ‘A Student’s Guide to IFRS’

PQ

The Management Integrated Case Study (MICS) is a vigorous test of your writing skills, writes Clare Finch

For the latest issue see issuu.comNQ magazine is an e-mag for newly qualifieds who want to get aheadAll the back issues are available too – type NQ magazine into www.issuu.com

Sign up today via the PQ magazine website – www.pqmagazine.co.uk

PQ Aug 15 p21 ccm_Layout 1 07/07/2015 09:59 Page 14

22 PQ Magazine August 2015

PQ AAT exams

LET’S GET TECHNICALMy gardener grabbed me by the

shrubs the other day. “I need £100off you, Gareth,” he said. “But I

haven’t had an invoice from you Tony!” I replied.“But I did the work last week. I’ve earned memoney. I’m just not very good with mepaperwork!” Little did Tony know that he wasapplying the accounting concept of accruals.

A couple of months ago I looked at dealingwith accrued expenses. In this article I am goingto look at dealing with accrued and deferredincome.

In essence both are examples of theapplication of the accruals, or ‘matching’concept. We must ensure that income isrecognised in the period that the income is‘earned’ (when you did the work that generatedthe income). It doesn’t matter when the sale ispaid for or when we send out the invoice.

If we earn some income by delivering goods toa customer (selling them some sugar, forexample) and the customer pays for those goodsimmediately then the double entry is:Dr Cash (the asset that we now own).Cr Sales (the income that we have generatedfrom delivering the goods).

This is a cash sale.If we earn income by delivering goods to a

customer and they do not pay immediatelybecause we offer them a credit period we wouldnormally send them an invoice as a request forpayment at a later date. The double entry forthis is:Dr Sales ledger control account (the asset of thereceivables balance owed by the customer).Cr Sales (we have still generated income bydelivering the goods even if we haven’t beenpaid yet).

This is a credit sale. Note that it doesn’tmatter that we haven’t been paid for the goodsyet, we have delivered them to the customer sohave ‘earned’ the income. This means that thecredit is still made to the sales account.

Accrued income .Now, what if we deliver goods to a customer andthey are not paying immediately but we haven’teven issued an invoice yet (perhaps due to anadministrative delay)? We still need to recognisethe income we have earned as we havedelivered the goods, but since there is no salesinvoice to list in the sales day book there wouldbe no entry made to the sales ledger controlaccount. We therefore need to recognise anotherform of receivable that we will invoice andcollect at some point in the future; accruedincome.

The double entry for this is:Dr Accrued income (again, an asset. Think ofthis as an ‘uninvoiced receivable’).Cr Sales (again, still recognising the incomegenerated as we have delivered the goods).

As long as we have delivered the goods wehave ‘earned’ the income, it does not matter thatwe haven’t sent an invoice.

Accrued income is a current asset and would

sit on the balance sheet (the Statement ofFinancial Position) under trade receivables.

Eliminating accrued incomeWhen you eventually raise the invoice for thegoods that the customer has had you caneliminate the accrued income as follows:Dr Sales ledger control account (now that youhave raised an invoice).Cr Accrued income (getting rid of our‘uninvoiced receivable’ now that it has beeninvoiced).

Deferred income .If accrued income is where we have earnedincome but not yet been paid for it or sent aninvoice to the customer, deferred income is theexact opposite; where we have been paid by acustomer for something but haven’t actuallyearned the income (we haven’t delivered thegoods yet). It would occur in a situation where acustomer is paying in advance for goods that weare going to deliver in the future.

If we haven’t delivered the goods yet then wehaven’t ‘earned’ the income so we cannotrecognise anything in the sales account yet.Instead we recognise a liability called deferredincome. It may seem strange that we arerecognising a liability when we are dealing with acustomer but if they pay in advance for goodsthen we owe them that money until we deliverthe goods. If we fail to do so we will have torepay them the amount that they have paid.

The double entry is therefore:Dr Cash (the payment we have received inadvance from the customer).Cr Deferred income (the liability we owe to thecustomer until we deliver their goods).

Note that we don’t recognise anything in thesales account as although we have had somecash from the customer we haven’t done thework that ‘earns’ this income.

Deferred income is a current liability andwould sit on the balance sheet under tradepayables.

Eliminating deferred incomeWhen we deliver the goods to the customer, wehave now done the work to ‘earn’ the incomeand will no longer have to potentially pay themback so the double entry posted is:Dr Deferred income (to remove the liability nolonger needed).Cr Sales (as we have now ‘earned’ the income).

Other forms of income .In some tasks the ‘income’ being dealt with maybe something other than sales of goods, forinstance it may be rental income. The basicdouble entry here is much the same as above.

So, if a tenant has occupied some space weown (meaning that we have ‘earned’ the income)but we haven’t yet invoiced them this is accruedincome:Dr Accrued incomeCr Rental income (instead of sales)

And if a tenant has paid in advance for nextperiod it is deferred income as we haven’t‘earned’ the income yet:Dr CashCr Deferred income

Try this task and then watch me work myanswers at www.firstintuition.co.uk/category/aatWe own a building in which we rent space totenants at £1,000 per annum. One tenant paysfor two years in advance and a second tenantwill be invoiced for the same two years at theend of the second year. Show the relevant ledgeraccounts at the end of the first year.• Gareth John is a tutor/director with FirstIntuition and helps to manage their AATdistance learning programme. He was PQ’sAccountancy Lecturer of the Year in 2011

PQ

Accrued and deferred income is fertile ground for Gareth John

PQ Aug 15 p22 ccm_Layout 1 07/07/2015 10:00 Page 23

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023_PQ 0815.qxp_PQ 1209 000 30/06/2015 10:26 Page 7

• Pass rate: 76%• Technical difficulty: 5/10• Weighting of discursive

elements: 100%• Exam technique: 7/10

The syllabus .The E1 exam provides the core knowledgeneeded for much of the E pillar. Students needto be aware that much of what they learn at thislevel is relevant both to the E3 paper and to thecase study exams at all levels.

The E1 syllabus is broken down into six keyareas (all of which are further split into two):

A Introduction to organisations (25%): Thissection requires students to understand

how businesses function and how they interactwith the outside world.

A1 looks at why we need organisations andthe types of form that organisations may adopt.There is an element of common sense in thissection, but you will also be expected to knowvarious key theorists. It also explores howmodern businesses have moved away from ahierarchical structure (doing everythingthemselves) and towards more modern forms ofbusiness operation including shared servicecentres and business process outsourcing.

Students may be required to identify theadvantages and disadvantages of particularstructures and forms of operation.

A2 covers corporate governance, such asboard structures, stakeholder theory and ethics,where students will be expected to identifyethical dilemmas and suggest courses of action

BManaging the finance function (15%): Thislooks at the role of finance in the modern

business.B1 looks at why we need a finance

department. It covers the main roles of thefunction and explores how a good financedepartment can help the business achieve itsstrategic objectives. It also examines whatconflicts and problems the finance team mayhave in fulfilling its role.

B2 takes the issues from B1 and looks atthem in more detail, looking particularly at howthe finance function can support decisionmaking and control.

CManaging technology and information(15%): This examines how modern

businesses can’t exist without good use ofinformation.

C1 looks at the fact that we are living in atechnological age and examines how a goodinformation system can assist the business inmeeting its objectives. It also examines how thebusiness needs to ensure that it has the correctinformation in the various areas/levels of thebusiness. It also starts to explore changemanagement.

C2 brings data and information into the 21stcentury, where it examines how moderntechnologies (often called web 2.0) such asFacebook, Twitter and big data can have animpact on the organisation and its stakeholders.

DOperations management (15%): Operations(how a business carries out its function) is

key to any business and is examined here.D1 looks at what the operations department is

and how it interacts with other areas of thebusiness. It also looks at the external links andexamines the organisation’s supply chain fromraw materials to finished product.

D2 looks at particular tools and theories thatwill aid the operations and supply chain, such asPorter’s Value Chain and Reck & Long

EMarketing (15%): This explores themarketing function and its importance in

modern business.E1 looks at the difference between selling and

marketing and further examines the variousrequirements needed for a successful marketingstrategy (the marketing mix).

E2 returns to the idea of big data and socialmedia to examine how these can help anorganisation with the marketing of its products.It also examines how the organisation mayobtain data to successfully use in its marketingstrategy.

F Managing human resources (15%): Noticethe term ‘human resources’ rather than

‘personnel’. Section F looks at modern thinkingaround enduring that the business has aneffective HR policy.

F1 looks at how the HR function can supportother areas of the business in achieving theirstrategic aims and looks at the HR cycle fromrecruitment to termination.

F2 examines how understanding more aboutpeople and how they learn can help theorganisation develop employees, looking attheories such as Kolb and Honey and Mumford.It also examines the responsibilities of the linemanager in relation to the employees

Sitting the E1 exam .As with all other exams at this level, this paper isa mixture of multiple choice, multiple responseand drag-and-drop style questions (amongothers). Note that there should be no ‘fill-in-the-blank’ style questions where students arerequired to type in text. While students may feelthat this means that exam technique is notimportant, in actual fact this is not the case.

Key points .• Read the question carefully: Many questionswill have a short paragraph explaining thescenario, with the answers being related to thespecific issues mentioned.• Read the instructions carefully: There is arange of different question styles and studentsneed to ensure they check what they need to doto answer the requirement. • Timing: While you need to work on an averageof 1.5 minutes per question there will be someyou can answer immediately and some that willtake more thought. Many students will find ituseful to flag questions they cannot answerimmediately and return to these at the end.• Answer everything: There is no negativemarking in any of the CIMA exams. Studentsshould make sure that they attempt everyquestion. If they are unsure of the correctanswer they should first eliminate any answersthey know to be incorrect – don’t forget thatbeing able to identify one correct or incorrectoption may eliminate more than one potentialanswer in questions where you have to makemultiple selections. • Study the entire syllabus, even the material thatis not taught by your tutor: Any area from theCIMA texts may come up in the exam and youneed to know it to think how to apply it.• Do not rely on memory: These exams are verygood at establishing whether you actuallyunderstand the material rather than whether youjust remember it. One method I recommend tostudents is to watch or read the news a littlemore actively – think about why companies aredoing things that you see in the news. Thinkabout why your company is organised and run inthe way it is. What issues does it face and how isit addressing them? • Kim Lawley is a tutor at Kaplan Financial

PQ

24

PQ CIMA E1 paper

PQ Magazine August 2015

Kim Lawley explains what youneed to know to get a pass in theOrganisational Management paper

Foundation for growth

PQ aug 15 p24_Layout 1 09/07/2015 10:02 Page 14

First Intuition’s Mike Pennington has a fantastic blog (seebelow). Here’s one he wrote earlier…

It occurred to me recently when marking an audit paper that an auditorperforming an audit for the first time is very much like going on a first date.There is risk – the ‘client’ (ok, not a great way to describe your date, but it’s a

start!) may try to overstate their assets and their income to you. They may try todeceive you as to how big their bank balance is or how large their non-currentassets are (“I’ve got a big boat in Monte Carlo”). They will want you to believe thatthey have a long-term future and that you can trust everything they say.

As an auditor, however, you would not simply rely on the client telling you aboutthese ‘facts’; you would like some documentary evidence – “show me your bankstatement”, “I’d like to verify that your yacht physically exists”.

You can also ask the client to confirm in writing all of the oral suggestionsthey’ve made during the date, particularly if there is no third-party evidenceavailable – “I promise you there’s no-one else that you need to know about – I’vetold you everything.” If the audit/date goes well, they won’t question the bill. Theywill be satisfied that the level of work you’ve put in thoroughly justifies the amountthat is now in front of them and will happily pay it. Hopefully, they’d like you tocome back and do it all over again soon.

So there you have it – auditing is just like dating. Remember this the next timesomeone tells you that “auditing is boring” – like anything in life, if you know whatyou’re doing it can be very exciting. • For more of Mike’s blogs go to http://www.firstintuition.co.uk/auditing-the-new-dating/#sthash.DYK3IxCO.dpuf

PQ

25PQ Magazine August 2015

accountancy blog PQ

So is audit thenew dating?

pq aug 15 p25 CCM.qxp_Layout 1 09/07/2015 10:07 Page 23

To be effective as a financeprofessional you need to beable to communicate

effectively and have the ability tobuild strong, productive relationships that getthe job done. All of this requires emotionalintelligence. The origins of emotionalintelligence can be traced to David McClelland’slandmark 1973 article ‘Testing for Competencerather than Intelligence’. The study identifiedthat what differentiated the top 10% ofperformers from others was emotionalintelligence – how we manage our thoughts,feelings and behaviours.

And research over the past 40 years hasdemonstrated time and again that whatdistinguishes performance, and is the key factorin terms of progression as a leader andeffectiveness at any level, is not technical abilityor IQ but emotional intelligence.

Emotional intelligence is the ability tounderstand and manage your own emotions,and those of the people around you. People witha high degree of emotional intelligence knowwhat they are feeling and what their emotionsmean (self awareness) and know how theseemotions can affect other people and they areaware of how other people are feeling (socialawareness). They are also able to:

• Manage their emotions so that they don’tnegatively impact what they are trying to achieve(self management).• Use their self-awareness, self-managementand social awareness to manage theirinteractions with others in an effective way(relationship management).

The good news is that emotional intelligence issomething we can all develop – it’s a skill.

Transactional Analysis (TA) is one of the manymodels and approaches we can use to develop

our emotional intelligence. Don’t confuse it withtransactional analysis in accounting terms – butthere are some parallels. The accountingprocess starts by analysing the effect oftransactions – any event that has a financialimpact on a company.

TA is a communication model andpsychological theory developed by psychologistEric Berne in the 1950s. It is in effect an‘analysis of transactions’: it gives us a languageto interpret and analyse the ‘transactions’ orinteractions with others and communication withourselves. It’s a very simple tool to help us todecode tones, gestures, body language, facialexpressions and micro expressions, so that wecan manage ourselves and interactions withothers in a considered way: an emotionallyintelligent way to achieve our desired outcomes.

TA is a model increasingly being used withinbusiness as it enables us to diagnose veryquickly what is going on in any ‘transaction’(communication). Some people develop theseskills from an early age and we call them‘intuitive’. What we now know is it’s never toolate to develop intuition! • Nike Lawal is accredited coach for the HayGroup’s Emotional and Social IntelligenceCompetency Inventory (ESCI), and a directorat Mindsight Coaching (UK)

PQ

26

PQ career guidance

PQ Magazine August 2015

Nike Lawal, who spoke recently at the CIPFA Student Conference, offers you some self-improvement advice

Emotional intelligence is key

BPP Professional Education is looking for skilled and

dedicated Accountancy and Tax Tutors on a permanent

basis to join our team in London, Birmingham and Reading.

As a qualified professional or experienced tutor looking to use your skills in a new and rewarding way, you will

provide the highest quality, exam-focussed expertise and student support. These exciting roles ofer variety and

challenge for individuals excited about developing a career in education.

At BPP, our goal is to challenge the educational status quo and so whilst face to face teaching is a core part of

the role, there are opportunities to combine this with the following: teaching online; developing and writing

courseware; module leadership; marking and feeding back on student scripts; and supporting students with

research projects. There may also be involvement in account management and delivering training sessions onsite

for a corporate client. Tutors may have the opportunity to teach on our Business School programmes.

With a professional qualification as appropriate, you will be an outstanding communicator who can engage your

students and collaborate efectively with your colleagues. Highly organised, you will have experience of achieving

quality output and results and will be motivated to help students succeed. Digitally literate, you will display a

flexible and adaptable approach according to business needs. Previous teaching experience is not required, as full

training will be provided.

We will be holding an Open Evening in July at which you will have the opportunity to meet our professionals and

find out a little more about the roles available. If you would like to find out further information about the Open

Evening or current opportunities, please contact vacancies@bpp.com

vacancies@bpp.com

BPP Vacancies

PQ Aug 15 p26 ccm_Layout 1 07/07/2015 10:11 Page 14

Standard costing and varianceanalysis is heavily tested in theAAT Level 4 paper Financial

Performance and ICB Level 4Management Accounting, and studentspreparing for either F2 or F5 ACCA mayfind this article useful.

The following series of MCQ’s will testyour competence in this topical area.

Case scenario .Sandsend Animal Feeds produce astandard product. Its budget for 2015includes the following information:• Budgeted production 144,000 tonnesor 12,000 tonnes per month.• Budgeted fixed overhead for the year£1,134,000.• Standard usage of raw material pertonne of product 1.05 tonnes (allows forwastage).• Raw material cost per tonne delivered£100.• Standard hours per tonne 0.75.• Standard rate of pay £8.00.

Actual output and costs January 2015:• Output 12,200 tonnes, hours worked9,250 and cost of direct labour £74,925.• Raw material tonnage used 13,420 andcost of raw material used £1,328,580.• Actual fixed overhead £93,500.

(Q1) The standard hours produced in themonth were:(a) 9,000(b) 9,100(c) 9,150(d) 9,250

(Q2) The efficiency ratio for the monthwas:(a) 101.09%(b) 98.36%(c) 97.29%(d) 98.92%

(Q3) The capacity ratio for the monthwas:(a) 102.78%(b) 101.67%(c) 98.92%(d) 100%

(Q4) The activity or production volumeratio for the month was:(a) 102.78%(b) 97.30%(c) 98.36%(d) 101.67%

(Q5) The total direct labour cost variancefor the month was:(a) £1,725 (A)(b) £1,725 F(c) £2,925 (A)(d) £2,925 F

(Q6) The direct labour efficiency variancefor the month was:(a) £800 F(b) £800 (A)(c) £1,200 F(d) £1,200 (A)

(Q7) The direct labour rate variance forthe month was:(a) £925 (A)(b) £925 F(c) £1,739 (A)(d) £1,739 F

(Q8) The total direct material costvariance for the month was:(a) £60,580 F(b) £60,580 (A)(c) £47,580 F(d) £47,580 (A)

(Q9) The direct material usage variance

27PQ Magazine August 2015

variance accounting PQ

for the month was:(a) £82,000 F(b) £82,000 (A)(c) £61,000 (A)(d) £61,000 F

(Q10) The direct material price variancefor the month was:(a) £12,810 F(b) £12,810 (A)(c) £13,420 F(d) £13,420 (A)

(Q11) The total fixed overhead variancefor the month was:(a) £3,625 F(b) £3,625 (A)(c) £2,575 (A)(d) £2,575 F

(Q12) The fixed overhead expenditurevariance for the month was:(a) £1,575 F(b) £1,575 (A)(c) £1,000 F(d) £1,000 (A)

(Q13) The fixed overhead volumevariance for the month was:

(a) £2,625 F(b) £1,575 F(c) £1,575 (A)(d) £2,625 (A)

(Q14) The fixed overhead capacityvariance for the month was:

(a) £1,050 F(b) £1,050 (A)(c) £2,625 F(d) £2,625 (A)

(Q15) The fixed overhead efficiencyvariance for the month was:

(a) £1,575 (A)(b) £1,575 F(c) £1,050 (A)(d) £1,050 F PQ

MCQs just for you!Philip Dunn sets you a standard costing andvariance analysis test – with answers below

1.c2 d3. a4. d5. a6. b7. a8. d9. c10 c11. d12. c13. b14. c15. c

• Dr Philip E Dunn is afreelance authorand assessor,Kaplan DistanceLearning

ANSWERS

pq aug 15 p27••_Layout 1 09/07/2015 10:06 Page 23

Sixth-formers from Simon LangtonGrammar School for Boys were crownedchampions of ICAEW’s national business

competition, BASE, part of a drive to get schoolsand employers working together to address theskills gap.

The students beat 45 other teams in thenational final in Birmingham in a year thatcelebrates the competition reaching more than10,000 students since 2009.

Up to 300 students, aged 16–19, were set afictitious challenge to give business advice to apanel of directors, which tested their team-working, communication skills, financial abilitiesand ethics.

The final concluded a series of 46 regionalcompetitions involving up to 500 teams fromschools and FE colleges around the UK. Thepanel of judges included directors from Sky,BBC, Walt Disney, ITV, EY and PwC.

ICAEW President, Andrew Ratcliffe, said:“Businesses are crying out for the right skillsand this competition helps young people buildthem. It is essential that future generations buildtheir soft skills to complement their academicachievements, and are informed about careerchoices.

“Employers are looking for ‘well rounded’people who can communicate, solve problems

and demonstrate resilience, commercialawareness and team working. All these skills, aswell as exams, will attract recruiters.”

He added: “I am thrilled to see schools andemployers work with us to improve employabilityskills. It is also a chance for young people tolearn about the varied responsibilities and rolesof a chartered accountant. I congratulate thewinners, and every finalist who took part. Theyimpressed big business names with their brightideas, ethical considerations and team-working

skills. It doesn’t end with the BASE final – theywill make contacts here and learn skills that willserve them well into their future.”

Director at Walt Disney, Sarah Williams, whowas a judge at the final, said: “I was deeplyimpressed by the champions at the BASE final.The team were very bright and were full of ideason the media industry and applied anunderstanding of ethics to a tough businesssituation. I was thrilled to take part, and urgeschools and businesses to get involved incompetitions like these.

“It’s so important that young people startthinking about their skills and their readiness forthe workplace well before they begin applying forjobs. Businesses need to be receptive too andcompetitions like these are great ways to getschools, employers and young people workingtogether to improve skills. Good communicationand team-working are vital for the workplace andthis first-hand experience and networkopportunity is invaluable.

Students had the chance to meet tuitionproviders and employers including AAT, BDO,BPP, Crowe Clark Whitehill, Deloitte, EY, KPMG,Mazars and PwC.

To find out how you can get involved inmentoring a team next year, visiticaew.com/base. PQ

28

PQ ICAEW spotlight

PQ Magazine August 2015

A competition run by the institute aims to unearth Britain’s top young talent – and you too can get involved

‘Work-ready’ Kent students win out

Top of the class: the winning team, from left,Kate Hawkins, Hannah Averbeck, NickElorreaga, Gabi Kehily, Mona Moyo, AlexMilsom win £500 each and a day at CharteredAccountants’ Hall in London to develop theiremployability skills

Sorted, thanks topqjobs.co.uk

PQ jobs pqjobs.co.uk

PQ Aug 15 p28 ccm.qxp_Layout 1 10/07/2015 12:12 Page 14

29PQ Magazine August 2015

CIMA E3 paper PQ

PYRAMID SELLINGThe E3 syllabus has alwaysfeatured a learning outcome thatrequires you to ‘evaluate

alternative models of strategicperformance measurement’. This articlewill focus on the performance pyramid.

Remember, at this level your examineris more interested in what you can dorather than what you know. If you havefailed this OTQ previously it is perhapsbecause you are trying to memorisemodels within the E3 syllabus when youreally need to understand them so thatyou can apply them to a given scenario.

An organisation can link strategy (atthe top of the pyramid) with day-to-dayoperations in departments (at the bottomof the pyramid) by balancing measuresand targets to cover the four areas at thebottom of the pyramid. For example, theCorporate Vision can be translated intoobjectives for both market standing andfinancial results of the organisation’sstrategic business units (SBUs orDivisions). Market standing dependsupon the business systems theorganisation has in place for customersatisfaction and flexibility, and these canbe measured in departments by lookingat quality, delivery and cycle time.

The business systems in place (forcustomer satisfaction, flexibility andproductivity) are the driving forcessupporting the company objectivesabove. It follows that the functioning of

these driving forces can be monitored bydepartmental measures below (for quality,delivery, cycle time and waste).

The performance pyramid comes fromthe idea that an organisation operates atdifferent levels each of which has adifferent focus. Market and financialmeasures are more likely to be ofimportance to the heads of businessdivisions and the main board. Lowerlevels in the management, controllingsystems and processes, are more likely toneed non-financial measures such as

External effectiveness Internal efficiency

Enterprise Strategy tests how you apply what you know, says Jan Weston

Quality Delivery Cycle time Waste

Customersatisfaction Flexibility Productivity

Market Financial

Corporate Vision

quantities andtimes, however, it isvital that thesedifferent levelssupport each other.Consequently, thepyramid links thebusiness strategywith day-to-dayoperations.

This model alsoshows the differencebetween measuresthat are of interest toexternal parties –such as customer

satisfaction, quality and delivery – andthose of interest to the business such asproductivity, cycle time and waste.

If you understand these points you willbe able to apply the model (this is whatyou can do) rather than simply memoriseit (this is what you know). Now have alook at the question in the extendedarticle that you will find on our website:www.reedbusinessschool.co.uk/blog • Jan Weston, professional educationmanager and tutor, Reed BusinessSchool

PQ

OBJECTIVES

MEASURES

Departmentsor Work Units

Business Systems

SBUs or Divisions

THE PERFORMANCE PYRAMID

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PQ Magazine August 2015

PQ careers

Shahid Nawaz offers some tipsfor PQs wanting a new role

PQs who are now getting qualified face a verypositive market compared to those in recent years.There has been an increase in recruitment activityacross all sectors, with employers looking to recruitgraduates into these roles to cover a shortage incandidates. As the restraints on training contractsare lifted we are experiencing heightened demandfor early and mid-stage studiers. There is also now asignificant demand for NQs moving frompractice into their first commercial roleand for those who have recentlycompleted graduate schemesmoving within industry.

When starting your search fora new job, it is important toidentify the skills andcompetencies that you have andresearch organisations and rolethat you would look to move to. Youneed to be armed with all thisinformation to know where you need totarget your search.

Secondly, meeting with an expert recruiter todiscuss your career options and the roles suitable foryou will enable you to gain a better understandingabout different job roles, working environments andsectors. They will also be able to review your CVobjectively and suggest how to make this the best itcan be before searching and applying for new roles.

Ensure your CV is up-to-dateIt is important to ensure that your CV reflects all yourexperience, training and qualifications; make sureyour previous employment dates are accurate.Remember, your CV is your sales pitch to a potential

employer, so ensure there are no spelling orgrammatical errors and explain any gaps in youremployment history. It is important to understandwhat the trends are in your field of finance, forexample if there is increased merger and acquisitionactivity in the industry, you will want to ensure thatyou can highlight areas that support this in your CVsuch as due diligence. Employers and recruiters willbe looking to see the professional qualifications thatyou already have or are working towards, so be sureto detail these on your CV or job applications.

The most important point to remember is that yourCV and application need to be tailored to each

individual role. This means ensuring thatyou demonstrate you meet all the

required competencies as outlined inthe job and person descriptions. If youhave further study to undertake andwould be looking for a new role withan employer who would support this,both financially and with study leave,

be sure to check if this is mentioned inthe job description, or raise this with

your recruiter or at interview so you are onthe same page as prospective employers.

Employers looking at your CV or application willwant you to demonstrate your experience and anumber of key competencies and characteristics, soinclude keywords to meet the job specificationcriteria. It is important to reference the environmentsthat you have worked in such as practice or if youhave experience even on a secondment basis inaudit, tax or corporate governance and the projectsthat you have worked on.

Find us on Facebook – www.facebook.com/HaysAccountancyFinanceUK – or atwww.hays.co.uk/accountancy• Shahid Nawaz, Business Director, HaysAccountancy & Finance, London

30

The PQ Book ClubEVERY MONTH WE REVIEW THEBOOKS YOU SHOULD BE READING

How to Develop A Brilliant Memory byDominic O’Brien (Watkins Publishing

£7.99)Does yourmemory let youdown? Or couldyou do with aweek-by-weekguide offering 50proven ways toenhance yourmemory, writtenby an eight-timesWorld Memory

Champion? If that’s the case, thisbook is for you!

The first thing this book asks of youis that you test your memory. O’Brienthen takes you on a step-by-stepjourney on how to improve your brainpower. He even has his own methods:visualisation, acronyms and the‘journey method’ are among thetechniques he employs. What isinteresting is the importance he putsin mind maps. Every accountancystudent should be using these in therevision phase. They are also a greataide-mémoire for speaking in public.PQ rating: 4/5 If you don’t have agood memory then this book is afantastic tool for you

The Daily Telegraph Tax Guide 2015by David Genders (Kogan Page,£14.99)This latest tome contains everythingyou would need to know aboutcompleting a self-assessment taxreturn for 2014/15. Author DavidGenders has been writing andupdating this guide since 1982 andin another life was a partner withSayers Butterworth. It includesdetails of the new ISAs and the majorpension changes. The key changesfrom the 2014 Autumn Statementand 2015 Budget (not the 8 July onethough) are also here.

The book’s publication coincidedwith the release of tax return formsfor tax year 6 April 2014 to 5 April2015. We particularly liked theopening chapter on dealing withHMRC, and the one on current taxrates and allowances. Everything youneed is here including residence anddomicile, inheritance tax and interestand penalties.

Although not written for PQs, thisguide is easy-to-read style and theuse of examples and tax saversuggestions make it a great way toget to grips with how our tax systemworks. PQ rating: 5/5 This book will makeyou an instant expert. A very usefulbook to have on your bookshelf

Esther Bulengo Alum is a Customer Liaison Officer, Capital Delivery Team, based inLondon. She has worked there for two-and-a-half years. PQ’s current Distance LearningStudent of the Year, she is studying for the AIA Statutory Auditor Training Programme

Life at Lambeth Living

What time does your alarmclock go off on a workingday? 5.45am. I have a four hour-plus journey to and from work. Itgets ‘better’ with any hiccups onthe road!What’s the first thing you dowhen you get to your desk?Say good morning to mycolleagues, switch on my PC, login to my desk phone and cleanmy desk. Oops, more than onething!What’s on your desk? My workstation and a few folders. Notmuch really. I try to keep my deskclutter free.What’s the best thing aboutwhere you work? There aresome really nice people and Ihave made very good friends.Where’s your favourite placeto go for lunch? San Marino inBrixton.

What (or who) can you seewhen you sit at your desk? The head of capital delivery,capital delivery manager, seniorprogramme manager, projectmanagers and project officers andcustomer liaison officers.What are your favouriteswebsites and why? TheFinancial Times and the Guardian,to search for jobs and to keepabreast with financial goings-on.Which websites do you usefor work? None in particular.Work-relatedissues arecentralisedon sharedapplications.How manyhours a week do you spend inmeetings? Eight on average.What time do you leave theoffice? 6pm, sometimes 6.30.

How do you relax? Laughingwith family and friends, listeningto music and walking.What’s your favourite tipple?A glass of full-bodied red wine.How often do you take workhome with you? Very rarely. Iprefer to work a little late thantake work home.What is your favourite TVshow? Two and a Half Men.Summer or winter? Summer.Pub or club? Pub.Who is your hero? Winnie

Mandela.If you had a timemachine, where wouldyou go? Back to when Ihad my Dad. It was asmall, very pleasant world.

If you hadn’t chosenaccountancy, where mightyou be right now? In journalism or midwifery.

The workplace: finding your dream job

pq aug 15 p30 ccm.qxp_pq oct07-p31 07/07/2015 10:49 Page 31

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031_PQ 0815.qxp_PQ 1209 000 30/06/2015 12:16 Page 7

Farnham office: 01252 718777

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032_PQ 0815.qxp_PQ 1209 000 30/06/2015 10:50 Page 7

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033_PQ 0815.qxp_PQ 1209 000 30/06/2015 10:25 Page 7

FEELING STRESSED?STROKE A PUPPY!

If revision is getting you stressed then youdon’t need to turn to drink, drugs and

copious amounts of caffeine. What youneed is to cuddle up to a puppy! PQrecently read that ‘puppy rooms’ havebecome a growing trend atuniversities to help students keepcalm. It appears research publishedin Japan show that pictures ofanimals can help improve

concentration and performance.

PQ Magazine August 2015

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

W E V E G O T T H E L O T’

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 bereceived by Friday 14 August. The draw will take place on Monday 17 August 2015

TO ENTER THESE GIVEAWAYS EMAIL GRAHAM@PQACCOUNTANT.COM34

YOU MUST BE JOKING!by Rachel GarveyPQ reader Shahrukh Bhatty recently sent us a joke, which he

thought very funny: Creditors have bettermemories than debtors. Now that is quite an

old joke, attributed in fact to BenjaminFranklin. This got us in a happy mood,

so we then had a look at 2020Innovation’s ‘101 Jokes AboutAccountants’, but in truth westruggled to find anything funnythere. So we thought we should lookelsewhere to find some better gags –

and here is our top five:1) Be audit you can be.

2) How do you know accountants have noimagination?

They named a firm PriceWaterhouseCoopers3) Where do homeless accountants live? In a tax shelter.4) What’s the difference between an accountant and a lawyer? The accountant knows he’s boring.5) Why do accountants make good lovers?They are good with figures.OK they may seem a bit ‘Christmas crackery’, but if you can dobetter send your gags to graham@pqaccountant.com

LIKE MY NEW PEN?Everyone loves a pen – but this one could get you intoserious trouble in the assessment/exam room! AATdistance learning Facebook group’s Joanne Parry wasvery pleased with her new pen when we meet on a roofgarden in Cambridge. It had a scroll with useful tax factsand figures that neaty rolled back into the pen. All shehad to do is swoop it for one of the group’s Wyndoo’s –which we are giving away next month!

DOUBLE ENTRY DOMINOESOne of the best ways of learning is to get a studybuddy. And Accountancy Learning has the perfecttool to make this work even better and more fun foryou – its Double Entry Dominoes! They come as apack of cards and are an excellent way to help youpractise your debits and credits together. We havethree sets of Dominoes to give away this month.All you need to do is send your name and addressso we know where to send your cards if you are alucky winner! Email graham@pqaccountant.com,and head up your email ‘Dominoes’

TAX GUIDE 2015We reviewed The Daily Telegraph Tax Guide 2015this month (see page 30) so thought it only right tolet some of you get this great read for free! We havethree copies of David Genders’ book to give away. Itreally will help you get ahead in tax and give you amuch better understanding of the workings of thevarious HMRC departments responsible for the day-to-day running of our tax system.To enter our draw simply email ‘Tax Guide’ tograham@pqaccountant.com. We need an address tosend the book to if you get pulled out of the hat!

A FINEMESSIBarcelona starLionel Messi haslost his final appealand will stand trialfor tax fraud. Alongwith his father,Messi is accused ofnot paying £3.4m intax on his imagerights from 2007–2009. Messiblames a formeragent and deniesany wrongdoing.Prosecutors claimthe pair created anetwork of firms tofacilitate the fraud.His father made a£5m payment in2013 to cover thealleged unpaid taxbill (plus interest)and this could helpreduce any jailterm!

ARE ALL ICAEWs CONSERVATIVE?The ICAEW now has 13 members in the House ofCommons – more MPs than the Liberal Democrats!Some nine out of 10 ACAs were re-elected as ToryMPs, the exception to the rule being Hartlepool’s IainWright of the Labour party. To that you can add anotherthree newbies, including Craig Mackinlay, who beat UKleader Nigel Farage in Thanet South.

TALL PEOPLE DESERVE MORE MONEY!Employers pay tall people more than they pay their shortercolleagues – and it seems that they are right to do so. There has longbeen a ‘height premium’ in employment, corresponding to a biggerpay packet. Now researchers from Ohio State University have foundtaller people tend to be on average cleverer and have better socialskills. Study leader Andrea Schick said: “Height captures two things– that you are growing up in a healthy environment, and that you areable to develop as fully as you are allowed and access your truecognitive capacity.” We aren’t told how tall Schick is!

pq aug 15 p34 ccm_pq aug 13 fun 07/07/2015 10:48 Page 42

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