This short article provides Paper P7 candidates with information on question styles and the wording of exam requirements, and reiterates and builds upon guidance given in previous examiner’s articles.
The regulatory requirements
As stated on ACCA’s website, in order to obtain the audit qualification/audit practicing certificate and practice as an auditor in the UK or Ireland, candidates must attempt the UK/Irish papers for both Papers P2 and P7. This is because all UK and Irish professional accountancy bodies are governed by the requirements of the European Commission’s Statutory Audit Directive (SAD). In order to comply with the requirements of SAD – and to practise as an auditor – certain elements of UK/Irish legislation and regulation need to be included in the syllabus and examined, which is one of the reasons for Papers P2 and P7 having locally adapted variants. For example, in Pape P7 the syllabus for UK and Ireland includes auditing aspects of insolvency.
The regulatory bodies review the Syllabus and Study Guide and exam papers and recommend certain question styles to be used in the exams to ensure the rigour of the exams for those wishing to practise as an auditor in the UK and Ireland. As well as technical knowledge, and the ability to apply that knowledge in given situations, the regulatory bodies also expect certain skills to be displayed by candidates, which has led to new learning outcomes being included in the syllabus, and the development of certain features in the way that requirements are presented in the exam.
ACCA has implemented the regulatory body’s recommendations when producing the exam.
The style of question in the UK and IRL papers is not very different from the INT paper. The main difference is that more additional information will be given, often to provide a context for the question scenario in the form of background information. For example, in Question 1 of the June 2013 exam, information was given on the ownership of the audit client, its location and number of employees, and the reasons for the resignation of the previous audit firm.
There are two reasons for the inclusion of such information. First, as it provides a setting for the audit scenario, it should allow a better understanding of the environment in which the company is operating and the context in which the audit is taking place. Second, while the information does provide a context, not all of it will be directly relevant to the question requirements, so candidates will need to be selective in choosing which information is pertinent. The ability to recognise matters that are not relevant to the question requirement – for example, in the planning of an audit assignment – is a skill that the regulators are looking for.
A further issue relating to question style is that in some questions the mark allocation will not be broken down between question requirements. This can be seen for example in Question 2 of the June 2013 exam, where there were two instructions given in the question, for a combined total of 25 marks. The reasoning behind combining mark allocations is to assess if candidates can gauge the importance of the matters they have to deal with in answering the requirements and allocate their time appropriately to those matters. In practice, combining mark allocations allows more flexibility in marking as marks are not capped for one particular issue, and this can be an advantage.
The regulatory authority favours question requirements that are both embedded in the question scenario and are open-ended in nature. Requirements have been embedded for several sittings, so candidates should be used to seeing instructions contained within emails and notes from audit partners, to which they have to respond.
The open-ended nature of requirements means that candidates need to consider how to use the information that they have been provided with to respond to the instructions given. A good example is from Question 1 from the June 2013 exam, in which the audit partner asked for an evaluation of audit risks. No specific instruction was given to perform analytical review; however, given that detailed extracts from the financial statements had been provided, it should have been clear to candidates that some analytical review should have been performed on those financial statements in order to generate answer points in the form of identified audit risks, mimicking what would be done in a real audit.
The important thing is for candidates to think carefully about how to use the information contained in the scenario. Some parts of the information will be more relevant to the question requirements than others and the skill is to prioritise the most useful information and use it to respond to the instructions given.
Open-ended question requirements should be seen as advantageous because rather than restricting answer points to those within a very narrow focus, marks will potentially be awarded for a wider range of comments. Open-ended question requirements do not necessarily make the question more difficult.
Candidates attempting the UK or IRL papers should carefully consider the points in this article in preparation for their exam, and should bear in mind that the practical nature of auditing and the skills required by an auditor in practice are emphasised in how questions are constructed for these papers, which are designed very carefully for those wishing to practise as an auditor in the UK or Ireland.
Written by a member of the Paper P7 examining team