This article outlines the approach that will be used to examine P7, Advanced Audit and Assurance. The article should be read in conjunction with the Study Guide and Syllabus for the exam.
Format of the exam
Section A will consist of two compulsory 'case study' style questions, worth a total of 60 marks. Question one will be for 35 marks and Question two worth 25 marks. The case study questions will provide detailed information, including extracts from financial statements and audit working papers, and strategic and operational details, for a client business. A range of requirements will be set for each case study, covering different syllabus areas. For example, a case study question could contain requirements on planning, evidence, and ethics. The aim is to mix up requirements and place candidates in a 'real world' situation where they would be faced with several very different issues in relation to the same client.
Section B will contain three questions of 20 marks each from which two should be attempted. Short scenarios will be provided as a basis for the Section B requirements.
It is imperative that candidates do not try to topic spot as the entire above mentioned syllabus areas could be tested in Section A or Section B.
One of the features of the Professional level exam s is the awarding of 'professional marks'. These are marks allocated not for the content of an answer, but for the degree of professionalism with which certain parts of the answer are presented. These will be awarded in Section A (the compulsory part of the exam) and will total four marks.
It may be, for example, that one requirement asks you to present your answer in the form of, say, a letter, a presentation, a memo, a report, briefing notes, or similar. Some marks may be awarded for the form of the answer in addition to the content of the answer. This might be for the structure, content, style and layout, or the logical flow of arguments in your answer. You should assume that if the question asks for a specific format of answer that some marks may be awarded for an effective presentation of that format.
Key objectives of the syllabus
The building blocks of a successful audit or assurance engagement are thorough planning and risk assessment. Therefore, these areas will continue to be examined in every sitting, and are likely to form part of at least one of the compulsory questions. Candidates should be aware that 'planning' covers a wide variety of topics, and does not just mean 'risk assessment'. For more clarity in this area it is essential to read the Syllabus and Study Guide in order to appreciate the breadth of the syllabus in relation to 'planning'. Also bear in mind that 'planning' is not restricted to the planning of an audit, but could relate to the planning of an assurance or non-audit engagement. It has become apparent that many candidates learn a topic, such as planning, within the context of an audit engagement but are then often unable to apply their knowledge of that same topic to a different type of assignment. The exam is called Advanced Audit and Assurance for a reason, and an inability to tackle scenarios involving assurance or non-audit work will adversely affect exam performance.
At each sitting, candidates should also be prepared to tackle requirements relating to evidence gathering. Requirements are likely to focus on specific assertions, and specific financial statement balances or transactions, and could be set in the context of an audit or an assurance engagement. For an example of the type of wording that is likely to be used, see Question 2(aii) of the June 2014 exam.
When asked to explain 'matters to consider' for an audit of financial statements, such as in Question 2 of December 14, candidates should be aware that one of the key matters to consider is whether the relevant accounting standard has been adhered to. Candidates often display a lack of financial reporting knowledge when answering questions of this type. Be warned – the Study Guide contains an extensive list of financial reporting areas that fall within the syllabus, and any of these areas could be part of a compulsory evidence question and future candidates are advised to review the Study Guide carefully and ensure that their P2 Corporate Reporting knowledge is up-to-date.
Reporting is another important area, likely to feature in every sitting, either in Section A or Section B. This is the second area where candidates should understand the crucial relationship between financial reporting and auditing. Candidates often attempt to justify an audit opinion without any apparent knowledge, or – even worse – incorrect knowledge, of the relevant financial reporting standards. How can one reach an opinion as to whether financial statements have been properly prepared if one doesn't know the financial reporting rules that must be used in their preparation?
Ethics and professional issues are also important areas within the syllabus, likely to feature in every sitting, either in Section A or Section B. In today's climate, auditors are often called upon to justify their ethical status and it is important that candidates are regularly tested in this area. Candidates may see the ethics question as an 'easy pick', but it is important to appreciate that ethics is not just about independence but also covers ethical issues such as conflicts of interest and confidentiality, as well as fraud and error, and professional liability.
More peripheral areas of the syllabus include the regulatory framework, money laundering, obtaining professional work, corporate governance, and transnational audit. These topics are best suited to be tested in Section B of the exam.
A note on current issues – there is likely to be at least one requirement per exam dealing with a current issues topic. It will not, however, be tested in isolation, and candidates should therefore be ready to discuss a current issues topic in the context of the client scenario provided. This is exactly what 'real world' auditors have to deal with on a day to day basis, and it is essential that a high-level audit and assurance exam regularly tests the ability to discuss new developments in the profession. As current issues have an impact on the planning and execution of an audit or assurance engagement, a current issues requirement could feature as part of the case study scenario in Section A.
Candidates should appreciate that they are expected to read around current issues and not rely on manuals from tuition providers. Good quality newspapers, professional journals, as well as ACCA's website, provide sources of information on current developments in audit and assurance. Candidates must not rote learn a provided piece of information on a current issue and then proceed to regurgitate this information verbatim as an answer to an exam requirement. By the time candidates have reached this stage in their professional studies they should take responsibility for developing their own opinion on a current issue, and be able to reach their own conclusion.
P7 is one of the Professional level Options exams. Candidates must consider carefully whether they have the required competencies when deciding whether to take P7. The competencies necessary to all a candidate to achieve a clear pass in P7 include:
- a thorough understanding of the relevant audit, assurance and financial reporting regulations that fall within the syllabus
- the ability to apply knowledge to specific client scenarios
- the ability to have an independent opinion, backed up by reasoned argument
- an appreciation of commercial factors which influence practice management
- an appreciation of the fast-moving developments in audit and assurance practices.
Candidates would be ill-advised to choose P7 as an Options exam if they:
- have little or no practical audit experience
- struggled with preceding audit exams
- are unwilling to take responsibility for their own opinions by reading around current issues
- are uncomfortable discussing arguments or reaching opinions.
Candidates should ensure they are familiar with the wide range of materials available to help them with their studies. In addition to material provided by tuition providers, and ACCA's website, candidates are encouraged, as discussed above, to regularly read up on current issues.
Candidates are encouraged to practise past questions to ensure that that they have good knowledge of the syllabus, are familiar with question requirements and have strong exam technique.
Student Accountant will notify you via email from time to time when new technical articles for P7 have been published. Such articles should be considered essential reading, and will cover both exam approach and technical issues from the syllabus. These articles are also available on the ACCA website and candidates are reminded to visit the site regularly to ensure they are aware of additional resources.
Candidates who have practised plenty of past exam questions, who have taken time to read around the syllabus, and who use sensible exam technique on the day of the exam are very likely to secure a pass. This exam should not be approached as a rote learning exercise, but as a chance to show the ability to think logically and practically, reach an opinion, and demonstrate the application of technical issues to a real-world scenario.
Written by a member of the P7 examining team